AML/CTF Employee Due Diligence – New Proposed Guidance
In December 2022, AUSTRAC released proposed updated guidance on employee due diligence (EDD) for reporting entities.
The report covered which employees need to be screened, how to screen them, details on compliance training and possible steps to respond to non-compliance.
EDD involves screening employees for money laundering or terrorism financing risk. A reporting entity’s EDD program should screen and re-screen employees; the nature of these processes and their frequency should be based on risk levels, rather than prescription.
Which employees need to be screened?
Employees that need to be screened include
- board members/directors
- executives
- senior managers
- officers
- contractors
Existing employees may need to be re-screened prior to taking on new roles or duties that facilitate the commission of money laundering or terrorism financing.
Although all prospective and current employees must undergo some form of money laundering and terrorism financing check, some roles pose higher risk and require more rigorous processes. For example, a manager poses a higher risk because they can authorise the release of funds, correspond directly with customers and have access to highly sensitive customer and business information.
How should employees be screened?
The process for screening prospective and current employees is flexible and can be adapted to each reporting entity’s business structure and risk level.
AUSTRAC advises reporting entities to consider the following steps:
- Identifying and verifying employee identity
- Confirming employment history and qualifications
- Undertaking character and background checks
- Reviewing a licence with a Fit and Proper Person test
- Requesting they complete a National Police Check
For employees in high-risk roles, reporting entities should also consider requesting more information that may expose any individual vulnerabilities or risks to the company. For example, businesses can search if they are the subject of any adverse media reports or legal proceedings.
Self-Disclosure
Alongside a formalised recurring screening process, reporting entities may include compulsory self-disclosure in their EDD program. This requires employees to communicate any material changes in their circumstances that may impact their suitability for their role, such as undertaking a second job or being charged with a criminal offence. You may also request self-attestations, in the form of a signed document or questionnaire, from employees on a regular basis to capture any material changes to their circumstances.
Training processes
All employees must undertake anti-money laundering risk awareness training. This training outlines a business’ obligations, the consequences of non-compliance, the specific type of money laundering and terrorism financing risk faced by the business and any internal procedures the employee must carry out. It can exist in a number of forms: online training courses, training with an instructor, induction training and/or regular bulletins to employees about legal updates or changes to money laundering risk.
A reporting entity must regularly review its training, updating it to align with any legal changes or changes to risk profiles. It may also be required to provide additional or revised training if employees fail to comply with the anti-money laundering program, new methodologies related to the business emerge, or AUSTRAC issues new guidance or feedback to the business.
Dealing with non-compliance
A reporting entity’s EDD program must outline standardised steps to respond to an employee who does not comply with the anti-money laundering program. AUSTRAC advises that these steps can range from increased mandatory anti-money laundering training to disciplinary action, such as dismissal.
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