Australia is one of the largest and most developed economies globally and is home to thousands of financial corporations including over 600 fintechs. Those financial institutions have to learn to navigate the Australian legal framework protecting the country’s financial system against money laundering threats and terrorist financing.
AML-CTF Process in Australia
Australia is currently in the process of refining its AML/CFT regime. Following the recent Westpac and Commonwealth Bank scandals, AUSTRAC has indicated that they can take more action against financial services firms.
Managing Australia’s AML/CFT regulations should be a high priority for fintechs: stay on top of your obligations with our list of the most important compliance considerations.
AUSTRAC-The Australian Transaction Report and Analysis Center
The Australian Transaction Report and Analysis Center (AUSTRAC) serves as Australia’s main financial intelligence agency and regulator to prevent all financial crimes. AUSTRAC works to ensure that all financial corporations operate in compliance with Australia’s AML regulations and those of the Financial Action Task Force (FATF).
AUSTRAC has the power to investigate and impose fines on firms that are in breach of AML regulations. In 2019, it initiated legal proceedings against the Australian bank, Westpac, after finding over 23 million breaches of AML/CFT law, in transactions worth over $11 billion. In 2018, similar breaches by Commonwealth Bank resulted in a fine of $700 million.
Australia AML/CTF LegislationThe main AML legislation in Australia is the Anti Money Laundering and Anti Terrorism Act in 2006. The Act includes a list of specified services for deposit-taking, payroll or currency exchange services. Firms providing any of those services have to register with AUSTRAC and comply with their regulations. That legislation imposes a number of obligations reports on financial institutions, including Threshold Transaction Reports (TTR) and Suspicious Activity Reports (SAR).
Fintechs: Despite there is no regulation about them in Australia, still they have to comply with existing AML/CTF regulations and the licensing and reporting regulations that it imposes.
1. Data Privacy
Fintechs have to treat data privacy as a priority since it is regulated at all levels in Australia especially the Federal Privacy Act of 1988 and the Australian Privacy Principles (APP) both of which apply to firms with turnovers of $3 million or over per year.
Australia’s Customer Data Right got introduced in 2019 and will be applied progressively across all sectors starting with the banking sector. The CDR impacts fintech firms significantly since it gives customers wider control over their personal data by allowing them to choose who it is shared with and for what purpose.
2. Monitoring AML TransactionsAustralia’s AML/CFT Act demands to monitor accounts for suspicious activity that may be linked to money laundering for firms. Monitoring programs must be based on each customer’s and businesses’ risk level. Firms should monitor accounts for the activity such as:
•Transactions involving unusual amounts of money.
•Unusually complex transactions or transactions with no clear purpose.
•Transactions in and out of countries at a high risk of money laundering.
AUSTRAC’s investigation of Westpac’s AML breaches focused on its transaction monitoring process. Specifically, Westpac missed a number of transactions related to money laundering activities linked to child exploitation. Those breaches involve numerous transactions amounting to $11 billion over several years to high-risk countries.
3. Payment Sanctions Screening
Fintechs in Australia have to comply with financial sanctions imposed by both the United Nations Security Council (UNSC) and the Australian Government. That means that firms have to screen payments against a list of names and entities provided by the Department of Foreign Affairs and Trade (DFAT). The DFAT list consolidates both Australian DFAT sanctions and UNSC Sanctions.
•Australia’s sanctions apply all of its citizens no matter they are residents or not.
4. Onboarding and Monitoring
AML policy in Australia demands firms conduct Customer Due Diligence (CDD) checks when onboarding new customers and monitor them thoroughly on a regular basis. Onboarding checks must verify each customer’s identity accurately to establish their risk level while ongoing monitoring must establish when the customer’s risk profile changed over time.
5. Upcoming Regulations
Australia is currently in the process of refining their AML/CFT regulations, a process that is expected to run into 2020. Widely, the changes are intended to make regulations and make it for firms to comply with anti-money laundering in Australia easier with widening AUSTRAC’s regulatory field to cover new technologies and payment systems used by fintechs.
With recent Westpac and Commonwealth Bank investigations, AUSTRAC has shown that they can take more action against financial institutions: regulators have ordered the appointment of an external auditor to examine PayPal for potential AML violations. The Currency Bill 2019 will also be introduced in 2020, applying for an economy-wide cash payment up to $10,000.
How Sanction Scanner Helps You
Complying with Australia’s anti-money laundering regulations involves significant administrative effort, especially if firms carry out the required screening processes manually. The complexity of regulations can also create costly efficiency drains, while human errors can hamper the process further, and even lead to compliance penalties. Sanction Scanner aids firms avoid those issues with automated AML solutions tailored to your risk profiles. Our program takes advantage of smart technology to build accuracy and speed into your AML program by complementing the skills of compliance teams.