Consultation on proposed guidance relating to employee due diligence
This submission is made by the Financial Services Committee of the Business Law Section of the Law Council of Australia (the Committee). The Committee thanks the Australian Transaction Reports and Analysis Centre (AUSTRAC) for the opportunity to comment on the proposed guidance on EDD in the anti-money laundering and counter-terrorism financing (AML/CTF) compliance framework issued for consultation on 3 November 2022 (the Guidance).
The Committee has the following four general comments and observations in relation to the proposed Guidance:
- The Committee is of the view that, in reality, many small to medium reporting entities will treat all employees with the same risk rating for both EDD and training purposes, which the Guidance does not appear to contemplate. The Committee submits that this approach is reasonable under a risk-based approach.
- The Committee is of the opinion that significant resourcing would be required by all reporting entities to comply with the mandatory elements of the Guidance, which would be disproportionate to the ML/TF risk most reporting entities would reasonably expect to face.
- The Guidance goes beyond the obligations in Rules 8.2 and 8.3 of the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (Cth) (the Rules): for example, the suggestion that training include topics outside those in Rule 8.2.3 (training program objectives).
- The Guidance uses the word “must” with respect to things which either are not stated in the Rules or are appropriately risk-based. The Guidance therefore is suggesting that a reporting entity is required to do these things under the Rules when that is not the case.