On November 13, the Australian Transaction Reports & Analysis Centre (AUSTRAC) commented on the civil proceedings that it successfully brought against Tabcorp under Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) legislation (see here).
In those statements, AUSTRAC CEO, Nicole Rose, summed up AUSTRAC’s approach to compliance succinctly:
AUSTRAC will continue to collaborate with industry to strengthen the financial sector against serious financial crime and reduce regulatory burden where possible, but we will continue to take strong action against those companies who break the law where appropriate
In today’s article, we look at how AUSTRAC’s risk-based approach to compliance has informed its regulatory and enforcement program over the 2016-2017 year, as evidenced in its 2017 Annual Report. This provides a good indication as to AUSTRAC’s future focus.
Risk-based compliance
A risk-based approach means that instead of applying its efforts uniformly across activity covered by the AML/CTF legislation and associated regulatory framework, AUSTRAC focuses its finite time and resources on areas of higher risk. We can discern two ‘strands’ in this approach:
- AUSTRAC reducing ‘red-tape’ in areas of lower-risk, and;
- A ‘tight-loose-tight’ accountability framework. AUSTRAC focuses on
- a. setting clear and specific expectations for business (‘tight’)
- b. industry taking responsibility for its own compliance with the AML/CTF legislative framework (‘loose’), and
- c. vigorous pursuit of material non-compliance (‘tight’).
AUSTRAC programs in 2017
Ongoing programs of AUSTRAC which exhibit this risk-based approach include:
- The Fintel Alliance (see Annual Report, p9). This is a private-public partnership uniting business, AUSTRAC, and other federal government agencies to combat money laundering and terrorism financing. It aims for regulation and enforcement that is ‘co-designed’ by government and the private sector to get ongoing input from business on risk areas and strategies for managing that risk. This program is implemented through a range of measures including an operations hub (where partners work side-by-side), financial intelligence analysis courses and work on specific priority threat areas (such as the Panama Papers, and Money Mules).
- Rule-making and exemption powers (see Annual Report, p40). AUSTRAC uses its rule-making and exemption powers under the AML/CTF legislative framework to provide regulatory relief from some of the requirements that would otherwise apply. In 2016-2017, AUSTRAC registered 11 amendments to the AML/CTF Rules, which led to regulatory savings of more than $28 million. It also granted exemptions to eight reporting entities from certain provisions of the AML/CTF legislation and Rules resulting in $1.8 million of regulatory savings.
- Area risk assessment and compliance guidance (see Annual Report, p67). AUSTRAC has released a range of reports looking at risk in particular areas or concerning particular products (such as in the Securities & Derivatives Sector, see our previous post on the subject). Guidance has included a risk-management tool to help businesses work out if their AML/CTF risk management program is up to scratch (see our previous article on the subject).
- Enforcement (see Annual Report, p70). AUSTRAC has demonstrated that it will take action in cases of serious non-compliance. In the Tabcorp case (which we discussed here), the Federal Court found that Tabcorp had contravened the AML/CTF legislation on 108 separate occasions over a period of more than five years. As a result, Tabcorp was required to pay a record penalty of $45 million. See AUSTRAC’s 2016-2017 Annual Report here.
If you think that we could be of any assistance in developing your own program for AML/CTF compliance, please get in contact with us.
