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AUSTRAC Source of Funds/Wealth Guidance

AUSTRAC_crypto_AML_reporting

The Australian Transaction Reports and Analysis Centre’s (AUSTRAC) Source of funds and source of wealth guidance, as issued on October 5th, applies to all reporting entities.

The guidance provides a definition of SoF and SoW:

Source of funds refers to how and where the customer obtained the funds for a specific transaction or designated service you provide to the customer.

‘Source of wealth’ refers to where the customer’s entire body of wealth and assets came from – not just what is involved in a transaction or business relationship. It describes the economic, business, or commercial activities that generated, or significantly contributed to, the customer’s overall net worth.

Key takeaways:

  • Conduct a healthy assessment of the risks the business is exposed to and develop a risk-based approach in line with the findings to effectively use resources and efficiently combat, prevent, and disrupt ML/TF.
  • The AML/CFT policy and procedures of a business must document the circumstances in which the identification of the SoF and SoW of customers and beneficial owners is necessary.
  • SoF and SoW checks are to be applied on a risk-based approach, for high-risk clients and transactions
  • Once it is determined that SoF/SoW checks are necessary and information is obtained from the customer, businesses need to decide on a risk-sensitive basis whether additional steps are necessary to verify the accuracy of the information based on reliable and independent sources.

The guidance covers the following topics:

  1. Timing of identifying SoW/SoF:
    • At onboarding
    • When the customer or beneficial owner is a foreign PEP
    • when carrying out ECDD for higher-risk customers
    • as part of ongoing due diligence and monitoring of any customer,
    • where there is a change in the ML/TF risk profile.
  2. Ways to obtain information on SoF/SoW:
    • Requesting the client to make a formal declaration about their source of funds or source of wealth
    • Verify if the customer has already provided such information for the purpose of other designated services or products
    • Resort to searches on secondary reputable sources (internet, commercial databases, published lists of prominent persons) made available by reputable persons (such as company registries, banks, accountants and lawyers, commercial data bases, sanctions lists and reputable media sources)
  3. The guidance provides an extensive and non-exhaustive list of documents that can be accepted as SoF/SoW proof.
  4. Transaction specific risks that should be a trigger for SoW/SoF checks (non-exhaustive list):
    • Either party to a transaction is established in a high-risk country
    • The transaction is complex,
    • The transaction is unusually large,
    • The transaction forms an unusual pattern of transactions,
    • The transaction has no apparent legitimate purpose (commercial, legal or otherwise)
    • There is adverse media reporting or other reliable information that is relevant to the customer’s source of funds and/or source of wealth
    • There has been a material change in the customer’s circumstances
  5. High-risk customers and control structures:
    • PEPs (foreign and domestic)
    • High-net-worth individuals moving funds into or out of Australia for the purposes cash intensive services
    • Complex and opaque corporate or trust structures that do not appear to have a legitimate economic purpose.
    • Customers acting as intermediaries for another person 
  6. If the source of funds or source of wealth cannot be established
    • Consider whether to close the business relationship
    • If the business relationship continues, the frequency of reviews must be increased
  7. Report suspicious activity via the suspicious matter report to AUSTRAC if there is suspicion or reasonable grounds that a person or transaction is linked to a crime or may otherwise be relevant to the investigation of an offence.

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