Similar obligations from different parts of the advice chain means AUSTRAC reporting adds a layer of redundancy, the Financial Advice Association has argued.
AUSTRAC, which is the government department that tracks and prevents money laundering, held a consultation regarding the use of external providers to meet anti-money laundering and counter-terrorism financing (AML/CTF) obligations.
“Your business is responsible for any breach of your AML/CTF obligations, even under outsourcing arrangements,” the consultation said.
“You should take steps to ensure you manage any risks of outsourcing and have appropriate oversight of your providers.”
While the consultation focused on outsourcing of external providers to make sure AML/CTF obligations are fulfilled, the FAAA argued that the provision of financial advice is unique, as is the arrangements between AFSLs and product providers which makes the process redundant in some circumstances.
“Under the Corporations Act, product providers are required to conduct due diligence on the advice AFSL prior to permitting the distribution of their financial products through the AFSL’s advisers,” the FAAA submission said.
“The product provider/AFSL/adviser distribution channel is heavily regulated under corporations and financial services law.”
The submission said the AFSL-product provider relationship already operated under AUSTRAC’s guidance on reliance.
“We are concerned that the application of the proposed outsourcing guidance to these relationships will create confusion and potentially duplicate existing obligations for reporting entities,” the submission said.
FAAA head of policy Phil Anderson said the process for outsourcing was sensible, but there’s an important distinction between whether someone in the product chain also had AML/CTF obligations or not.
“That’s the distinction we’re making,” Anderson told Professional Planner.
“If you’re relying upon someone who is a reporting entity and they have other obligations that through another regime they’re part of which is the case of advice licensees, the Corps Act regime, then we shouldn’t be doubling up and saying you’ve got to meet these obligations as well.”
In a separate submission, the Financial Services Council argued more guidance to business on outsourcing arrangements was needed.
“Our view is that the guidance would benefit with the inclusion of more detail to provide industry with more insights that will enable reporting entities across the regulated population to effectively implement the requirements with a clear understanding of AUSTRAC ‘s expectations,” the FSC submission said.
