Latest News from AUSTRAC
Disclaimer: The contents of this article are intended to provide a general understanding of the subject matter. However, this article is not intended to provide legal or other professional advice, and should not be relied on as such.
Keep on top of the latest advisories and guidances from Australia’s financial intelligence unit (FIU) AUSTRAC. This blog will update with any new information from the regulator as it becomes available.
Sep 06, 2021 – New Banking Risk Assessments
AUSTRAC has released four new banking risk assessments, which examine the threats criminals pose to major banks, other domestic banks, foreign subsidiary banks and foreign bank branches. The regulator found that the overall risk rating was the highest for major banks, with high vulnerabilities including:
Size of customer base
- Higher-risk customers
- Use of cash
- Ability to store and move funds
- Level of face-to-face contact
- Ability to move funds or value internationally
- Prevalence of higher-risk jurisdictions
AUSTRAC found that other domestic banks had almost the same level of criminal threat environment and vulnerabilities, but with the higher number of institutions, lower total number of customers and total assets compared to major banks, it had a slightly lower overall ML/TF risk rating. Foreign subsidiary banks and foreign bank branches maintained a lower overall ML/TF risk rating.
In terms of risk mitigation strategies, AUSTRAC stated the following for major banks:
Systems and resourcing – legacy IT systems and databases, along with multiple customer databases were found to be a vulnerability. In one case, the existence of multiple customer databases being used by separate businesses within the group, resulted in inconsistencies.
Customer Due Diligence – information received from a customer is ‘static’, while real world circumstances change frequently. One entity told AUSTRAC that it preferred to rely on ‘dynamic’ information, such as information acquired through transaction monitoring.
Outsourcing CDD and other AML/CTF processes to offshore subsidiaries or third parties – may carry risks, including diminished accountability and control by the domestic entity, and jurisdictional risk. Reporting entities proposing to engage in offshore outsourcing should engage with AUSTRAC at the earliest opportunity.
Transaction Monitoring – AUSTRAC has identified a number of instances where some major banks’ transaction monitoring and ECDD processes were poorly designed and executed. In some cases, this contributed to a significant volume of suspected criminal exploitation.
Suspicious Matter Reporting – AUSTRAC observed instances in which SMR submissions could be improved including providing more detailed grounds for suspicion, avoiding trigger-based reporting, summarizing suspicions and including documents that provide additional context.
Upcoming risk assessments will focus on remittance network providers and their affiliates, independent remittance providers, Australian casinos and the bullion sector.
If you are a financial institution looking to invest in more advanced risk mitigation systems and controls, contact Alessa to learn more about our due diligence, transaction monitoring and risk scoring capabilities.
Aug 06, 2021 – Scams, #HumanTrafficking and Slavery Indicators
AUSTRAC has advised that scammers, pretending to be from AUSTRAC, are sending emails to reporting entities and members of the public seeking payment of fines, taxes or other financial transfers.
The Australia financial regulator will never demand a payment via email and advise that if you think an email claiming to be from AUSTRAC is not genuine, do not reply to it. Report online and email scams to Cyber.gov.au.
Another crime in the spotlight is human trafficking. AUSTRAC partner, the Australian Federal Police (AFP), has compiled an extensive list of potential indicators of human trafficking and slavery. While not exhaustive or targeted specifically for financial institutions, the list provides a number of indicators that are useful for those who may interact with perpetrators and/or victims.
- Example of indicators that may be red flag indicators for financial institutions include:
- Received little or no payment for employment
- Excessive cost charged for accommodation or living expenses
- Forced to open bank accounts controlled by the employer
- Have their passport and other personal documents kept by the employer and the worker is not allowed to have them when they want them
- Sleep where they work (same home and work address)
To report a crime in Australia, call the AFP on 131 AFP (237).
June 17, 2021 – New Guidance for CIP and Correspondent Banking Relationships
As of June 17, 2021, a number of amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) and related legislation came into effect.
Couple of areas interest include amendments impacting:
- customer identification procedures; and
- correspondent banking relationships;
Reliance on customer identification procedures by a third party
In certain circumstances, reporting entities can rely on customer identification procedures undertaken by reliable third parties: other reporting entities or AML/CTF-regulated foreign equivalents. This is known as “reliance”.
There are two options for relying on a reliable third party to carry out customer identification procedures: ongoing arrangements and case-by-case arrangements. The reforms expand the circumstances in which reporting entities can rely on a third party for customer identification and verification.
AUSTRAC has updated its information on the reliance provisions; reasons reported entities may choose to use reliance; and benefits of entering into an ongoing customer due diligence arrangement. They also provide quick guides for each of the reliance cases.
Correspondent banking relationships
The reforms also involve changes to strengthen the protections for correspondent banking relationships. The amendments extend restrictions to correspondent banking relationships with financial institutions that permit their accounts to be used by shell banks.
