26th May 2006
It is estimated that there are more than $2 billion worth of transactions in Australia per year as a result of money laundering activities, said Chris Noble, Director at Deloitte in a presentation at the Institute of Chartered Accountants Queensland Business Forum today.
Money laundering is funds generated from illegal activities and introduced into and moved within the financial system, via multiple legitimate accounts to disguise or obscure the original source, making it difficult to trace, so that the funds can be used freely.
“Estimated to be two to five percent of the global GDP, money laundering is a global issue and therefore a global responsibility and professionals in the financial services sector such as accountants need to be especially vigilant,” Noble said.
The three key stages in the laundering of money are, the placement of funds/value into the financial system, the movement of funds/value from institution to institution to ‘hide’ the source and ownership of the funds and the reinvestment of funds/value in a legitimate business or transaction.
“Currently, there are no obligations on accountants but this is likely to change in the near future. When the law reform is finally enacted, the government will adopt a risk based approach, in order to improve Australia’s reputation for safeguarding our financial sector from money laundering,” Noble said.
Accountants are targets for money launderers because:
- Firms can offer legitimacy and introductions to other advisors
- They are expert in the creation of corporate vehicles (eg managed investments or trusts) and facilitation of transactions and
- Firms can offer international connections, either through member firms or networks
The proposed Anti-Money Laundering and Counter Terrorism Financing (AML / CTF) Bill 2005 consultation period ended 13 April 2006. The Institute of Chartered Accountants compiled a joint submission with CPA Australia. The Bill is expected to be presented to the House of Representatives in only a matter of weeks and gain Royal Assent by the end of this year.
“Since 9/11 there has been significant political pressure to combat proceeds of crime and the financial resources behind terrorism. Terrorist financing often diverts ‘clean’ or legitimate funds such as from a charity or not for profit organisation and uses them to finance terrorist activities, alternatively, the proceeds of crime can also be used as a means to the same end” Nobel said.
“The proposed AML / CTF Bill will help combat money laundering in Australia, but financial professionals such as accountants are likely to need to ensure they have the training and the resources to comply with the legislation. A sensible, risk based approach will hopefully prove not too onerous,” Noble said.
As a cautionary measure many businesses and professional firms should consider assessing operational impacts on their organisation by:
- Risk classification of customers, products, services, channels, (look for the risk factors and red flags)
- Obligations under legislation to report any suspicious behaviour
- Robust customer identification procedures
- Transaction monitoring systems
- Enhance due diligence for high risk customers
”The bottom line is - your business, your customers, your products equals your responsibility, for if a financial specialist is found to be involved or implicated in money-laundering schemes, significant penalties may apply in the near future, damaged reputation (certainly for larger financial institutions), heightened financial risks, by being frozen out of the market or blacklisted, legal and regulatory risks and significant remediation costs and operational risks,” Noble concluded.
For more information on the Institute of Chartered Accountants and CPA submission and information on the proposed AML / CTF Bill visit charteredaccountants.com.au
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