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Not Enough on AML?

Transaction Report and Analysis Centre (AUSTRAC) has taken the mainstream media by storm. However, it might also speak to deeper systemic challenges within the financial sector when it comes to questions around risk assessments, transactions monitoring and customer due diligence.

It also addresses the issue of significant reputational damage that can result from controls that aren’t sufficiently up-to-task when meeting obligations under the anti-money laundering and counter terrorism financing legislation.

Chanticleer, in the Australian Financial Review, paraphrased Professor Elizabeth Sheedy from Macquarie School of Business:

Sheedy says she has been constantly shocked at how many large financial institutions around the world have struggled to get anti-money laundering (AML) systems and processes right, and argues that, partly, these banks are reacting to pressure from investors to keep costs down.

Recently, the GRC Professional spoke to Andrew Ham, who suggested the shared complexity of some of our larger financial institutions might be part of the problem.

“Banks are complex institutions and the reason this happening is that there are many channels in banks, and therefore it’s very complicated to ensure that every possible way a transaction can be processed will trigger the right checks,” Ham said.

While the Financial Intelligence Unit (FIU) has shown a willingness to engage with responsible entities, especially with its partners in the Fintel Alliance, Ham said the FIU will litigate if they don’t think businesses are making sufficient progress.

Earlier this year at the Refintiv Australian Regulatory Forum, AUSTRAC’s Peter Soros highlighted that the FIU would do better when it comes to communication with its responsible entities. He also mentioned that, before the year was out, there would be major enforcement action from the regulator.

Speaking in the context of the Tabcorp and CBA breach, Soros said, “It’s fair to say the AML Act and its requirements were varied across our 14,000 reporting entities, and I think it’s also fair to say that, since those two matters, there is much better understanding, much greater interest and much bigger investment from the reporting entities we regulate.”

Soros continued that, “I think there is real work for us to be doing when it comes to working with big reporting entities. Reporting entities sends us thousands—tens of thousands, hundreds and thousands—of Suspicious Matter Reports every year, and we could do better in providing feedback where there is over-reporting or under-reporting.”

In Thomson Reuter’s special report on Financial Crime Compliance for Non-Financial companies: the expanding regulatory perimeter, former Global Compliance Director of GlaxoSmithKline, Mike Melia said, “Corporates are not focused on AML. People assume money laundering is only a problem for financial services, but money launderers will be creative. There are ways they can use corporate supply chains to launder money.”

The Thomson report goes on to highlight that, and certainly from an organisational perspective, compliance remains the key element. The report quotes Financial Crime Consultant Neil Jeans:

Ultimately, all the compliance work is about providing actionable intelligence to AUSTRAC. Regulators use their supervision and enforcement powers in areas where they want to see industrywide improvements.

This falls in line with the comments made by Soros.

For more on the issues on which you should focus to improve your AML Framework, listen to our podcast with Anthony Quinn from Arctic intelligence on the top of Explainability and Defendability, earlier this year. Click here to listen.

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