Financial Services Reform Update 2008

AML/CTF applies to managed investment schemes from 31 January 2008

1.	a fund manager that issues a security may carry out customer identification procedures within 5 business days after issuing the security if the fund manager:
		(a) does not accept physical currency;
		(b) does not permit the customer to transfer or part with the proceeds from a sale of a security; and
		(c) does not permit the customer to re-sell, transfer or part with a security or derivative which has been acquired by the customer.
2.	a fund manager, as an issuer of securities (amongst other reporting entities), is included as an ordering institution or a beneficiary institution for the purposes of sections 8 and 9 of the AML/CTF Act, concerning same-person and person-to-person electronic funds transfer instructions – this may require the fund manager to keep records of EFTs and report certain transactions to AUSTRAC, and involve the provision of designated services referred to in items 29 or 30 of table 1 in section 6 of the AML/CTF Act;
3.	if reporting entity 1 is taken over by reporting entity 2 under a takeover bid, or transfers its shares to reporting entity 2 under a scheme of arrangement, or disposes of or assigns a part of its business involving a designated service to reporting entity 2, reporting entity 2 is not required to carry out customer identification procedures in relation to reporting entity 1’s customers (whether pre- or post-commencement), but only if reporting entity 2 has determined the ML/TF risk it may reasonably face in providing a designated service to reporting entity 1’s customers – curiously, the draft rule does not appear to apply to private share acquisitions.

Please note these rules are still drafts only, hence fund managers should carry out customer identification procedures prior to issuing units until the final rule is issued allowing 5 business days to conduct identifications.

If you would like more information, please contact a member of our National Financial Services Reform Team listed on the right hand side of the screen.

To view a print friendly version please click on the PDF link below.