Financial institutions should undertake a due diligence assessment prior to entering into a correspondent banking relationship and conduct ongoing due diligence assessments throughout the period of the relationship. AUSTRAC has updated its information on why additional due diligence is required for correspondent banking relationships; factors to consider during due diligence assessments; and procedures to maintain correspondent banking relationships. They also provide a list of additional resources.
If you are a reporting entity that is looking to enhance your customer due diligence and correspondent banking relationships, Alessa offers an AML solution that offers due diligence, sanctions and watch list screening, real-time and batch transaction monitoring, regulatory reporting and more. To learn more, contact us.
Apr 29, 2021 – New SMR Guidance Resources
The 22-page reference guide includes information about legal obligations and liability, what is considered “reasonable grounds’ for suspicion, timing for submitting SMRs, characteristics of a clear and concise SMR, and more. The document also contains information about red flag indicators, which includes:
- Structuring: the deliberate division of large amounts of cash into smaller deposits to avoid threshold reporting requirements.
- Layering: passing money through ‘layers’ of transactions to legitimize and hide ownership. For example, moving funds between multiple banks or financial institutions.
- Transaction volumes: much larger or more frequent-than-usual transactions.
- High-risk areas: transactions to or from a high-risk country or region.
- Sanctions list: payments to or from a person or organization on a sanctions list.
- Suspicious identification: using false or stolen identities to open or access bank accounts.
- Unusual account activity: any other unusual account activity, such as transactional activity inconsistent with the customer’s profile or typical patterns of behavior.
Alessa offers a host of capabilities to enable financial institutions to flag potential suspicious transactions that require further review and reported to regulators. Contact us to learn more about Alessa’s AML compliance solution including our sanctions screening, transaction monitoring and regulatory reporting capabilities.
Mar 29, 2021 – New resources and guidance
To help financial institutions review and strengthen their AML/CTF program, systems and controls, AUSTRAC has developed five new regulatory quick guides. These include:
- Governance: board and senior management oversight – answers the question of what does good governance mean and provides an example of what good governance looks like.
- Money laundering/terrorism financing risk assessments – provides insight on what is an effective approach to assessing ML/TF risk and an example of effective ML/TF risk assessments in action
- Ongoing customer due diligence (OCDD) – looks at the role of transaction monitoring in OCDD, what is an effective transaction monitoring program and when to apply enhanced customer due diligence (ECDD).
- International Funds Transfer Instructions (IFTIs) reporting – answers the questions of what processes must be in place for IFTI reporting and what an effective IFTI reporting program looks like.
- Correspondent banking relationships – Details some of the processes that must be in place to mitigate the risks associated with correspondent banking relationships (CBRs).
AUSTRAC also released some new resources for Suspicious Matter Reports (SMRs). The resources include a video as well as answers to the following questions:
- Your obligations to submit an SMR
- How to identify suspicious activity
- What an SMR must include
- Who has to submit an SMR
- Deadlines for submitting an SMR
- Doing business with a suspicious customer
- What happens after you submit a report
- Penalties for not submitting an SMR
In addition to the above resources, AUSTRAC also updated their customer identification procedures (ACIP) and ongoing customer due diligence resources, which includes new guidance and example scenarios that will help identify gaps in customer identification, verification and ongoing customer due diligence processes. Areas covered include:
- Customer identification and due diligence overview
- Enhanced customer due diligence (ECDD) program
- Transaction monitoring
- Suspicious transactions.
Finally, AUSTRAC also released a financial crime guide to help understand, identify and report suspicious financial activity to prevent fraud against the National Disability Insurance Scheme (NDIS).
Jan 27, 2021 – Consultation now open on Rules for AML/CTF reforms
Reforms have been made to strengthen Australia’s anti-money laundering and counter-terrorism financing laws. Known as Phase 1.5, the changes are expected to increase the resilience of the country’s financial system against criminal threats, while making it easier for businesses to understand and comply with their obligations.
Draft Rules to support the implementation of Phase 1.5 reforms includes:
- Customer due diligence: Customers must be identified before providing a designated service, except for very limited circumstances. Also expands the circumstances where you can rely on customer identification by another reporting entity.
- Tipping off: Expanded exceptions to tipping-off provisions that allow information from suspicious matter reports (SMRs) to be shared with an external auditor, or offshore members of the same corporate or designated business group that are regulated by laws that give effect to some or all of the FATF recommendations.
- Correspondent banking: For financial institutions, clearer prohibitions against entering into a relationship with a bank that allows its accounts to be used by a shell bank, in addition to clearer and strengthened due diligence and risk assessment requirements during a correspondent banking relationship.
Submissions on proposed amendments to the AML/CTF Rules must be submitted to AUSTRAC by March 11, 2021.
Dec 01, 2020 – Compliance Reports, Resources for Remittance Service Providers
AUSTRAC reminds regulated businesses that they must complete a compliance report where they detail compliance for the previous calendar year. The 2020 compliance report will be open from 1 January to 31 March 2021. Visit here to learn more about what is included in the report and who needs to report.
