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Chapter 3 - Designated business groups

Contents


Introduction

A designated business group (DBG) is a group of two or more associated businesses or persons who join together to share certain obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).

This chapter assists reporting entities to understand how DBGs are established and the specific requirements for DBGs under the AML/CTF Act and AML/CTF Rules.

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What is a 'designated business group'?

A 'designated business group' enables associated business entities to share the administration of certain obligations under the AML/CTF Act.

The AML/CTF Act allows any member of a DBG to fulfil certain obligations on behalf of other members of the group. Alternatively, reporting entities that are members of a DBG may still choose to fulfil their own AML/CTF obligations.

Importantly, each reporting entity remains responsible for its legal obligations under the AML/CTF Act, even if it is a member of a DBG.

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Which AML/CTF Act obligations can be fulfilled by members of a DBG?

The AML/CTF Act allows DBG members to adopt a joint AML/CTF program (comprising Part A general and Part B customer identification), rather than individual AML/CTF programs (see section 85 of the AML/CTF Act). Alternatively, an individual DBG member may still choose to adopt their own standard or special AML/CTF program. See Chapter 6 - AML/CTF programs for more information.

A DBG member may fulfil a range of other AML/CTF Act obligations for another member of the group as follows:

  • retaining verification information about verification requests to a credit reporting agency (section 35F of the AML/CTF Act)
  • conducting ongoing customer due diligence (section 36 of the AML/CTF Act)
  • lodging AML/CTF compliance reports with the AUSTRAC CEO (section 47)
  • recording designated services (section 106)
  • retaining transaction records and customer provided transaction documents (section 107 and 108)
  • making and retaining records of customer identification procedures (section 112 and 113)
  • providing and retaining copies of customer identification records about procedures deemed to have been carried out by a reporting entity (section 114)
  • making and retaining records of AML/CTF programs, including any variations (section 116).

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What are the requirements for a DBG?

A DBG must meet the requirements of section 5 of the AML/CTF Act and chapter 2 of the AML/CTF Rules.

A DBG comprises two or more persons where:

  • each member of the group has elected in writing to be a member of the group
  • no member of the group is a member of another DBG
  • the group meets the criteria outlined in chapter 2 of the AML/CTF Rules. These criteria are described below.

Reporting entities may be asked to show they meet the criteria for forming a DBG. For example, they may be asked to provide evidence of a relationship with other members of the group or evidence of a joint venture agreement.

To form a DBG, each member of the DBG must be one of the following:

1. A related company

Each DBG member must be related to other members within the meaning of section 50 of the Corporations Act 2001. That is, each member must be a holding company, a subsidiary or a subsidiary of a holding company, of another member and be either:

  • a reporting entity; or
  • a company in a foreign country that would be a reporting entity if it resided in Australia.

2. Joint venture

A joint venture only satisfies the DBG eligibility criteria if:

  • the relationship between the participants is governed by an agreement that sets out legal contractual arrangements of the joint venture; and
  • each DBG member provides designated services under that agreement.

3. An accounting practice

Each member of the group must be an accounting practice or an accounting practice related-person that is:

  • a person, other than an individual, which the accounting practice controls; or
  • an accounting practice that provides a designated service under a joint venture agreement, to which each member of the group is a party; or
  • a person that provides or assists to provide a designated service to the customers of the accounting practice;

and be either:

  • a reporting entity; or
  • a foreign entity that would be a reporting entity if it were resident in Australia.

4. A law practice

Each member of the group must be a law practice or a law practice-related person that is:

  • a person, other than an individual, which the law practice controls; or
  • a law practice that provides a designated service under a joint venture agreement, to which each member of the group is a party; or
  • a person that provides or assists to provide a designated service to the customers of the law practice;

and be either:

  • a reporting entity; or
  • a foreign entity which would be a reporting entity if it were resident in Australia.

5. An entity that provides a registrable designated remittance service

Each member of the group must be a reporting entity that provides a registrable designated remittance service, either as a:

  • money transfer service provider; or
  • a representative of a money transfer service provider under a representation agreement with a money transfer service provider; or
  • a sub-representative of a money transfer service provider under a sub-representation agreement with the representative of the money transfer service provider.

The DBG must also meet the additional criteria in paragraph 2.1.2A of the AML/CTF Rules.

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How is a DBG established or varied?

A DBG is established when the 'nominated contact officer' provides AUSTRAC with the approved form.

Completed forms to establish or vary a DBG can be submitted to AUSTRAC electronically through a reporting entity's AUSTRAC Online account.

Alternatively, hardcopy DBG forms can be submitted using the templates described in chapter 2 of the AML/CTF Rules. There are three templates specified in the Rules:

  • Form 1: Election to be a member of a designated business group
  • Form 2: Formation of a designated business group
  • Form 3: Variations.

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What is a 'nominated contact officer'?

A 'nominated contact officer' is a person appointed by the DBG to hold this position. This person must be either:

  • an 'officer' of a member of the group as defined in the Corporations Act (section 9 of the Corporations Act defines an 'officer' of a corporation and an 'officer' of an entity that is neither an individual nor a corporation)
  • the 'AML/CTF compliance officer' (as required under chapter 8 of the AML/CTF Rules) of a member of the group.

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How can DBG members notify AUSTRAC of changes to their DBG?

DBG members are required to keep their information up to date. The nominated contact officer must notify AUSTRAC, using DBG Form 3: Variations, if:

  • a member withdraws from the DBG
  • a person elects to be a member of the DBG
  • the DBG is terminated
  • any other change occurs in the details previously provided to AUSTRAC about the nominated contact officer or DBG.

AUSTRAC must be notified of these changes within 14 days of the event occurring.

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Last modified: 24/11/2014 13:01