The State of AML Regulations in Australia
#AUSTRAC #AML #Australia
May 18, 2023
4 Minutes
English
The Land Down Under is Thriving, But Money Laundering Remains an Ongoing Challenge
Australia’economy has been booming in recent years thanks to increasing global trade and mining. With a GDP of over $1.89 trillion in 2022, Australia ranks 13th in economic freedom and 3rd in the Asia-Pacific on the 2022 Index of Economic Freedom. Australian capital cities such as Sydney, Melbourne and Brisbane are also now emerging as major financial hubs in the Asia-Pacific region.
However, with rising economic activity comes a higher risk of money laundering. As a result, the Australian government has put in place regulations to combat money laundering and terrorist financing, which has led to the formation of the Australian Transaction Reports and AnalysisCentre (AUSTRAC). In this blog, we will explore the state of anti-money laundering (AML) in Australia, the current landscape of regulations, and the consequences of non-compliance.
As Australia's central government agency responsible for collecting, analysing, and disseminating financial intelligence, AUSTRAC regulates over 16,000 businesses to detect and curb money laundering.
AUSTRAC is the regulatory body in charge of AML and CTF in Australia. It requires businesses to implement AML/CTF programs, conduct risk assessments, and report suspicious transactions. The Office of the Australian Information Commissioner (OAIC) also plays a role in the AML/CTF prevention, ensuring the privacy of client information is upheld and data breaches, such as the serious cyber attack on Australia’s biggest telecommunications provider in September 2022, are reported and investigated.
According to AUSTRAC's 2020-2021 annual report, it oversees $7.3 trillion in transactions annually. AUSTRAC requires regulated entities like banks, remittance firms, and other industries under scrutiny (more on this shortly) to conduct enhanced customer due diligence, keep records, report suspicious transactions over $10,000 (or $5,000 for cash), and annual compliance reports. Failure to comply can result in significant penalties. For instance, Westpac, one of Australia’s largest multinational banks, was fined $1.3 billion in 2020 for 23 million AML/CTF breaches.
Australia has come a long way in its fight against money laundering. Recent regulatory changes, such as the Anti-Money Laundering and Counter-Terrorism Financing and Other Legislation Amendment Act 2020, have strengthened the nation's AML/CTF framework.
However, Australia's AML/CTF regulations are continuously being revised to mitigate new risks and identify areas of improvement. Recent reforms that came into effect in June 2022 strengthen due diligence on crypto asset exchanges and crowdfunding platforms. The reforms also increase penalties for non-compliance, empowers AUSTRAC to issue remedial directions, and expands the categories of regulated businesses. These updates aim to combat the emerging use of digital currencies and platforms for money laundering.
Various sectors in Australia must follow AML/CTF laws, including banks, casinos, money transfer firms, gambling services, bullion traders and the real estate industry. According to AUSTRAC, the most considerable value of suspicious matter reports filed between 2020 to 2022 came from banks, followed by casinos.
The real estate sector will likely receive more oversight as property is an attractive vehicle for laundering money. If you or your business are part of any of the industries, you better pay attention to your AML/CTF obligations, or you might find yourself in a bit of a pickle.
Failure to comply with AML/CTF laws can damage Australia's financial reputation and economy. Regulated entities that break the laws face severe consequences like fines, remediation actions, and even loss of license.
Recent cases include:
• Crown Resorts: fined $300 million in 2021 and at risk of losing casino licenses for AML/CTF failures.
• Star Entertainment Group: fined $30 million in 2020 for AML/CTF breaches in its Sydney casino.
• Tabcorp: In 2020, Tabcorp was fined $45 million for failures in its Sunbet business in monitoring unlawful gambling and money laundering.
• Western Union: In 2022, Western Union agreed to pay AUSTRAC $15.2 million for compliance failures in its Australian remittance business from 2016 to 2018.
It's also important to note that the consequences of AML non-compliance are not just financial; they can also lead to reputational damage and loss of customer trust.
The Financial Action Task Force (FATF) is an intergovernmental organisation that sets international standards to combat money laundering and terrorist financing. The FATF conducts peer reviews of countries' AML/CFT regimes, and those that do not meet the standards are placed on a "grey list”, which identifies countries with strategic deficiencies in their AML/CTF frameworks.
Fortunately, Australia isn't on the FATF's Grey List. However, the FATF has highlighted areas where Australia can improve, such as better cooperation between agencies and increased outreach to non-profit organisations.
Reporting entities can meet AUSTRAC's requirements by implementing an effective Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) program. Here are some key steps that businesses can take to ensure compliance with AUSTRAC's requirements:
1. Conduct a risk assessment: Businesses should conduct a risk assessment to identify the specific risks of money laundering and terrorism financing that are relevant to their operations. The risk assessment should consider factors such as the nature of the business, the products and services offered, the customer base, and the geographic location.
2. Develop a customer due diligence (CDD) program: Businesses must verify the identity of their customers and conduct ongoing monitoring to identify any suspicious activities. The CDD program should include procedures for verifying the identity of customers, monitoring transactions, and reporting suspicious activities to AUSTRAC.
3. Develop an AML/CTF compliance program: Businesses should develop a comprehensive AML/CTF compliance program that addresses the risks identified in the risk assessment. The program should include policies and procedures for managing the risks, training for employees, and ongoing monitoring and review of the program's effectiveness.
4. Report suspicious activities: Reporting entities must report any suspicious activities to AUSTRAC as soon as possible. Suspicious activities may include transactions that are unusual, large, or inconsistent with the customer's known financial profile.
5. Keep accurate records: Businesses must maintain accurate records of all transactions and customer information. The records should be kept for at least seven years and should be readily accessible for audit purposes.
6. Conduct regular reviews: Reporting entities should conduct regular reviews of their AML/CTF program to ensure that it remains effective and up-to-date. The reviews should consider changes in the business, the regulatory environment, and emerging risks.
By following these steps and implementing a robust AML/CTF program, reporting entities can meet AUSTRAC's requirements and help to combat money laundering and terrorist financing. It is also important to note that businesses should seek professional advice to ensure that their AML/CTF program is appropriate for their specific circumstances and meets all regulatory requirements.
Regulated businesses in Australia are also turning to new technologies like advanced fraud prevention systems such as offered by GPayments to detect suspicious transactions.
Machine learning and AI can identify anomalies in massive datasets that humans alone may miss. These solutions also automate time-consuming manual reviews and reporting to reduce compliance costs. With advanced technologies, regulated entities can comply more effectively with Australia's rigorous AML/CTF framework.
In summary, while Australia's economy is booming, the government is committed to fighting money laundering. By continuously improving its AML/CTF laws and promoting the use of technology, Australia aims to curb illicit finance effectively while supporting business growth. Close collaboration between regulators, regulated companies, and tech solution providers such as MemberCheck will shape the future of compliance in Australia.
At Membercheck, we are committed to helping our clients stay compliant with AML regulations. Our solutions are designed to help reporting entities meet AUSTRAC's requirements and protect against financial loss and reputational damage.
To learn more, reach out to one of our friendly team members by clicking here.
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