Contributions to this article also by Jessica Hope

Last week AUSTRAC published Information Circular No. 76 - External Administration and AMLCTF Act obligations. The Information Circular confirms that a company under the control of an external administrator must still comply with all of its obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Act).

Obligations

The Act imposes certain obligations on a reporting entity conducting designated services. Section 6 of the Act identifies 71 separate activities primarily carried out by the financial services sector, the gaming industry and bullion dealers. These activities are referred to as designated services. Any business which carries out designated services will be covered by the Act and will be a reporting entity regardless of the industry in which it operates.

Key obligations under the Act include:

  • adopting, maintaining and complying with the company's AML/CTF Program
  • carrying out customer identification procedures
  • retaining records of certain transactions
  • lodging transaction reports, suspicious matter reports and international funds transfer instruction reports, and
  • lodging compliance reports with AUSTRAC.

Tips for insolvency practitioners

In accepting an appointment, an insolvency practitioner should determine whether the company over which he or she has been has appointed conducts designated services and is consequently a reporting entity for the purposes of the Act. If so, and if it is intended that the company will continue to trade, then the practitioner should, as a starting point:

  • determine whether the company has an AML/CTF program and compliance officer, and if not then a program should be prepared and a compliance officer with suitable training should be nominated
  • review any existing AML/CTF Program to ensure it is compliant and update the Program if necessary
  • review the company's procedures and reporting to ensure the company is compliant
  • notify AUSTRAC of the appointment and update AUSTRAC with the details of any replacement AML/CTF contact officer and company contact details.

Whilst it may, in appropriate circumstances, be possible for the practitioner to delegate some of the responsibility for AML/CTF compliance to employees or directors in the company, in doing so a practitioner should proceed with caution and keep informed of his or her obligations. In issuing the Information Circular, AUSTRAC have made it clear that an external administrator appointed over a reporting entity cannot ignore the obligations imposed under the Act.

Penalties

Failure to comply with obligations under the Act can attract harsh penalties including fines of up to $11 million and/or imprisonment for up to 10 years.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.