AUSTRAC praises regulation of digital currency exchange sector

Maria Nikolova

The latest AUSTRAC annual report says the regulation of the DCE sector has closed a significant gap in the AML/CTF regime.

AUSTRAC has earlier today posted its Annual Report 2017-18, evaluating highly the recently introduced rules for digital currency exchange (DCE) providers.

AUSTRAC has continued to work closely with and support the Attorney-General’s Department and the Department of Home Affairs, to develop and implement the first phase of reforms resulting from the statutory review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). On December 7, 2017 the Parliament passed the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017. After a public consultation period, AUSTRAC registered AML/CTF Rules to implement the amendments to the AML/CTF Act.

This allowed AUSTRAC to progress initiatives that were identified as priorities, including the regulation of digital currency exchange (DCE) providers. These reforms came into force on April 3, 2018, with a transitional period to enable the newly-regulated DCE sector to implement plans to meet their obligations and achieve full compliance within 12 months.

“AUSTRAC assesses that ‘phase 1’ of the reforms has been implemented successfully. The regulation of the DCE sector has closed a significant gap in the AML/CTF regime, with DCE providers now submitting valuable intelligence reports to AUSTRAC”.

The reforms are also expected to generate savings to industry each year, for the 10 years after the measures come into force, of more than $36 million.

To assist DCE operators in meeting their new obligations under the AML/CTF Act, AUSTRAC held six half-day workshops across Australia. These included presentations on topics such as DCE registration, AML/CTF program requirements and reporting obligations, with a particular focus on suspicious matter reporting. In total, 59 employees from 35 DCE businesses attended the workshops. Feedback from DCE businesses following the workshops was overwhelmingly positive, with all of them saying they now have a better understanding of their AML/ CTF obligations.

Let’s recall that, under the new regulation, DCE providers are required to:

  • enroll and register with AUSTRAC;
  • establish, implement and maintain an AML/CTF program, which sets the framework for businesses to comply with their obligations, including customer due diligence requirements;
  • report threshold transactions and suspicious matters to AUSTRAC, and
  • keep appropriate records.

The registration by AUSTRAC of a digital currency exchange or remittance service provider, however, does not constitute endorsement of that business or compliance with any anti-money laundering and counter-terrorism financing (AML/CTF) obligations. DCE providers are not allowed to put AUSTRAC’s logo on their websites even if they are registered.

In its annual report, AUSTRAC explains that the next phase of AML/CFT reforms will include the simplification and enhancement of secrecy and access provisions, the customer due diligence reliance process and cross-border reporting reforms. The final phase will implement broader streamlining, simplification and enhancement of the AML/CTF framework, and consider options for the regulation of designated non-financial business and professions.

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