AIST requests clarity on superannuation AML obligations

The Australian Institute of Superannuation Trustees (AIST) has written to Australian Transaction Reports and Analysis Centre (AUSTRAC) asking for clarity on how anti-money laundering (AML) and counter-terrorism financing (CTF) measures apply to superannuation funds.

The submission concerns AUSTRAC’s guidance on Source of Funds (SoF) and Source of Wealth (SoW) with the AIST requesting further clarification on how it applied to profit-to-member superannuation funds.

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“AIST believes it would be beneficial for this to be specifically restated in the guidance to clarify obligations on profit-to-member superannuation funds to follow the proposed SoF and SoW measures,” it noted.

With AUSTRAC preparing an updated industry risk assessment on the application of SoF and SoW measures, AIST suggested AUSTRAC defined how it applied to the superannuation sector by acknowledging:

1. Super funds operated in a medium risk money laundering (ML) and terrorism financing (TF) environment which was lower in risk than other reporting entities;
2. A risk-based approach in a super fund’s AML/CTF program included the flexibility to accept self-attestation as a valid method for confirming SoF;
3. Although super funds were reporting entities and provided designated services under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act), they did not deal in a heavy cash environment and were not exposed to the same ML/TF risks as the banking sector;
4. The impact of schemes such as early release on the criminal threat environment in superannuation; and
5. Super funds would have greater capacity to detect and prevent fraud related activities if super funds had access to a register that allowed them to check the bank account that belonged to the payee.

AIST also requested the updated risk assessment provided:

1. Clarity in expectations for SoF and SoW checks that recognise super funds may have a simplified verification standard compared to other reporting entities in financial services;
2. Clarity that the guidance did not extend beyond the legislative requirement that reporting entities take reasonable measures to establish SoF and SoW; and
3. Mechanisms for consistency in risk assessment across the industry to ensure that super funds’ AML/CTF programs were resourced and managed in a way that was proportionate to the risks and to reduce regulatory burden.