The AML/CTF framework in Australia will now be extended to Tranche 2 entities, including precious metals dealers, as part of a broader effort to bring them in line with worldwide standards established by the Financial Action Task Force (FATF). The Tranche 2 Reforms aim to ensure that high-risk industries are properly regulated in order to protect the financial system from criminal activity.
AML/CTF Risks for Precious Metals and Stone Dealers
The precious metals and stones business is vulnerable to exploitation for money laundering and terrorism financing operations due to several distinguishing characteristics:
- These items can be purchased and sold with large quantities of cash or cryptocurrencies.
- They can be purchased from individuals at a discount without demanding confirmation of ownership for second-hand things.
- They are an alternative currency for untraceable payments for unlawful goods and services.
- They are regarded as a reliable investment option that produces regular profits.
- Despite their enormous worth, these objects are frequently tiny enough to pass over borders or inside countries without drawing attention.
- It is difficult to track the origins or movements of precious metals and stones.
- They are easily manipulated, altered or hidden within everyday things to avoid discovery.
- The value of these products can be purposefully misrepresented to conceal the transfer of unlawful payments.
Tranche 2 AML Compliance for Precious Metals and Stone Dealers
The new regulatory standards for precious metals dealers are focused on six primary areas:
Enrolment with AUSTRAC
Dealers must register with AUSTRAC if they handle transactions involving $10,000 or more in physical currency or digital assets for the sale or purchase of precious metals, gemstones or jewellery.
Developing an AML/CTF Program
Following the amendments, dealers in precious metals and stones will be required to establish and maintain an AML/CTF program tailored to their risk profiles. This includes evaluating risks related to client groups, services provided, distribution methods and regional risks.
Customer Due Diligence (CDD)
Dealers in precious metals and stones will now have to authenticate customer information to confirm their identification and comprehend the nature of the business relationship. In addition, they must determine whether consumers are politically exposed persons (PEPs) or appear on sanction lists.
Ongoing Due Diligence
The new reporting organisations must continuously monitor client transactions and activity to detect changes in risk profile by updating the customers’ risk assessments. They should also put in place mechanisms to detect questionable activity.
Reporting Requirements
Threshold Transaction Reports are issued for cash transactions totalling $10,000 or higher. Suspicious Matter Reports (SMRs) are filed with AUSTRAC if there are reasonable reasons to believe that a transaction involves illegal activity.
Record Keeping
Dealers in precious metals and stones, like other reporting firms, must keep full records of CDD measures and transactions and demonstrate to AUSTRAC that they follow AML/CTF responsibilities.
How will Tranche 2 Reforms Affect Business Operations?
These regulations will require considerable adjustments in how precious metal dealers conduct their business.
- Implementing AML/CTF programs and conducting CDD will incur additional costs.
- To avoid AML/CTF duties, dealers may need to adjust their business practices, such as refusing to accept cash or digital payments of more than $10,000.
- Employees will require training to understand and follow the new regulations, including how to recognise and report suspicious activities.
- Businesses will require sophisticated systems capable of securely storing comprehensive records of all transactions and customer information.
Implementation and Support
The Australian government understands that this is a big transformation for the business and will support Tranche 2 entities. Such as:
- Businesses will have time to prepare before the regulations take effect.
- AUSTRAC will offer sector-specific guidance, e-learning courses and informational briefings.
- A contact centre will be accessible to help with enquiries.
Summary
As Tranche 2 takes effect, precious metal dealers must act quickly. Vigilance and compliance with AML/CTF obligations will help to protect the industry’s integrity. By implementing these steps, Australia seeks to prevent dealers in precious metals and stones from being used by criminals to launder money or fund terrorists, to comply with the most recent FATF standards and to contribute to the global fight against financial crime.
FAQs
What is the Tranche 2 Reforms?
The Tranche 2 Reforms are a package of proposed legislative changes aimed at widening the scope of Australia’s anti-money laundering and counter-terrorism financing laws to include more enterprises and occupations.
Which industries will be impacted by the Tranche 2 Reforms?
The Tranche 2 Reforms will affect real estate agents, precious metals dealers, lawyers, trust and company service providers and accountants.
When will the Tranche 2 Reforms take effect?
The actual timeline for implementing the Tranche 2 Reforms is determined by the legislative procedure. Stakeholders should monitor announcements from appropriate government authorities, such as the Australian Transaction Reports and Analysis Centre (AUSTRAC), for dates and transitional periods following the Act’s passage.
Why are the Tranche 2 Reforms necessary?
The Tranche 2 Reforms must align with global standards established by the Financial Action Task Force (FATF), which recommends that countries regulate DNFBPs within their AML/CTF frameworks and strengthen Australia’s ability to detect, prevent, and combat money laundering and terrorism financing activities.
What steps should regulated entities take to comply with the Tranche 2 Reforms?
Regulated entities must conduct thorough risk assessments, develop and implement strong AML/CTF programs, ensure that employees receive adequate training on AML/CTF obligations and the entity’s compliance program and establish systems for reporting suspicious activity and maintaining records in accordance with regulatory requirements.
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