AUSTRAC to Ramp Up Industry Guidance on AML Obligations

An unprecedented amount of AML/CTF information will be provided to industry in the next 6-12 months, says AUSTRAC’s David Hawkins. 

AUSTRAC has set up a new Education Capability and Communication Branch, in a bid to increase the amount of guidance and information it provides to reporting entities in relation to their AML/CTF obligations.

In a webinar hosted by Regulation Asia and NICE Actimize on Wednesday (4 November), AUSTRAC’s acting National Manager for Intelligence Partnerships Branch, David Hawkins, said the new Branch is a key priority for AUSTRAC’s CEO Nicole Rose.

The Branch will have its own national manager, whose key priority will be to scour AUSTRAC’s operations as well as its partner agencies for information that can be packaged and provided to the financial industry. Work is already underway to develop a work programme for the new Branch, which was formed just last month.

AUSTRAC has already been providing a significant amount of guidance to the industry in recent years through its ML/TF risk assessments and financial crime guides. These publications contain criminal methodologies, indicators and case studies across different financial crime types, as well as information on best practices and controls.

To date, ten ML/TF risk assessments have been published, the most recent focusing on Australia’s mutual banking sector. According to Hawkins, AUSTRAC’s work on sector-specific risk assessments has been progressed particularly in the last four years and has been the subject of “huge industry engagement”.

About ten more risk assessments are currently in the pipeline, many due to be published in the next 6-12 months. This will include ML/TF risk assessments for the banking, remittance and gambling sectors, among others.

AUSTRAC also publishes financial crime guides, primarily through its work with the Fintel Alliance, a public-private partnership launched in 2017 that brings together government and private sector members to work together in the fight against financial crime.

Most recently, AUSTRAC published a financial crime guide to help regulated entities in identifying, targeting and reporting suspicious financial activity related to illegal wildlife trafficking. Previously, financial crime guides have also been published on illegal phoenixing and child sexual exploitation.

AUSTRAC also has a stable of annual Typologies and Case Studies reports which have some 20 sanitised law enforcement case studies, and a range of indicators and methods which are “all still quite relevant”, Hawkins said. “A lot of those financial crime types are still happening using the same methodologies.”

He said AUSTRAC expects reporting entities go through the ML/TF risk assessments and financial crime guides “with a fine tooth comb”, to work out which parts apply to them and identify gaps in their risk assessment and mitigation processes and controls.

Hawkins also indicated that AUSTRAC does expect regulated entities to have technology-based systems to detect unusual and suspicious behaviour as part of their transaction monitoring programmes. However, he emphasised the “human element” in financial crime management to triage alerts, which often “requires human judgment”.

Recognising some of the difficulties firms experience when incorporating AUSTRAC guidance into monitoring systems, Hawkins said the regulator is “very conscious” of the significant and increasing AML spend in the industry, with some firms going even further than stipulated regulatory requirements.

“We do see many instances where firms have gone further than the black letter of the law. Firms are willing to push customers into an uncomfortable space, questioning them about source of funds and purpose of business … even though it can put in jeopardy some accounts.”

According to Hawkins, some firms have also gone the extra mile in providing “extremely detailed” SMRs (suspicious matter reports], which indicate they have done a lot of analytical work to determine why something is suspicious in a customer’s behaviour and transactions, including to link this information with other data such as client histories.

These “gold-plated” SMRs are of high value to AUSTRAC as well as its 50 partner agencies at the state and Commonwealth level who have access to the information, Hawkins said. AUSTRAC received 265,000 SMRs in the previous financial year, representing a 258 percent increase over a four year period.

Yet, it is clear to AUSTRAC that more guidance and information will be helpful to the industry. “Industry has perennially been asking us for more and more detailed information on the risks they face,” Hawkins said. “We have listened and put in place a range of workstreams. In the next 6-12 months, there will be an unprecedented amount of information provided to industry.”

To access the webinar, click here.

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