Banks and other organisations with reporting responsibilities under anti-money laundering and counter-terrorism financing legislation may have to conduct far more comprehensive customer due diligence, if changes being considered by the AML/CTF regulator are adopted.The Australian AML/CTF regime has been identified as not meeting international standards. According to the Financial Action Task Force, an international body that sets standards for anti-money laundering activities, the Australian regime does not have adequate provisions that would allow a reporting entity to understand the "control structure" of a customer.Last week, the Australian regulator, Austrac, issued a consultation paper that outlines FATF's due diligence standards and considers whether Australia's anti-money laundering and counter-terrorism financing regime should adopt them.The FATF standard requires reporting entities to understand who the customer is, understand who owns and controls the customer, and understand the business relationships of the customer.In addition, the reporting entity must conduct ongoing due diligence on these business relationships, including scrutiny of transactions.Under current Australian rules, reporting entities must have programs in place that enable them to "know their customers". They must also perform ongoing due diligence, monitor transactions and report suspicious matters.Reporting entities are expected to take a risk-based approach to implementing these programs, based on a profile of the customer's business.Under current Australian rules it is left to the discretion of reporting entities to decide whether to undertake further checks in order to understand the beneficial ownership structures. Austrac said this discretion had led to inconsistent practice.It said: "Many reporting entities are not undertaking customer due diligence beyond the minimum threshold mandated. The regulator's view is that these reporting entities may have a limited ability to understand the full spectrum of risks presented by their customers."FATF found that, in some instances, Australian reporting entities are given too much discretion in addressing these obligations, especially when it comes to understanding the beneficial ownership, control and nature of the business of their customers.Specific measures Austrac is considering include an extension of the definition of beneficial ownership used in customer due diligence to include a concept of "control". Reporting entities may have to take steps to determine whether the customer is conducting a transaction on behalf of a third party and to identify the beneficiaries of the transaction.This would involve finding out whether the customer is a subsidiary of another entity and understanding the customer's organisational structure. It would also involve collecting information on the powers that bind the legal arrangements of a customer, such as its articles of association. FATF said another shortcoming of the Australian system was that it did not include an obligation to apply enhanced customer due diligence where a customer is classified as a politically exposed person.FATF was also critical of the fact that the local regime does not include an obligation to keep customer due diligence information up to date.Austrac pointed out that there was a risk of adverse consequences if Australia's AML/CTF regime did not meet international standards. Regulated entities are to apply a higher level of due diligence when dealing with