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The update comes after the association sought urgent clarification following the introduction of updated anti-money laundering and counter-terrorism financing (AML/CTF) regulations on 1 July, amid concerns that commercial asset finance broking activities could fall within the definition of “debt financing” as a designated service under the legislation.
Following discussions between the Finance Brokers Association of Australia (FBAA) and AUSTRAC, the regulator acknowledged that the wording could be broad enough to potentially include commercial asset finance broking and recognised that its current guidance does not explain how it interprets the scope of “debt financing”.
“AUSTRAC has acknowledged our valid concerns and advised it is actively considering the issue before clarifying its position,” FBAA CEO Leo Gagic said.
AUSTRAC also advised the FBAA that it does not expect finance brokers to begin working towards compliance until it publishes its position on the scope of debt financing under the legislation.
“If the outcome is that finance brokering activities are within scope of the AML/CTF Act, we recognise that affected businesses will need time to work towards compliance, including establishing AML/CTF programs and training staff,” the regulator said.
Gagic said: “Brokers do not need to do anything now, and we will update the industry when we know more.”
What happened?
The FBAA first raised the issue after reforms expanded the AML/CTF Act from 1 July to cover a new tranche of businesses and professional service providers while also bringing additional designated services under AUSTRAC’s remit, including certain professional services relating to equity or debt financing.
The association said concerns centred on AUSTRAC’s guidance, which states that debt financing includes “all capital and debt raising methods”, including “secured or unsecured bonds, bills or notes, asset financing, loans (including government loans) and debentures”.
It’s this broad definition that the FBAA has raised questions over whether commercial asset finance brokers arranging finance for a business to purchase a vehicle or piece of equipment could fall within the expanded regime.
All new entities captured by the definition could be required to enrol with the Australian Transaction Reports and Analysis Centre (AUSTRAC) and meet a raft of AML/CTF obligations, including developing an AML/CTF program, appointing a compliance officer, conducting customer due diligence, and reporting suspicious matters.
Gagic said there was “genuine concern” over whether the industry had been captured by the reforms.
“Our industry is keen to understand its compliance responsibilities and ensure we are appropriately preparing for any regulatory changes,” Gagic said.
He said AUSTRAC needed to address the “significant uncertainty and confusion across the broker community regarding whether these changes apply to our sector, and if so, explain the extent of the obligations that may arise”.
The FBAA said it would continue engaging with AUSTRAC and provide further updates to members once the regulator clarifies its position.
[Related: APRA proposes shake-up of presale requirements]
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