New customer verification AML/CTF Rule to support early release of superannuation initiative

AUSTRAC has introduced a new AML/CTF Rule that will help to streamline the customer verification process for superannuation funds to make payments to their members made under the COVID-19 early release of superannuation initiative.

The COVID-19 early release of superannuation initiative is administered by the Australian Taxation Office.

The new Rule means that where the Australian Taxation Office (ATO) has approved the payment, superannuation funds will not have to carry out their customer identification procedure before making these payments to their members. This follows our update made on 27 March 2019.

Other obligations

Despite this change to customer identification procedure requirements specifically for the COVID-19 early release of superannuation initiative, other obligations under the AML/CTF Act still apply, including ongoing customer due diligence and suspicious matter reporting.

Continuing to comply with these other obligations, which are often required when you suspect a customer is not who they claim to be, will help to protect your fund from existing, as well as new and emerging threats, including fraud and identity theft.

Some of these other obligations are:

Ongoing customer due diligence

Your ongoing customer due diligence systems and controls, including your Transaction Monitoring Program (TMP), will help you to identify payments that are unusual and that should be subject to enhanced customer due diligence.

• AUSTRAC understands that the exemption will mean superannuation funds will have less information to form judgements about a transaction before making the payment.
• Instead, ongoing customer due diligence will more likely identify unusual transactions after a payment has been made.
• However, if you identify an unusual transaction that warrants further investigation before a payment is made, you should still undertake enhanced customer due diligence in accordance with your AML/CTF program.

Enhanced customer due diligence

Your enhanced customer due diligence (ECDD) program will guide you through measures to apply if you identify a high risk of money-laundering or terrorism-financing, including after a payment. Your ECDD program may comprise aspects of your existing customer identification procedure.

Suspicious matter reporting

Continue to submit suspicious matter reports (SMRs) to AUSTRAC if you have reasonable grounds to suspect that a transaction may be related to a crime or suspect a customer is not who they claim to be.

• Those grounds may be a result of your ongoing customer due diligence or information provided to you by authorities.
• It could include where you suspect, on reasonable grounds that the recipient of the payment is not who they claim to be. Or, that you hold other information that may be relevant to the investigation or prosecution of an offence.
• High-quality, accurate and timely suspicious matter reports give AUSTRAC and our partner agencies the best chance to detect, deter and disrupt criminal activity.
• Please include the term “FASUPER2020” in any SMRs you submit in relation to the early release of superannuation initiative.

Guidance scenarios

The following scenarios are illustrative only and will help you to manage and resolve situations that involve discrepancies with customer information and certain customer behaviours. You may adopt other approaches to achieve the same or a similar outcome.

Example 1: Jenny’s date of birth details don’t match ATO notification

Super Fund A receives a notification from the ATO under the COVID-19 early release of superannuation initiative to make a $10,000 payment to their member, Jenny. The notification includes Jenny’s name, date of birth, Tax File Number and bank account number.

Super Fund A notices that the date of birth provided by the ATO doesn’t match the date of birth on Jenny’s account.

In accordance with its AML/CTF program, Super Fund A applies its risk based systems and controls on to how to respond to discrepancies. Super Fund A contacts Jenny and asks her to provide a clear, front-view selfie photograph that includes a clear image of her drivers licence. Super Fund A has now confirmed Jenny’s correct date of birth and that the discrepancy was an administrative error.

Super Fund A processes payment of the funds.

Example 2: Finn receives an unusually large contribution

Super Fund B receives a notification from the ATO under the COVID-19 early release of superannuation initiative to make a $10,000 payment to Finn. The notification includes Finn’s name, date of birth, Tax File Number and bank account number.

Super Fund B is satisfied that the information provided by the ATO matches the information held on Finn’s member file.

However, Super Fund B’s transaction monitoring program recently flagged a large contribution made to Finn’s account. 

Super Fund B applies its enhanced customer due diligence program, and conducts further analysis of transactions and customer identification. It reveals that the transaction is unusually large compared to historic account activity.

Super Fund B allows the payment, however forms the view that the large contribution payment was suspicious and submits a suspicious matter report to AUSTRAC.  

Example 3: Unknown person attempts to change contact details

Super Fund C has had frequent contact from a person identifying themselves as Harriet since the early release of superannuation initiative was announced. She has made repeated attempts to change her postal address, but in each case, she was unable to complete the security questions.

Super Fund C contacts Harriet using her contact details on file, and asks whether she recently made such requests. Harriet advises that she hasn’t contacted Super Fund C for over a year. 

Super Fund C forms a view that the frequent contact was suspicious and submits a suspicious matter report to AUSTRAC. Super Fund C also places an alert on Harriet’s member account and increases the level of security questions required to make any changes to account details.

Example 4: Daniel receives two payments for early release of superannuation

In mid-September 2020, Super Fund D receives a notification from the ATO under the COVID-19 early release of superannuation initiative to make a $10,000 payment to Daniel. The notification includes Daniel’s name, date of birth, Tax File Number and bank account number.

Super Fund D realises that it has already made a payment under the COVID-19 early release of super initiative in the previous financial year (June 2020).

Super Fund D compares the bank account details provided with the current application with the bank account provided in the previous application and notices they are different BSB and account numbers. 

Super Fund D applies its enhanced customer due diligence program which involves making contact with Daniel and verifying the two payments and accounts. Daniel confirms that he recently changed banks and that both accounts belong to him. Super Fund D processes payment of the funds to Daniel.

Example 5: Suspected fraud identified by Alicia after payments are made

Super Fund E receives two separate notifications from the ATO under the COVID-19 early release of superannuation initiative to each make a $10,000 payment to Alicia in May and September.

In November, Alicia checks the balance of her super fund and notices two separate withdrawals of $10,000 were made earlier in the year that she did not authorise. Alicia contacts Super Fund E and advises them of these payments. Super Fund E contacts the ATO and provides them with this information.

Super Fund E also applies its enhanced customer due diligence program. This includes checking whether any changes were made to Alicia’s contact details, and whether the fund has made any other payments to the bank account used to withdraw funds from Alicia’s account. 

Super Fund E forms the view that fraud has been committed and submits a suspicious matter report to AUSTRAC.

Example 6: Law enforcement information about a payment on Gary’s account

Super Fund F receives a notification from the ATO under the COVID-19 early release of superannuation initiative to make a $10,000 payment to Gary. The notification includes Gary’s name, date of birth, Tax File Number and bank account number.

Super Fund F is satisfied that the information provided by the ATO matches the information held on Gary’s member file. Super Fund F processes a payment of $10,000.

Three months later, a law enforcement agency contacts Super Fund F to enquire about the circumstances regarding the payment. The law enforcement agency advises that the funds were used to finance a major criminal syndicate to undertake further criminal activity. The law enforcement agency serves a notice on Super Fund F that requires them to produce records and information about the payment.

Super Fund F applies its enhanced customer due diligence program, which involves further analysis of KYC information and past transactions. As a result of enquiries from the law enforcement agency and findings from undertaking enhanced customer due diligence, Super Fund F submits a suspicious matter report to AUSTRAC.