AML/CTF a Compliance guide for Clubs and Pubs

Read our AML/CTF compliance guide to learn what you need to do to keep your venue and its customers safe.

The United Nations estimates that $800 billion-$2 trillion are laundered every year, making up 2-5% of the global GDP or gross domestic product.

This money funds a range of criminal activity, including everything from small robberies to major terrorist activity. The Australian government enacted AML/CTF regulations to limit its spread and protect anyone who could potentially be affected.

Clubs and pubs that use gambling machines are money launderers’ most frequently targeted businesses. They need to keep all the requirements in mind and be sure to meet them.

What Is AML/CTF?

AML/CTF stands for anti-money laundering/counter-terrorism financing. It’s a set of laws put in place to fight against these dangerous actions.

Understanding compliance begins with a breakdown of the behaviours it fights against. There are several types of money laundering. The better you know what they are, the easier it will be to prevent them.

What Counts as Money Laundering?

Money laundering is the process of illegally making money through criminal activities such as drug trafficking and terrorist funding. The money is considered “dirty,” but criminals “launder” it to make it seem like it comes from a “clean” source.

Money laundering is a multi-step process. First, criminals place dirty money into a legitimate financial system. Next, they layer it to conceal its source using multiple transactions and bookkeeping tricks. Finally, they integrate the money by withdrawing it from a legitimate account.

There are several ways to launder money, including:

  • Using a legitimate business owned by a criminal organization, known as a “front”
  • Shell companies that only exist on paper but seem legitimate
  • Smurfing or structuring by breaking large amounts of cash into small deposits and putting it into several accounts to avoid detection
  • Wire transfers
  • Using mules who smuggle cash across borders to deposit them in foreign accounts in countries with less restrictive laws
  • Investing in gems, gold, real estate, and other commodities
  • Counterfeiting

AML/CTF rules aim to prevent all of these illegal acts.

What Counts as Terrorism?

Terrorism covers a wide range of violent acts, but it’s also a terrorist act offence to fund a terrorist act. This is an unfortunately common use of money laundering, which is why the two are grouped together in AML/CTF legislation.

AML/CTF for Pubs and Clubs in Sydney

Gambling is also a common form of money laundering, which is why clubs and pubs that use gambling machines have to be extremely careful. Criminals can launder their cash through poker machines and collect their winnings as a cheque.

Approximately 95% of clubs in New South Wales alone don’t adhere to AUSTRAC rules. They may have an incomplete program, fail to complete all the necessary steps, or fail in any number of other ways.

How to Achieve AML/CTF Compliance

There can be severe financial and criminal penalties for failing to remain compliant. Ways to prevent these issues include enrolling with AUSTRAC, performing a risk assessment, creating all the necessary programs, submitting reports, maintaining your records, and completing reviews.

Enrol with AUSTRAC

AUSTRAC, or the Australian Transaction Reports and Analysis Centre, is in charge of all AML/CTF laws. All pubs and clubs with gaming machines must register with them online.

Once you complete registration, your venue will receive an AUSTRAC account.

Perform a Risk Assessment

A risk assessment is the first step to compliance because it determines how likely your venue is to experience money laundering or terrorism funding actions.

Consider every aspect of your business when conducting a risk assessment. Think of what types of customers you serve, the services you provide, the gaming machines you have on-site, and whether you provide services online or in-person.

Create an AML/CTF Program

You’re required to create your own AML/CTF program. It must be risked-based, taking into account how likely it is that criminals will use your business for money laundering or terrorism funding. You must also create and document policies to identify and mitigate the risk.

When creating your program, consider the nature of your business. Take into account its size, services, complexity, and any foreign jurisdictions you deal with.

Your AML/CTF program must include two components; Part A and Part B.

