Brokers are likely to emerge unscathed from anti-money laundering regulations coming into force tomorrow – but life insurers and premium funders will probably have to amend their procedures.

The Australian Transaction Reports and Analysis Centre (Austrac) is enforcing rigorous client identity checks as part of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.

National Insurance Brokers Association CEO Noel Pettersen says the impact on the general insurance sector will be minimal.

“It will certainly affect those involved in premium funding,” he said. “They need to ensure anti-money laundering and counter-terrorism funding programs are in place.

“It will have the greatest impact in life insurance. I don’t think it will have a great impact on the general side.”

The reforms bring Australia into line with regulations issued by the influential Paris-based Financial Action Taskforce on Money Laundering.

In 2005, the taskforce issued a damning report on Australia, saying the Federal Government had failed to counter money laundering worth up to $3 billion a year.

New rules mean firms must now establish anti-money laundering and counter-terrorism financing schemes, including risk assessments of customers and employees.

Businesses must also complete a compliance report outlining how they intend to reduce risk. New clients will also face stringent identification tests.

Banks, non-bank financial firms, gaming companies and bullion dealers are the first companies to face the new rules.

Austrac’s imposition of civil penalties of up to $11 million for non-compliance by companies and $2.2 million for individuals makes Australia one of the toughest anti-money laundering regimes worldwide.

There are fears a second stage of reforms due next year – extending to a wider range of financial service providers – will blow out red tape and compliance costs.