International Funds Transfer Instruction (IFTI) reporting: An ongoing compliance challenge
28 June 2021
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28 June 2021
An age-old adage in the project management world "high speed, high quality, low cost...pick any two" accepts the premise that compromise is inevitable.
In the contemporary world of cross-border financial payments, reporting entities enjoy no such luxury. In fact, the opposite is the case given the importance of, and scrutiny placed on, the adherence to cross-border financial payment obligations. Therefore, there is no room for compromise when designing and implementing a robust IFTI reporting framework.
Section 45 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) outlines an obligation to report IFTIs within 10 business days after the day on which the instruction is sent or received. An IFTI is defined under section 46 of the AML/CTF Act and includes an electronic funds transfer instruction (IFTI-E) and instruction under a designated remittance arrangement (IFTI-DRA). While IFTI obligations may appear deceptively straightforward, in practice, it can be difficult to determine which entity in a payment chain is obligated to provide the IFTI report to the Australian Transaction Reports and Analysis Centre (AUSTRAC) .
Chapters 16 and 17 of the Anti‑Money Laundering and Counter‑Terrorism Financing Rules Instrument 2007 (No. 1) (Cth) (AML/CTF Rules) provide details of the information to be provided by a responsible entity when submitting an IFTI report.
Regulator expectations in relation to IFTI reporting have intensified in recent times. In response, reporting entities are facing ongoing challenges meeting their IFTI obligations, an issue which is compounded by emerging developments within the payments landscape, as summarised below:
Recent well-publicised enforcement action by AUSTRAC has highlighted the consequences a reporting entity may face if it has failed to implement a robust IFTI reporting framework.
In conducting numerous cross-border payment reviews for our clients, including assessments of the associated regulatory reporting obligations, we have observed that clients are over-reporting, under-reporting and mis-reporting their cross-border payments. In some cases, certain payment message types have been mis-used and payment data has been identified in incorrect fields.
The improper classification of payment messages and the presence of data quality issues reduce payment transparency and make adherence to IFTI reporting obligations more difficult to achieve.
Furthermore, a failure to detect and rectify weaknesses within a reporting entity's IFTI reporting framework may impede their ability to effectively migrate to the ISO 20022 standards before November 2025.
Given AUSTRAC's recent willingness to pursue enforcement action in response to IFTI non-compliance, it is important for reporting entities to ensure they have implemented a robust IFTI reporting framework.
Reporting entities can ensure they are well placed to consistently achieve accurate and compliant IFTI reporting outcomes by:
Authors: Samantha Carroll, Partner and Kieran Francis, Director, Risk Advisory.
This publication is a joint publication from Ashurst Australia and Ashurst Risk Advisory Pty Ltd, which are part of the Ashurst Group.
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This material is current as at 28 June 2021 but does not take into account any developments after that date. It is not intended to be a comprehensive review of all developments in the law or in practice, or to cover all aspects of those referred to, and does not constitute professional advice. The information provided is general in nature, and does not take into account and is not intended to apply to any specific issues or circumstances. Readers should take independent advice. No part of this publication may be reproduced by any process without prior written permission from Ashurst. While we use reasonable skill and care in the preparation of this material, we accept no liability for use of and reliance upon it by any person.
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