Australia’s government agency for detecting, deterring and disrupting financial crime has published guidance to help reporting entities undertake source of funds and source of wealth checks and mitigate the risk that a customer’s funds relate to money laundering, terrorism financing (ML/TF) or other serious crimes.

The guidance by the Australian Transaction Reports and Analysis Centre (Austrac) underlines the importance anti-money laundering and counter financing of terrorism (AML/CFT) programmes with appropriate risk-based systems and controls for providers of financial, gambling, bullion or digital currency exchange services.

High risk traders

Reporting entities must identify the source of funds and source of wealth on certain high risk customers and higher-risk transactions and activities, or when the customer or their beneficial owner is a foreign politically exposed person (PEP) according to Austrac.

It says the guidance is relevant to all reporting entities, and incorporates a range of examples to explain how source of funds and source of wealth processes apply across various industry sectors, including trading businesses such as bullion dealers, pubs and clubs as well as non-bank lenders.

Scope

The guidance looks at sources of funds which refers to how and where the customer obtained the funds for a specific transaction or designated service.

It also looks at sources of wealth, which refers to where the customer’s entire body of wealth and assets came from, not just what is involved in a transaction or business relationship.

Source of funds

Reporting entities should verify, on a risk-sensitive basis, information collected about each customer’s source of funds to assist in the application of risk-based systems and controls.

In collecting and verifying information on a risk-sensitive basis about a customer’s source of funds, reporting entities should be aiming to answer questions such as whether there is a reasonable explanation for the customer to conduct this transaction or whether there are there any indicators that the customer’s source of funds are derived from the proceeds of crime.

Source of wealth

In collecting and verifying information on a risk-sensitive basis about a customer’s source of wealth, reporting entities should be aiming to answer questions such as why and how a customer has accumulated the amount of assets they have and asking how they acquired or generated these assets.

The guidance emphasises that an understanding of where customers obtain the funds and wealth to conduct transactions or make investments is an essential component of reporting entities’ know your customer and enhanced customer due diligence requirements.

Austrac’s guidance, Source of funds and source of wealth, can be found here.

Categories: Trade Based Financial crimes News

Tags: AML/CFT, AUSTRAC, Australian Transaction Reports and Analysis Centre, guidance, illicit funds, PEP, risk, wealth