For remittance service providers, AUTRAC has released a new video, detailed guide to developing an AML/CTF program, and new fact sheets on risk management, reporting, customer identification and more that make understanding and following AML/CTF obligations simpler. View the updated resources.
Oct 14, 2020 – AUSTRAC to Replace Reporting System
Speaking at an industry event, the regulator is said to have received funding to replace its 20-year-old reporting system to something more adept and user-friendly. The national manager of regulatory operations also outlined the priorities for the organization for the next 12 to 18 months.
According to Dr. Nathan Newman, transaction reporting, risk management and know-your-customer requirements would remain key areas of focus. It is also expected that more enforcement actions will be coming from the regulator.
During the session, attendees were polled about their priorities for 2021. Thirty-five percent of attendees said improving know-your-customer (KYC) capabilities was a top priority. Another 30 per cent expected a drastic overhaul of their existing AML/CTF procedures in 2021.
Read the full story here.
Sept 24, 2020 – Westpac AML Settlement
Westpac and AUSTRAC have agreed to a $1.3 billion proposed penalty over Westpac’s breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). Westpac and AUSTRAC have agreed that the proposed penalty reflects the seriousness and magnitude of compliance failings by Westpac.
The Federal Court of Australia will now consider the proposed settlement and penalty. If the Federal Court determines the proposed penalty is appropriate, the penalty order made will represent the largest ever civil penalty in Australian history.
Westpac has admitted to contravening the AML/CTF Act on over 23 million occasions, exposing Australia’s financial system to criminal exploitation.
Read more here.
Jun 16, 2020 – FATF update on jurisdictions
The Financial Action Task Force (FATF) has published two recent updates on international AML/CTF compliance. Financial institutions should consider these when reviewing their obligations and risk-based policies, procedures, and practices.
- Jurisdictions identified by the FATF as high-risk jurisdictions: Iran and Democratic People’s Republic of Korea (DPRK)
- Jurisdictions identified by the FATF for increased monitoring: Albania, The Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Myanmar, Nicaragua, Pakistan, Panama. Syria, Uganda, Yemen and Zimbabwe
- Jurisdictions no longer subject to monitoring: Iceland and Mongolia.
Read the full advisory here.
Aug 14, 2020 – AML/CTF Advisers
AUSTRAC has released fact sheets for more information about the agencies expectations of AML/CTF advisers and things you should consider before engaging one. Read the factsheets.
The agency has also recently updated its overview on AML/CTF programs.
Apr 1, 2020 – COVID-19
As a result of the COVID-19 pandemic, AUSTRAC and its law enforcement and national intelligence partners are monitoring and preparing for a shift in the risks that criminals pose to the financial system and the community.
Reporting entities are at the front line in combating financial crime. We encourage you to monitor for new and emerging threats and submit suspicious matter reports (SMRs) to AUSTRAC. Submitting high-quality, accurate and timely SMRs give us the best chance to detect, deter and disrupt criminal activity.
AUSTRAC warns of criminal exploitation during the COVID-19 pandemic. These include the following areas:
- Targeting government assistance programs through fraudulent applications and phishing scams.
- Movements of large amounts of cash following the purchase or sale of illegal or stockpiled goods.
- Precious metals and gold bullion purchases that are out of character
- Exploitation of workers or trafficking of vulnerable persons in the community.
- Online child exploitation following restrictions on travel.
- Extremist views may rise either against members of the community or the government.
AUSTRAC asks you advise them of any significant changes you observe in relation to your financial crime and fraud monitoring. Please use this online form.
Mar 27, 2020 – COVID Pandemic
The COVID-19 global pandemic is impacting all Australians and Australian businesses. AUSTRAC acknowledges that this is an unprecedented time for the superannuation sector.
The regulator said that it will work with financial institutions to facilitate a streamlined process for the making of payments under the Early Release of Superannuation Initiative in order to provide funds to people experiencing financial hardship promptly.
If you are an individual affected by COVID-19 enquiring about early access to your super, please contact the ATO directly. If you are an AUSTRAC reporting entity and have questions about your customer due diligence obligations, please contact us using the online form.
Jan 16, 2020 – Campaign targeting illegal money transfer dealers
In December, AUSTRAC wrapped up our community campaign targeting illegal money transfer dealers, or unregistered remittance dealers. The campaign ran from August to November and focused on raising public awareness and educating communities about the risks they pose.
Unregistered money transfer dealers represent a real threat to Australian communities as they are at high risk of being targeted by criminals to launder money to fund their activities. They also negatively impact the reputation of registered money transfer providers who are trying to do the right thing.
AUSTRAC staff visited communities and registered businesses across Australia. We spoke about the threat that unregistered money transfer dealers pose and how people can anonymously report suspected unregistered dealers.
While the campaign has now finished, our work continues. Over the coming months, we will:
- Consolidate feedback and findings so we can determine the appropriate next steps
- Continue to assess reports of suspected unregistered remittance dealers submitted to AUSTRAC and take any action required
- Continue to support registered remittance providers through guidance resources and workshops throughout 2020 (details coming soon).
To learn more visit the campaign page.