Part A

Part A outlines the procedures you create to identify and mitigate potential money laundering or terrorist actions. It should include:

  • An ML/TF risk assessment
  • A compliance officer
  • Employee due diligence and risk awareness training programs
  • Ongoing customer due diligence or OCDD programs
  • Proof of board and senior management approval

Part B

Part B identifies procedures for customers and beneficial owners exposed to crimes. It should include:

  • A record of any customer or beneficial owner information you collect
  • Information on how you determine if customers or beneficial owners are vulnerable, how you respond to information discrepancies, and how to decide whether you need more information on customers

Types of Programs

There are multiple types of AML/CTF programs. You can create a standard program for individual reporting entities, a joint program for members of a DBG or designated business group, or a special programs for anyone with an AFSL or Australian Finacial Services License.

Board Approval

Your board or managers must approve your AUSTRAC program. You must prove you completed this step by implementing on-going reporting, meetings, and/or periodic reviews.

Use a TMP or Transaction Monitoring Program

Types of suspicious behaviour include:

  • Asking for payouts after little or no play
  • Buying winning tickets
  • Cheques written out to anyone other than the player
  • Regularly gambling with large amounts of cash
  • Unusual machine play styles
  • Regularly receiving winnings by cheque

Reporting involves a combination of careful observation and record-keeping. Your staff should always be on the lookout for suspicious activity and notify you right away. You should also ensure your reports and records are up-to-date and look for suspicious activity there as well.

Submit an SMR

Any suspicious transactions need to be reported, as does any suspicious activity. Submit an SMR or Suspicious Matter Report to AUSTRAC as soon as possible.

Train Your Staff and Implement Employee Due Diligence Programs

A compliance officer will become one of the most important members of your staff. They help you submit reports, look for criminals on your premises, and meet all legal requirements.

The rest of your employees must be trained to keep up with AUSTRAC requirements. This should be a regular occurrence enforced by AUSTAC signage placed in staff areas throughout your venue.

An Employee Due Diligence program prevents issues as well. Create one that includes steps such as screening prospective employees and a documented system for managing those who fail to comply with AML/CTF obligations.

Maintain Your Records

Money laundering works because criminals perform their deeds in secret and make them appear legitimate. Maintaining records for every employee and customer in your venue is the best way to fight against this.

Keep organized, frequently updated information about every customer and every transaction. Make a note of all suspicious activity. This will make reporting easier and help you maintain AML/CTF compliance.

Conduct Compliance Reporting and Independent Reviews

Compliance reporting is required for any venues licensed to run 16 or more electronic gaming machines that don’t provide other designated services and any member of a DBG or designated business group.

An independent review is an assessment of Part A of your AML/CTF program to ensure it’s compliant and relevant for your business. They’re completed between 1 January and 31 December and require you to submit an AUSTRAC compliance report between 2 January and 31 March.

Hire an AML/CTF Compliance Company

A compliance officer is a wonderful resource but may be unable to catch everything. There may be situations where you need extra help, especially if you run a large operation.

A compliance company can help you develop your program, perform risk assessments, and meet all other AUSTRAC obligations.

Potential Penalties

Potential penalties for not following AUSTRAC requirements include a maximum penalty of $4.2 million for individual owners and $21 million for companies.

Failure to submit a compliance report can result in an infringement notice of up to $12,600 for companies and $2,520 for individuals and civil penalties of up to $21 million for companies and $4.2 million for individuals.

Providing false information in your compliance report is considered a criminal offence in Australia. It comes with penalties of up to 10 years in prison and/or a $2.1 million fine.

These are only some of the potential penalties you may face. Australia takes AML/CTF compliance seriously, and you should as well.

Where to Find Help with AML/CTF Compliance

AUSTRAC regulations in Australia are a way to fight against the country’s problem with criminals who engage in money laundering and terrorism funding schemes. Every business must monitor its customers and employees for suspicious activity.

AML/CTF compliance for clubs and pubs is especially important because they’re a hotspot for these types of criminals. Gambling is one of the fastest ways to launder dirty money and make it appear legitimate.

 

The AML Company is here to help with all aspects of AUSTRAC compliance. Contact us for more information today.

The AML Company provides AML/CTF compliance solutions for Pubs and Clubs in NSW and QLD.
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