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Australia’s anti-money laundering (AML) regulator has said its “blitz” against non-compliant reporting entities has already claimed nine firms, and that more than 50 others are in its crosshairs.
Last week, the Australian Transaction Reports and Analysis Centre (AUSTRAC) confirmed that nine firms have had their registrations cancelled or suspended, or their renewals refused, due to AML non-compliance.
The nine firms were all remittance operators or digital currency exchanges, and the actions against them all took place in late 2024.
Brendan Thomas, CEO of AUSTRAC, said the enforcement activity wrapped up a year-long campaign targeting “systemic” non-reporting and under-reporting across the two sectors.
"AUSTRAC uses the reports submitted by our reporting entities to generate actionable financial intelligence, which is used by our law enforcement partners in thousands of criminal investigations every year,” said Thomas.
“This means remittance service providers and digital currency exchanges play a vital role in detecting and disrupting criminal abuse of Australia’s financial system.”
Two other firms had conditions placed on their registration, breach of which will lead to suspension or cancellation, and another two were struck off the Digital Currency Exchange Register due to insolvency.
In addition, AUSTRAC pursued enforcement actions against a number of key personnel at the non-compliant firms.
Staff at five firms were either convicted, prosecuted or charged with serious offences, or were subject to legal proceedings in relation to the management of their firms.
"AUSTRAC’s reporting entities are the front line of defence in detecting criminal activity, which is why it is important for all of them to take their AML/CTF obligations seriously,” said Thomas.
"Businesses working in this space who are not meeting their obligations can expect to hear from us."
Of more than 17,000 entities that are required to report to AUSTRAC, 5,112 are remittance operators and 417 are digital currency exchanges.
Since January 2024, AUSTRAC has issued reminders to 106 entities of their AML reporting obligations.
Background to the blitz
In early 2024, AUSTRAC initiated widespread investigations into remittance firms and digital currency exchanges, in an effort to improve their reporting of suspicious activities and transactions.
In December 2023, the regulator had identified both sectors among its priority targets for enforcement in the year ahead.
At the time, AUSTRAC said the two sectors would face additional scrutiny due to their rapid growth, concerns about the "significant variation” in compliance between firms, and concerns based on existing financial intelligence.
Prior to the blitz, the regulator said it had observed widespread examples of compliance cultures across the two sectors that “discourage” vigilance towards AML obligations.
“A culture which encourages avoidance or ‘compliance window dressing’ is a risk to the financial system, the reporting entity and its management,” AUSTRAC said.
“Of particular concern are examples where the compliance culture has led to compliance failures not being adequately identified, remediated and reported to senior management and the board.”
One example of the “compliance window dressing”, AUSTRAC said it would be looking closely at is arrangements where firms outsource AML and counter-terrorism financing (CTF) functions to third parties.
Typically, the functions outsourced include AML/CTF programme development, know your customer (KYC) controls and transaction monitoring.
However, as noted by AUSTRAC, this has resulted in widespread use of “generic” and “template” AML programmes and tools, many of which are not suited to the requirements of the reporting entity.
Moreover, the agency said it had observed “many” examples of firms outsourcing AML/CTF functions without appropriate due diligence, and/or without ongoing oversight.
“Once a third party is engaged, the reporting entity must ensure there are appropriate ongoing governance arrangements, systems and controls in place, and independent reviews are conducted,” it said.
“These measures are important to make sure the third party is meeting its obligations and delivering on agreed outcomes.
“Ongoing engagement is also required to ensure the outsourced functions can be updated to align with changes to an entity’s ML/TF risk exposure and risk appetite.”
Legislative changes for reporting entities
AUSTRAC’s investigations coincided with the passing of the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Amendment Bill in November last year.
A foundational piece of legislation, the law includes new provisions that are designed to modernise Australia’s AML framework to reflect changes in business structures, technology and illicit finance methodologies.
For example, as covered by Vixio, the bill introduces new customer due diligence requirements based around the concept of “beneficial ownership”.
Under the new rules, a “beneficial owner” is any individual who controls the customer (directly or indirectly), or who owns 25 percent or more of the customer (directly or indirectly).
Lawmakers hope that the new amendments will make it easier for reporting entities to understand their obligations and to maintain compliance.
Finally, the law also grants new powers to AUSTRAC to conduct examinations and to require the disclosure of information.
