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CQIB - Chapter 3 - The Regulatory and Legal Framework > Unit 3 - Legislation and Regulators (Part 2 of 2) > Flashcards

Unit 3 - Legislation and Regulators (Part 2 of 2) Flashcards

1
Q

What is AUSTRAC?

A

Australia’s financial intelligence agency.

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2
Q

What does AUSTRAC have regulatory responsibility for?

A

AML and counter-terrorism financing legislation, including the AML&CT Financing Act 2006

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3
Q

Who does AUSTRAC oversee?

A

More than 14,000 Australian businesses, ranging from major banks and casinos to single operator businesses.

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4
Q

What are AUSTRAC’s aims, and how does it achieve them?

A

Aims:
- Keep Australians safe from financial (and other serious) crime.
- Build/maintain trust in Australia’s financial system (as part of the global community).

Achieves this by:
1. Detecting, deterring, and disrupting money laundering and terrorism financing threats.
2. Providing financial intelligence to, and working with, domestic and international agencies (law, tax, etc).

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5
Q

What cash transactions must Australian banks report to AUSTRAC?

A

$10,000 or more AUD equivalent

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6
Q

What is the full name of the AML/CTF act?

A

Anti-Money Laundering and Counter-Terrorism Financing Act 2006

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7
Q

Who sectors does the AML/CTF Act cover?

A
  1. Financial
  2. Gambling
  3. Bullion dealers
  4. Others
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8
Q

What are 5 key obligations the AML/CTF Act places on reporting entities when they provide designated services?

A
  1. Registering with AUSTRAC
  2. Customer identification and verification of identity.
  3. Record keeping.
  4. Establishing and maintaining an AML/CTF program.
  5. Ongoing CDD and reporting (e.g., reporting suspicious transactions or cash transactions over $10k)
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9
Q

What is money laundering?

A

The process whereby criminals try to disguise the origin of their illegal profits - making illegal funds appear to have come from legitimate sources.

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10
Q

What affect does money laundering have on Australia (4)?

A
  1. Threatens prosperity
  2. Undermines integrity of financial system
  3. Funds further criminal activity
  4. Impacts community safety and wellbeing.
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11
Q

What is the estimated amount serious and organised crime costs Australia every year?

A

$10-$15 billion.

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12
Q

How many stages are there in the typical money laundering cycle?

A

3

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13
Q

What are the 3 stages of the money laundering cycle?

A
  1. Placement
  2. Layering
  3. Integration
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14
Q

In the money laundering cycle, what is stage 1 - placement?

A

Introducing illegal funds into the financial system.

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15
Q

In the money laundering cycle, what are two examples of ‘placement’

A
  1. Making ‘structured’ cash transactions into bank accounts (cuckoo smurfing).
  2. Lots of small deposits by many individuals
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16
Q

In the money laundering cycle, what is stage 2 - layering?

A

Moving, dispersing, or disguising illegal funds or assets to conceal their true nature (e.g., using a maze of complex transactions involving multiple banks and accounts, or corporations and trusts).

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17
Q

In the money laundering cycle, what is stage 3 - integration?

A

Investing the distances funds/assets in further criminal activity or legitimate business, or purchasing high-value assets and luxury goods. At this stage, the funds or assets appear to have been legitimately acquired.

18
Q

Instruments of the banking system can be manipulated for money laundering and associated criminal activity in various ways. How can the following be manipulated - Bank Accounts?

A
  • Build false customer profiles
  • Introduce illicit funds (that are then moved through Australia or abroad)
19
Q

Instruments of the banking system can be manipulated for money laundering and associated criminal activity in various ways. How can the following be manipulated - Safe Deposit Boxes?

A
  • Exploit the privacy to store proceeds and instruments of crime (including cash, drugs, and firearms).
  • Use false identities to lease multiple boxes across different bank branches.
20
Q

Instruments of the banking system can be manipulated for money laundering and associated criminal activity in various ways. How can the following be manipulated - International Fund Transfers

A
  • Move funds quickly and securely to foreign jurisdictions.
  • Cuckoo smurfing
21
Q

What is cuckoo smurfing and how does it work?

A
  1. ML syndicate targets the bank accounts of people who receive money transfers into Australia.
  2. A person located overseas wants to send money into Australia. They do this by placing the money with an overseas money transfer business.
  3. However, the overseas money transfer business does not send the money to Australia - instead, they ‘swap’ the transfer details to a money laundering syndicate. The syndicate arranges for money from a different transaction - of the same value - to be deposited into the receiving Australian bank account.
    - The replacement money is sourced from illegal activities and the ‘swap’ has allowed it to successfully enter the Australian banking system.
    - The bank account holders are usually unaware that the funds that were transferred into their accounts are the proceeds of crime.
22
Q

Instruments of the banking system can be manipulated for money laundering and associated criminal activity in various ways. How can the following be manipulated - Loans?

