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Better Reporting, Beyond Typologies

This panel session, from the recent Refintiv event, came after Australian Transaction Reports and Analysis Centre’s (AUSTRAC) Deputy Peter Soros announced there was more legal action ahead when it comes to breaches of the AML/CTF Act.

At the same event, Soros announced AUSTRAC was also working on how they communicate with responsible entities and/or reporting entities.

Pieces of the puzzle

Speaking on a similar topic at the panel event, Warren Lysaght, NSW Police Detective Sergeant, said, “Reporting entities obviously have their own businesses and priorities to look at. From the law enforcement perspective, however, we are the end user and what we are seeking is evidence—and that evidence for us is beyond a reasonable doubt.”

According to Lysaght, ideally, it would be good if Suspicious Matter Reports (SMRs) came packaged for them in such a way that they don’t have to keep going back to ask more questions.

Of course, when it comes to submitting SMRs and Threshold Transaction Reports (TTR), it is important to have a high-quality report; however, Lysaght does not want entities to dismiss those ‘gut instincts’.

“If you think it’s not right, put something in. I can’t stress that enough because it may be an important feature.”

Part of the bigger picture

Paula Chadderton, PhD researcher at the University of Canberra, suggested that the way SMRs are done might need to be re-thought because they really only capture one point in time, forming one piece of a what is invariably a much larger puzzle.

“If reporting entities—and this where the AML/CTF Act could use some reform—if they could only talk to one another, and it was permissible for them to talk to one another, they could lodge what in the UK is known as a super SAR [Suspicious Activity Report].”

Chadderton added that there will always be a need to have reporting obligations but there also needs to be a rethink about the approach to risk management issues and trends.

Nathan Lynch, Bureau Chief for the ASIA Pacific at Thomson Reuters, and chair of the panel, said that the concept of the super SAR or the 914b has been something that has been talked about in Australia for quite some time, but it is also an idea that has not seen a lot of action.

The UK considered the development of the super SAR because many of the defensive SARs that were being lodged to the National Crime Agency (NCA) were of poor value.

British Law firm, White & Case, writes that the NCA Annual SAR report noted that 419,451 SARs were lodged between October 2015 and September 2016 that the NCA found to unmanageable.

It seems organisations need to think beyond typologies.

One of the ways AUSTRAC communicates the key areas and beyond-sectoral reports to industries and sectors is by publishing typologies—such as those around money laundering or terrorist financing—that reporting entities can then absorb into the AML/CTF aspects of their compliance and risk management programmes.

However, Dr Nick Gilmour who is an Adjunct Fellow at Charles Stuart University told attendees that typologies change so often Reporting entities should not get so hung up on them.

“Typology denotes a type of money laundering. Well, criminals are always focused on an activity, an activity that involves different types of money laundering,” Dr Gilmour said.

As an example, Gilmour referred to the FATF typology published in 2006 that was focussed on trade-based money laundering.

“Is the typology the same it was 13 years ago? I would argue that it’s not.”

Gilmour believes there needs to be a move away from typologies towards more of a ‘holistic’ focus on what the vulnerabilities are now, in 2019.

How much is too much data?

The adjunc t fellow also argued that the more data, the better, and that goes back to the methodologies being utilised by the UK police.

“The challenge is the amount of data. A study is being released next year, in 2020…we will have something along the lines of, I think, 44 zettabytes—a zettabyte equalling about one billion gigabytes—of data relating to AML-type work. Now, that is a lot of information. There is a lot of information for us to go through and try to understand.”

According to Gilmour, “You have to balance the practical with the reality of data capability.”

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