AML/CTF Amendment Act 2024 -Exposure Rules – Initial CDD – Legal or official documentation

“Modernisation & Simplification” (cough).

Draft Rule 27 – Additional matters for initial customer due diligence – will require a reporting entity “to establish on reasonable grounds the following”:

“For any customer other than an individual acting on their own behalf or a
government body, the legal or official documentation that demonstrates how the customer is regulated is specified.

Note: Examples include the constitution of a body corporate, a partnership agreement or a trust deed.”

The word “regulated” is not defined. Does “regulated” mean internal regulation (a company constitution or a partnership deed or a trust deed, etc.), or does it mean externally regulated (as in by ASIC or APRA or a law society, etc. ), or does it mean both?

On initial scrutiny, I am leaning towards internally regulated on the basis of the heading – Legal or official documentation – and the note – examples include the constitution of a body corporate, a partnership
agreement or a trust deed. However, regulated could also mean external regulation. In fact, all the other references to “regulated” in the exposure draft refer to regulated in the external sense.

Currently, the requirement for collection and verification of “the legal or official documentation which demonstrates how the customer is regulated” (in the internal sense) related to partnerships, trusts, associations, etc. But not a requirement for companies, including proprietary limited companies (pty. ltd.). The vast majority of pty ltd. companies do not have a constitution or memorandum of incorporation and articles of association in the formal sense due to the operation of the Corporations Act allowing the use of a basic set of internal governance rules called the replaceable rules.

So, will an onboarding process get stuck due to a pty. ltd. company not being able to produce a constitution or memo and arts of association due to its use of the replaceable rules? Or will the reporting entity require a copy of the relevant section of the Corps Act? That would certainly not be a “Modernisation & Simplification”.

What about a partnership without a partnership agreement/deed formed under the Partnership Act? Or a trust that does not have a trust deed?