How The Banks and AUSTRAC Are Fighting Back Against Financial Crime

What is AUSTRAC?

The Australian Transaction Reports and Analysis Center (AUSTRAC) is a financial intelligence organization in Australia. This center, also known as AUSTRAC, was founded in 1989 to aid in the fight against money laundering. The organization's primary focus is on organized crime, terrorist financing, and money laundering. AUSTRAC collects information from legal entities and bodies. This data is reviewed to see if it has anything to do with money laundering, human trafficking, organized crime, or terrorist financing.

 

The Fight Against AML

A crime manager at the National Australia Bank's Docklands headquarters detected an unusual pattern of transactions made by a 70-year-old woman earlier this year. When the officer examined the bank account, he noticed more than 20 payments to Coinspot, a cryptocurrency exchange in Australia. According to the customer's transaction history, the woman had moved between $550 and $39,000, totaling more than $400,000. According to the account's notes, a previous examination found there was nothing to see, though, and the payments were allowed to continue. The officer was alarmed, so he called the customer and determined it was classic fraud. The lady never even used internet banking before, but her account was hacked after a stranger assisted her in setting up an online account so she could buy stocks over the phone. The officer advised calling the Australian Financial Complaints Authority because it was too late to get the money back. The guy was fired the next day. Because the employee was hired temporarily through Hays, there was little that could be done to oppose the dismissal. The officer, however, was ready to quit after nearly two years of increasing pressure and shrinking deadlines.


The Age and Herald spoke with dozens of former and present frontline workers in the battle against financial crime, including those from major banks and the Australian Transaction Reports and Analysis Centre (AUSTRAC), on the system's strengths and limitations. Because they were discussing sensitive information and were not authorized to speak publicly, none of them could be identified.


What has developed is an industry facing severe competition for personnel that knows complex anti-money laundering regulations at a time when compliance is more crucial than ever, and criminals are more clever than ever. In recent years, systemic breaches of these regulations have cost two of the country's largest banks, Commonwealth Bank and Westpac, a total of $2 billion in fines and resulted in the removal of their top executives.


The regulator has now turned its attention to the National Australia Bank, which has struggled for years to resolve outdated client identity issues. According to senior Jefferies banking analyst Brian Johnson, failure to comply with these requirements can result in banks losing their license to operate, and filling holes have become one of the most costly and crucial responsibilities.


AUSTRAC, a dynamic and proactive regulator that feeds information from banks to law enforcement, was the first major bank to be burned by AUSTRAC. CBA enabled millions of dollars to be laundered via its ATMs by criminals, including smuggling drugs and firearms, by failing to enforce a $10,000 cap on cash deposits. CBA was fined $700 million after apologizing. The shocking disclosures coincided with the royal banking commission, during which misbehavior allegations at the country's biggest financial firms were frequently front-page news.

 

Advanced Technology in AML

"We are committed to making considerable investments in technology to preserve our leadership over time," CBA CEO Matt Comyn said this week. CBA invested much in improving its compliance procedures and creating a rigorous training program for new hires. Chief executive Matt Comyn was in charge, and according to one source, he warned the entire institution to take this stuff seriously. According to some who have worked at other banks, CBA's technology is by far the most modern, with most systems running on CommSee, a centralized, purpose-built platform. CBA has an active rather than reactive approach to technology, and the bank is constantly innovating to better systems and automate procedures. However, as the country's largest bank, it also has the most work. CBA has turned to labor hire agencies to cover permanent posts with temporary contractors across its financial crime activities, in what could be regarded as a struggle for bodies.


AUSTRAC has rigorous guidelines for how quickly banks must report suspicious activity. Every day, CBA's teams gather for a "huddle," during which management sets goals to motivate employees to work efficiently. Teams competed against one another, with those that cleared the most alarms receiving gift cards or free breakfasts. Even though the targets were set to improve efficiency, employees claim that they led standards to fall. One former analyst claims, "They were basically pumping out numbers." Staff was caught copying and pasting material into reports supplied to AUSTRAC in a few cases, and temporary contractors were threatened with termination if they didn't meet "tough" and "numbers-driven" targets. Managers kept a close eye on the goals, which some claim led to micromanagement or bullying, particularly among those on insecure contracts. This masthead got an email sent by a former contractor that details were bullying so severe that the person felt obligated to file an official complaint.

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