AML/CTF COMPLIANCE

Introduction Clubs have obligations under the Anti-Money Laundering & Terrorism Financing Act 2006. As such a Club has obligations to implement a suitable compliance program and provide risk based training to employees who perform “at risk” roles. At risk roles may include: Gaming & TAB staff – who handle, transfer or perform monetary transactions including gaming machine payouts and TAB transactions. Staff who have control over the recording or data entry of these transactions.

Training Training must be delivered at appropriate intervals and ensure that employees understand: The obligations of the Club under the AML/CTF Act and Rules. The consequences of non-compliance with the AML/CTF Act and Rules. The type of money laundering and terrorism financing risk that the Club might face and the potential consequences of such risk. The processes and procedures that the Club has provided for that are relevant to the work carried out by them.

Penalties Failing to comply with the AML/CTF Act is an offence and holds both civil & criminal penalties for individuals and corporations. Individuals may incur fines of up to $2.2 Million or 10 years imprisonment. Corporations can face fines of $11 million (maximum). “Tipping off” is an offence under the Act and penalties can apply. You must not disclose to anyone that a suspicion has been formed on a matter or that a suspicious matter report has been submitted in relation to a person. KENO and Lotteries are exempt from AML/CTF requirements.

Objects of the AML/CTF Act The objects of the AML/CTF Act include: Fulfilling Australia’s international obligations, to combat money lauding and financing of terrorism. Addressing matters of international concern, including the need to combat money laundering and financing of terrorism. That by addressing those matters of international concern will in effect benefit Australia’s relations with foreign countries and international organisations. The objects of the Act are achieved by (among other things) requiring information to be given to the AUSTRAC CEO and by allowing certain other agencies to access information collected by the AUSTRAC CEO. The AML/CTF Act and Rules help law enforcement agencies prevent and detect money laundering and terrorist activity by gathering related information. The AML/CTF Rules detail how the Act is to be carried out.

What is money laundering? Money Laundering is the process of taking money obtained through illegal activity with the intent to conceal its origin. Essentially meaning “dirty money” is moved through a series of processes to make the money appear “clean”, in effect this distances the money from the crime. Money Laundering can also be described as the way some criminals choose to use the legitimate financial system to try to hide or disguise the proceeds of crime.

Why do people launder money? There are a number of reasons that criminals launder money but essentially it is to make money from crime and potentially make more money than if they were involved in lawful activities. Money laundering also allows criminals to use the money for future criminal activity or for legitimate business.

Links to money laundering Money Laundering is linked criminal activity and can involve people smuggling, drugs and arms trafficking, tax evasion, smuggling, illegal prostitution rackets, and identity theft, fraud, cyber crimes, investment and superannuation fraud and terrorism. It has been estimated by the Australian Crime Commission (ACC) that serious and organised crime in Australia costs $15 billion every year.

Gambling A placement technique The money laundering process can generally be broken down into 3 steps being:  Placement; Layering; Integration. Gambling is a popular placement technique, used by money launderers whereby illegal funds are placed into the gaming machines or by placing bets through the TAB. Money can be cashed out or collected and treated as gambling proceeds. The funds appear to be ‘winnings’ and can easily justify the person’s sudden financial peak.  

Gambling A placement technique The types of situations that Clubs may come across include: Claiming gaming machine prizes/payouts whilst not being the legitimate prize-winner (that is not the player who has accumulated the subject credits or turnover). Exchanging cash for purchased gaming prizes/payouts from legitimate prize winners, this could be a particularly attractive offer to problem gamblers. Exchanging cash for prize winning cheques or tickets. Negotiating cash loans to other member/patrons for the purpose of gambling. Engaging in activity that may otherwise be considered illegal or contrary to responsible gambling activities. Patrons working in groups on linked machines covering as many betting options as possible and winning as a group. Exchanges of paper money.

Terrorism Financing Terrorism Financing is essentially the administration of funds associated with terrorism, terrorists, or terrorist activity. On an international level terrorism has been broadly described as: ‘The unlawful use or threatened use of force or violence by a person or an organised group against people or property with the intention of intimidating or coercing societies or governments, often for ideological or political reasons.’ (UN Convention for the Suppression the Financing of Terrorism 2002). The Australian Federal Police (AFP) is responsible for investigations and preventing crime associated with terrorism. Terrorism financing and associated money laundering is a criminal activity in this country.

Who is the AML/CTF Regulator? AUSTRAC – Australian Transaction Reports Analysis Centre. AUSTRAC is Australia’s AML/CTF regulator and is responsible for ensuring compliance with the provisions of the AML/CTF Act 2006. AUSTRAC administers the AML/CTF Act, in its financial regulator role; teams of compliance and enforcement officers will perform audit and inspections to assist business to comply with the legislative requirements.