A
  • Used to layer and integrate illicit funds into other assets such as real estate and motor vehicles.
  • Works by obtaining loans which are repaid (wholly or partly) with illicit cash.
  • Loans can be obtained in false names.
  • ## Transactions related to a loan may attract less scrutiny than significant cash activity.
23
Q

Instruments of the banking system can be manipulated for money laundering and associated criminal activity in various ways. How can the following be manipulated - Bearer Negotiable Payments (BNIs)?

A
  • BNIs include bank drafts, promissory notes, traveller’s cheques and money orders.
  • BNIs offer a portable and compact way to smuggle high-value assets across international borders.
  • Criminals may try to purchase BNIs with co-mingled funds (some legitimate some illegitimate) to camouflage connection to underlying crimes.
24
Q

What are the two broad areas of terrorism financing?

A
  1. Terrorist attack funding.
  2. Logistical funding.
25
Q

Why might terrorism funding be for amounts lower than AUD$10,000? (3 reasons)

A
  1. Relatively small amounts required.
  2. Supporters lack of access to funds.
  3. Awareness of Australian regulations and scrutiny for higher amounts.
26
Q

What are 6 potential methods Australian agencies have identified could be used to misuse the Australian financial system to support terrorism?

A
  1. Opening/operating accounts in false names.
  2. Transacting using names of other individuals/groups.
  3. Providing or having access to other people’s accounts.
  4. Providing access to bank accounts within Australia and offshore.
  5. Obtaining loans, especially through fraud, to fund terrorism.
  6. Using online international funds transfer systems, especially with fake accounts.
27
Q

What is the purpose of Part A of an AML/CTF program?

A

Identifying, managing, and reducing the money laundering and terrorism financing risk.

28
Q

What are some things Part A of an AML/CTF program requires?

A
  • Conduct AML/CTF risk assessment.
  • Regular independent review.
  • Appointment of AML/CTF compliance officer.
  • Risk awareness training for employees.
  • System and controls.
  • OCDD procedures
29
Q

What is the purpose of Part B of an AML/CTF program?

A

Customer identification and Customer due diligence (CDD)

30
Q

What are some things Part B of an AML/CTF program requires?

A
  1. Establishing framework for identifying customers (and beneficial owners of customers) so the reporting entity can be reasonably satisfied a customer is who they claim they are.
  2. Collecting and verifying customer and beneficial owner information.
31
Q

What are the tipping off provisions?

A
  • AML/CTF reporting entity cannot disclose any information to anyone (except AUSTRAC) when they submit a Suspicious Matter Report (SMR)
32
Q

What are 7 Australian Privacy Principles (APPs)?

A
  1. Open/transparent management of personal information (including having a privacy policy).
  2. Individual having the option to transacting anonymously or using a pseudonym where practicable.
  3. Collection of solicited personal information and receipt of unsolicited personal information, including giving notice of collection.
  4. How personal info can be used and disclosed, including overseas.
  5. Maintaining the quality of personal information.
  6. Keeping personal information secure.
  7. The right of individuals to access and correct their personal information.
33
Q

Are the Australian Privacy Principles (APPs) prescriptive?

A

No, but each APP entity needs to consider how the principles apply to their own situation.

34
Q

What are 4 key obligations the Australian Privacy Principles (APPs) place on reporting entities?

A
  1. Sensitive information
  2. Personal information
  3. Credit reporting
  4. Tax File Numbers
35
Q

Under the Australian Privacy Principles (APPs), what are some examples of sensitive information?

A
  1. Health
  2. Racial or ethnic origin
  3. Political opinions.
  4. Religious beliefs.
  5. Sexual orientation
  6. Criminal record
36
Q

Under the Australian Privacy Principles (APPs), when is disclosure of personal information allowed?

A
  1. Individual has consented
  2. Individual would reasonably expect it.
  3. It is required by law or a court/tribunal order.
  4. Health situation exists in relation to the disclosure.
37
Q

Under the Australian Privacy Principles (APPs), can an individual be required to provide their TFN?

A

Individuals cannot be required to provide their TFN, but there may be consequences if they don’t.

38
Q

What is AFCA and what do they do?

A

The Australian Financial Complaints Authority. It is a free, fair, and independent dispute resolution scheme for customers to access.

39
Q

What is BEAR and what is its purpose?

A

The Banking Accountability Executive Regime. Its intent is to improve executive accountability in ADIs, recognising that leadership is key to driving cultural change. It aims to provide greater clarity of the responsibilities of senior executives and directors.

40
Q

What is FAR?

A

Financial Accountability Regime. It is an extension of BEAR, intended to increase the transparency and accountability of a wider range of financial entities to improve risk culture and governance.

41
Q

Who is Australia’s financial intelligence agency?

A

AUSTRAC

CQIB - Chapter 3 - The Regulatory and Legal Framework (6 decks)

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