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Austrac draft guidance: providing financial services to businesses that financial institutions assess to be higher-risk


AUSTRAC has released draft guidance for consultation to help financial institutions understand AUSTRAC’s expectations when they provide financial services to businesses they assess to be higher risk.

The draft guidance has been issued in the context of “debanking” of businesses providing services for the transfer or storage of value for underlying customers such as remitters, digital currency exchanges (DCEs) and some fintech businesses (for example, payment service providers).

Austrac says financial institutions may also consider other businesses, such as some not-for-profit organisations, the lawful sex work industry, adult stores, gun shops and some cash-intensive businesses, to be higher risk for other reasons.

The AML/CTF Act requires financial institutions to develop tailored risk-based systems and controls that are proportionate to the level of money laundering, terrorist financing and serious crime risk they face in providing services to particular businesses.

Austrac says that using a risk-based approach does not require disengagement from risk or prevent financial institutions from establishing business relationships with higher-risk customers.

It says that a risk-based approach does not imply a ‘zero failure’ approach to combating financial crime. Even if a financial institution implements appropriate risk-based systems and controls, AUSTRAC recognises that no reporting entity can reduce financial crime risk to zero.

AUSTRAC says it does not expect financial institutions to undertake a full compliance audit of their customer’s AML/CTF program. They are also not required to redo the customer’s own ML/TF risk assessment.

The draft guidance considers 3 scenarios:

  • Scenario 1: Lawful sex worker customer
  • Scenario 2: Accepting a DCE customer
  • Scenario 3: Declining a bank account due to adverse information.

Austrac acknowledges that whether a financial institution provides financial services to a customer will ultimately be a commercial decision.

The guidance makes clear there is no requirement in the AML/CTF Act or Rules for financial institutions to decline to provide designated services to whole industry sectors, notwithstanding a financial institution’s assessment of the business sector’s relative risk.

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David Jacobson

Author: David Jacobson
Principal, Bright Corporate Law
Email: djacobson@brightlaw.com.au
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.

The post Austrac draft guidance: providing financial services to businesses that financial institutions assess to be higher-risk appeared first on Bright Law.


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