Australia: Anti-money laundering regulator proposes amendments to customer due diligence rules

Late last year, AUSTRAC, Australia's anti-money laundering regulator, released draft amendments to Australia's Anti-Money Laundering and Counter-Terrorism Funding ("AML/CTF") Rules. The draft amendments address several deficiencies in the current AML/CTF regime and, if adopted, will impose additional customer due diligence requirements on 'reporting entities' (including banks, non-bank financial services and gambling services).

The draft amendments:

  • require reporting entities to identify and verify beneficial ownership and control for all customers;
  • clarify which customer information a reporting entity must ascertain through its statutorily-required AML/CTF compliance program;
  • clarify which actions a reporting entity must undertake where it identifies under its AML/CTF compliance program that enhanced due diligence is required;
  • introduce a definition of "foreign politically exposed person" and require reporting entities to conduct enhanced due diligence on customers who are foreign politically exposed persons; and
  • require reporting entities to take reasonable measures to keep, update and review their records in regards to customers and beneficial owners.

AUSTRAC invited industry and other stakeholders to provide feedback on the proposed amendments. The public consultation period closed on 24 January 2014.

A copy of the proposed amendments to the AML/CTF Rules is available here.

UK: Deferred Prosecution Agreements Code of Practice published 

On 14 February 2014 the Director of the Serious Fraud Office and the Director of Public Prosecutions published a joint code of conduct in relation to deferred prosecution agreements (“DPAs”), (the “Code”) which become available on 24 February 2014 as a tool with which to deal with alleged criminal conduct by a commercial organisation, most particularly in the field of economic crime or financial wrongdoing.

The Code makes it clear that the decision whether or not to offer a DPA is a matter for the prosecutor’s discretion alone. It sets out guidance on the following issues:

  • the factors that the prosecutor may take into account when deciding whether to enter into a DPA;
  • the process by which the organisation may be invited to enter into negotiations for a DPA;
  • the subsequent use of information obtained by a prosecutor during the DPA negotiation period and what happens to unused material;
  • what should be included in the statement of facts;
  • the potential terms of a DPA, including the use of monitors and the financial penalty that may be imposed;
  • the court’s involvement in approving the DPA;
  • what happens if the DPA is alleged to have been breached or a variation of its terms is requested or required;
  • the public nature of an DPA.

The SFO’s press release announcing the publication of the Code, which includes links to the consultation and responses, amendments to the Criminal Civil Procedure Rules as well as the Code itself.

We will be publishing a full review of the Code shortly.

UK: SFO head suggests extension of Bribery Act to catch other “acts of financial crime”

In an interview with the Daily Telegraph on 2 February 2014, David Green, director of the SFO, set the cat among the pigeons when he suggested that a “small amendment” to section 7 of the Bribery Act 2010, extending it to cover not just bribery but “acts of financial crime”, would make it easier to bring prosecutions against companies for failing to prevent conduct such as fraud, by their employees. The proposed change has apparently already been discussed with Dominic Grieve, the Attorney General, and Oliver Heald, the Solicitor General, as well as the Law Commission, the statutory body that recommends law reform.

Mr Green has repeatedly called for a change in the law to make prosecution of corporates easier. Currently, it must be shown that the “controlling mind” of the company – its board – knew about the unlawful conduct for the company itself to be guilty of an offence. This is a far higher test than under US law and has historically proved very difficult to fulfil. Making it easier to prosecute corporates is a major aim of the SFO head, who acknowledges that the UK is subject to unfavourable comparisons with the US in this regard.

The introduction of such an offence would be controversial as conviction of financial crime, even if only by way of failing to implement adequate controls to prevent such crime, could result in a company being blacklisted from tendering for European contracts. The then Minister for Justice, Kenneth Clarke, stated on 30 March 2011 that a conviction under section 7 Bribery Act would attract discretionary rather than mandatory exclusion from public procurement under the UK’s implementation of the EU Procurement Directive (Directive 2004/18). However, the threat remains with other organisations, such as the World Bank, known to debar companies convicted of bribery from bidding on World Bank finances projects.