AUSTRAC cont. AUSTRAC is Australia’s financial intelligence unit. Tens of thousands of reports are sent to AUSTRAC each week from the finance, gaming and bullion industries. The information is then made available to partner agencies including: Australian Crime Commission; Australian Customs and Border Protection Service; Australian Federal Police; Australian Secret Intelligence Service; Australian Taxation Office; Department of Immigration and Citizenship; State and Territory Police Services. AUSTRAC administers the AML/CTF Act, in its financial regulator role; teams of compliance and enforcement officers will perform audit and inspections to assist business to comply with the legislative requirements

Customer Identification Customers must be able to provide reliable and independent documentation that is acceptable under the AML/CTF Act, so that the venue can identify and verify the customer accordingly. This means that gaming payouts or transactions of $10,000 or more will require the customer to be able to provide ID before the payment can be made.

Customer Identification Reliable and independent identification is considered:  Secondary documentation: Primary Photographic ID Non photographic ID: Must be original or certified and may be used in combination with the NON Photographic ID: A Drivers License* – Issued in the country of origin and in English.  Must be original or certified and show name and current address Proof of Age Card. Govt. financial benefits notice; Birth Certificate; Passport* - Issued in the country of origin and in English. Citizenship Certificate; Tax Notice (not less than 12 months old); Health Care Card. National ID card – must be in English. Local Govt. or utilities notice (not less than 3 months old) and must show name and current address.   REMEMBER A membership card or sign in slip is not considered acceptable for identification purposes with regard to customer identification procedures applicable to AML/CTF obligations.

Know your Customer (KYC) Payment of transactions of $10,000 or more When a gambling payout of $10,000 or more occurs, the customer must be identified and verified before payment can be made irrespective of the form of payment. The customer must provide their name, date of birth and residential address. This is basic KYC information. The Club must collect (make record of) the customers: Name; Date of birth; and Residential address. The customers name; and either their: Date of birth; or Residential address; must be verified against reliable and independent documentation that is acceptable under the AML/CTF Act.  

Discrepancies with Identification It is important to remember the payment cannot be made until an acceptable form of ID has been collected and verified. Any discernible discrepancy between a claimed identity and the offered documentation must be recorded and must be subject to further enquiry of the customer (and a record kept). Discrepancies will need to be reported to the AML/CTF Compliance Officer who may decide to submit a suspicious matter report to AUSTRAC.

What types of situations may be considered suspicious? The following situations may be considered “red flag indicators” of a suspicious matter: Unusual transactions or circumstances are evident. The known business background of the customer may be considered suspicious. Production of unusual or false identification – the person may not be who they claim to me. The use of aliases and or a variety of similar addresses. Transactions involving known drug sources. The customer changes their mind about the transaction when they learn of reporting & ID requirements.

What types of situations may be considered suspicious? The behaviour of the person or persons receiving or requesting the designated service (for example, unusual nervousness). Customer asks for several cheques to be made out below $10,000. Gambling habits/ behaviour changes. Customer places large deposits placed into the electronic gaming machine and obtains or requests a payout after minimal or no play. Customer wanders through the gaming area with no visible intention of playing machines and approaches other customers to purchase payout vouchers. Customer requests cheques to be drawn in the name of a third party. Patron exchanges of large amounts of paper money.

More examples of suspicious matters High redemptions over a short period of time. Sum of transactions adds up to significant amounts of money. Customer sources of funds are suspected to be linked to criminal activities. Customer receiving multiple cheque payments on a single day. Customer receiving a volume of cheques within a specific time period that is beyond that of which would be considered to be reasonable amount of winnings by one person.

More examples of suspicious matters Staff collusion: Where staff (including management) alert money launderers to significant payouts and introduce money launderers to the prize winner), or do not report suspicious matters. Some things to remember: Be vigilant on note exchange. Gaming machines will detect counterfeit notes, but are not able to determine that a note is stolen or from illegal activity. ALWAYS report suspicious matters.

Suspicious Matters Remember to be discreet, if you identify suspicious persons, or matters. Do not discuss your suspicions with the suspicious person as this might be considered tipping off. Tipping off is an offence under the Act and penalties do apply. Please note that a transaction does not need to be greater than $10,000 to be considered suspicious and that a $10,000 gaming machine payment is not necessarily suspicious in nature.

Suspicious matters and high risk customers Customers who provide insufficient or suspicious ID may be considered high risk and additional documentation checks will be required. High risk customers require further action: Further KYC information Enhanced due diligence The Customer Identification and Risk Register may need to be completed The Compliance Officer may consider filing a suspicious matter report The Customers past and future transactions may be monitored.

Privacy and the AML/CTF Act Clubs with gaming machines have an obligation to comply with the Privacy Act (Commonwealth) 1988 and the Australian Privacy Principles APP’s. This means that any personal information collected must be kept safe and secure and destroyed or de-identified when no longer in use. Under the AML/CTF Act the secrecy obligations with regard to "tipping off" require that a reporting entity cannot disclose that it has: Reported or is required to report information the to AUSTRAC under section 41; or Formed a suspicion, under section 41 about a transaction or matter. (Ref: AML/CTF Act Part 11, section 120) Further information regarding the Privacy Act and privacy obligations as part of the AML/CTF Act is available from the Privacy Officer for the Club.

AUSTRAC PO Box 13173, Law Courts Melbourne VIC 8010 Telephone: 1300 021 037 (local call cost within Australia) Facsimile: 03 8636 0508 Email: help_desk@austrac.gov.au