Source: http://www.aic.gov.au
Executive summary
People and businesses wishing to transfer money between themselves can make use of a variety of procedures. In addition to using simple cash transactions, most money transfers in Western societies take place using conventional banks and other financial institutions. In addition to ordinary banking, however, money and other forms of value can be transferred through the use of so-called ‘remittance services’ which have operated for hundreds of years in non-Western societies. Originating in southeast Asia and India, users of
these systems transfer funds through the use of agents who enter into agreements with each other
to receive money from people in one country (such as overseas workers) and to pay money to specified relatives or friends in other countries without having to rely on conventional banking arrangements. Funds can be moved quickly, cheaply and securely between locations that often don’t have established banking networks or modern forms of electronic funds transfers available.
Because such systems operate outside conventional banking systems, they are known as ‘alternative
remittance’, ‘underground’ or ‘parallel banking’ systems. They are invariably legitimate and legal in many countries, although concerns have arisen in recent years that they could be used to circumvent anti-money laundering and counter-terrorism financing controls that now operate across the global financial services sector. Particular risks arise from the irregular forms of record-keeping which are often employed and the possibility that the laws of those countries in which they operate may not be fully complied with.
A heightened awareness of how terrorist activities are financed has led governments in developed
countries to include alternative remittance systems (ARS) within the regulatory controls that apply to conventional banks. In Australia, for example, the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) classified the provision of alternative remittance as a designated service which requires providers to not only report suspicious matters to Australia’s financial intelligence unit and anti-money laundering and counterterrorism
financing (AML/CTF) regulator, the Australian Transaction Reports and Analysis Centre (AUSTRAC), but also to register with AUSTRAC before designated remittance services can be provided. This legislation places remittance providers under the same obligations as other reporting entities. This includes obligations to adopt AML/CTF programs and to file annual compliance
reports with AUSTRAC.
Detailed report at the link: here