Articles > Finance

What is AML/CTF?

May 25, 2022   Fatima RazaPhilip Evangelou

And what does it Means For You if You Buy and Trade Cryptocurrency?

Whilst cryptocurrency allows for quicker and cheaper international transactions it unfortunately allows for criminal activity through the act of money laundering and terrorist funding. Due to those issues, The Anti-Money Laundering and Counter Terrorism Financing Act 2006 was implemented. This Act is thus very important to understand as it can affect individuals and businesses that buy and trade cryptocurrency.

What is AML/CTF?

The Anti-Money Laundering and Counter Terrorism Financing Act 2006 (AML/CTF Act) is the main body of Australian Government Legislation that regulates AUSTRAC’s functions. This Act helps detect and deter money laundering and terrorism financing. This is done through imposing obligations on regulated businesses: 

  1. All businesses must enrol with AUSTRAC and provide enrolment details. 
  2. Creating an AML/CTF program to help identify and control businesses that face a risk to money laundering and terrorism financing.
  3. Identifying and verifying a customer’s identity and furthermore monitoring their transactions. 
  4. Reporting suspicious activities to authorities, threshold transactions and international funds transfer instructions.
  5. A requirement for businesses to keep records of transactions, customer identification, electronic funds transfer instructions and details of AML/CTF programs.

What it means if you buy and trade cryptocurrency

AML/CTF risk awareness training 

If you are a business that buys and trades cryptocurrency it means that you will need to train your employees about the risks and relevant procedures of ML/TF. The training program should include the businesses obligations under the AML/CTF Act and the non-compliance consequences. As well as the risks and potential consequences they may face due to ML/TF. 

Due Diligence Program for employees 

The AML/CTF program must have a due diligence program that:

  • Lists what checks will be performed on potential employees before they are hired. 
  • Which business roles may potentially facilitate ML/TF and what extra checks will be performed for these employees. 
  • How to supervise employees to ensure that they comply with AML/CTF procedures and what will be done if they don’t comply. 

Monitoring Customer Transactions

In order to identify suspicious transactions, businesses must implement a transaction monitoring program which monitors: 

  • Unusual and large transactions.
  • Unusual patterns of transactions.
  • Complex transactions.
  • Numerous transactions that have a variety of currencies.
  • Digital currencies that pose a higher ML/TF risk or provide greater anonymity.

Suspicious transactions must then be reported to AUSTRAC.

Record Keeping

Businesses that buy and trade cryptocurrency must:

  • Keep any transaction records for seven years after the transaction is conducted.
  • Keep customer identification records for seven years after the last day they were provided service to.
  • Keep a copy of their AML/CTF program for seven years after the program terminates. 

New Penalties 

New penalties have been implemented through this Act, thus it is important to understand them as this affects anyone who buys or sells cryptocurrency. 

  • Under section 76A of the AML/CTF Act an individual can receive a fine up to $105,000 and/or can face imprisonment for up to two years if they are found to have breached any condition of their registration. In cases where an individual received compliance directions from the AUSTRAC CEO or there is a breach of compliance undertaking, the penalty can be doubled. 
  • Penalties can reach up to seven years imprisonment and/or $420,000 if a second breach occurs. 

Key Takeaway 

It is important to understand the regulations and changes in the AML/CTF Act in order to see how it can affect individuals and businesses involved in the purchase and selling of cryptocurrency. Ensuring these rules and regulations are complied with avoids the risk of penalties. For more information or help with these regulations, get in touch with our team via the contact form or by calling 1300 337 997. 

About Fatima Raza

Fatima RazaFatima is a legal intern at Openlegal and is currently in her third year studying Law and Media and communications at Macquarie University. Her interests are commercial, property and international law.

About Philip Evangelou

phillipPhil is a director at OpenLegal. He has over 16 years experience working in private practice and in-house counsel in Sydney and London, giving him expertise in employment law, IP, finance, leases, dispute resolution, insurance and contracts.