AUSTRAC warned on changes unreasonably tying up resources
A proposal by Government transaction tracking agency, AUSTRAC, to impose higher levels of customer due diligence (CDD) on financial services companies has prompted superannuation funds to warn that it risks unreasonably tying up resources.
In a submission to AUSTRAC dealing with the new CDD proposals, the Association of Superannuation Funds of Australia (ASFA) said the thrust of a paper outlining the agency's approach "seems to be to increase the obligations required of reporting entities, including superannuation funds".
"In particular, we are concerned about the superannuation industry's need to devote ever increasing resources to comply with anti-money launder/counter terrorism financing (AML/CTF) requirements," the ASFA submission said. "In a superannuation fund, many of which have tens of thousands of members, it is simply not possible to gain a detailed understanding of each customer, particularly those members of superannuation funds who have been enrolled by their employer."
The ASFA submission said that, given the long-term nature of superannuation where monies are subject to ‘preservation' and required to be retained in the system until a ‘condition of release' of the benefit is met, "it is likely that most superannuation funds have classified a substantial proportion of their members as low risk for AML/CTF purposes, and so are only undertaking basic know your customer (KYC) and ongoing customer due diligence (OCDD) processes".
"Therefore, we would envisage that enhanced CDD would only apply if an AML/CTF flag has been raised with respect to a specific customer (ie, superannuation fund member)," the submission said.
It said that, as a general principle, ASFA supported the proposed reforms in the discussion paper that reduced the regulatory burden on reporting entities — "That is, where the risk is low (eg, low value transactions), the effort and resources required to be expended by reporting entities should be reduced wherever possible".
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