Call to split adviser/product provider AML/CTF obligations

It will be inappropriate for financial advisers to be held responsible for monitoring unusual transactions and behaviours of behalf of product providers under new AML/CTF rules, according to the Financial Advice Association of Australia (FAAA).

The FAAA has told a Senate inquiry into the new Anti-Money Laundering and Counter-Terrorism Financing Bill 2024 that it wants clarity on the roles and obligations in circumstances where the new rules will be applied differently to product providers and advisers.

It said it needed to be recognised that the adviser-client relationship is different to the product-customer relationship and the different designated services each reporting entity provides.

“As such, we believe it would be inappropriate for product providers to rely on financial advisers to monitor for ‘unusual transactions and behaviours’ of a customer on behalf of a product provider. Each type of reporting entity should be responsible for their own customer monitoring based on the type of customer relationships they hold and the designated services they provide.”

“While third party reliance provides certain efficiencies for clients, these arrangements can create tension from product providers requesting additional and ongoing CDD of advisers (who are exempt from such obligations) even when there is no change in the client’s circumstances and no SMR event,” the FAAA submission said.

It said that, on this basis, it was recommending that the legislation exclude the monitoring of “unusual transactions and behaviours’ of a customer from third party reliance arrangements.

The FAAA made clear in its submission that the financial advice market had changed significantly from the days when it was predominantly made up of large financial institutions holding Australian Financial Services Licenses.

“There has been a noticeable shift with the major banks, Macquarie, Insignia and AMP all exiting or significantly reducing their footprint in the financial advice market over recent years,” it said.

“Small licensees now make up the largest portion of the advisory market. These small businesses do not have the luxury of AML/CTF in-house experts previously relied upon during the establishment of the regime and will require time as well as adequate guidance and support from the Regulator to ensure a clear understanding of the intent of their obligations under the Bill.”