AML/CTF Amendment Act 2024 – Proliferation Financing
What do you think it means? If you were assessing your organisation’s reasonable proliferation financing risk, how would you define proliferation financing?
Be warned!
The definition of proliferation financing contained in the Australian AML/CTF Amendment Bill is a whole lot broader than what you might think. It is defined as:
Proliferation financing means conduct that amounts to:
(a) an offence against the Charter of the United Nations Act 1945, or regulations made under that Act, that is prescribed by regulations made under this Act for the purposes of this paragraph; or
(b) an offence against the Autonomous Sanctions Act 2011, or a contravention of regulations made under that Act, that involves sanctions addressing the proliferation of weapons of mass destruction; or
(c) an offence against the Autonomous Sanctions Act 2011, or a contravention of regulations made under that Act, that is prescribed by regulations made under this Act for the purposes of this paragraph; or
(d) the provision of assets (including funds) or financial services, or other dealing with assets, in contravention of a law of the Commonwealth that:
(1) implements an international agreement, convention or treaty relating to the proliferation of weapons of mass destruction; and
(ii) is prescribed by the regulations for the purposes of this paragraph; or
(e) an offence against a law of a State or Territory that corresponds to an offence referred to in paragraph (a), (b), (c) or (d); or
(f) an offence against a law of a foreign country or a part of a foreign country that corresponds to an offence referred to in paragraph (a), (b), (c), (d) or (e); or
(g) an offence against a law of the Commonwealth, a State or a Territory that is prescribed by the regulations for the purposes of this paragraph.
So, once this section is enacted, a reporting entity will need to understand not only Australian sanctions laws in detail but also those of all foreign countries. Yes, I understand that Australia needs to placate FAFT, but surely Australia’s obsession with “gold standards” goes bridge too far?
Even the recent AUSTRAC National Risk Assessment: Proliferation Financing in Australia does not appear to define PF this broadly, although it does state “this national risk assessment adopts a broad approach to proliferation financing risk. It goes beyond FATF R.1 requirements and assesses Australia’s exposure to a wide range of direct and indirect proliferation financing threats.”
FAFT states: “In the context of Recommendation 1, ‘proliferation financing risk’ refers strictly and only to the potential breach, non-implementation or evasion of the targeted financial sanctions obligations referred to in Recommendation 7.
Recommendation 7 states: “Countries should implement targeted financial sanctions to comply with United Nations Security Council resolutions relating to the prevention, suppression and disruption of proliferation of weapons of mass destruction and its financing.”
Further, Note 3 to Interpretative Note 3 states: “Countries may decide to exempt a particular type of financial institution or DNFBP from the requirements to identify, assess, monitor, manage and mitigate proliferation financing risks, provided there is a proven low risk of proliferation financing relating to such financial institutions or DNFBPs. However, full implementation of the targeted financial sanctions as required by Recommendation 7 is mandatory in all cases.
I know that if a reporting entity assesses its PF risk as low, then it need not put in controls, etc., but that is not the point. If a reporting entity fails to consider all of the above, it will have breached the obligation with respect to the assessment of the PF risk. I can just imagine the conversations in an accountancy firm in Marlo, Victoria, about the PF risk.
