Mark Taylor
Senior Editorial Manager
Australia’s financial crime regulator has promised to step up its strict enforcement of anti-money laundering (AML) compliance after issuing notices to eight businesses for failing to report.
Financial intelligence unit AUSTRAC handed out fines varying from $3,300 for sole traders to $16,500 for companies per violation for failing to submit their 2022 annual compliance report.
The eight companies given infringement notices included Albany Capital Investors, Archiwoods Capital, CP2 Investment Services, Global Capital Management, John Charles Duffy, Katoomba RSL, Paul Kevin Klein, and Powered Investments.
AUSTRAC CEO Brendan Thomas said the regulator will continue to use enforcement measures to guard against non-compliance with illicit financing regulations.
Sending the annual report to the regulator is a stringent requirement under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, and one which will incur heavier penalties in the future if businesses do not comply, Thomas said.
Why is it important to file an annual compliance report with AUSTRAC?
The approach highlights the importance of adherence to anti-money laundering and counter-terrorism financing laws, AUSTRAC said.
“Criminals and terrorists target businesses with weak anti-money laundering and counter-terrorism financing settings, which is why continued industry engagement is crucial,” Thomas said in a media release.
“The annual compliance report helps AUSTRAC assess whether financial services providers are complying with our laws and identify problem areas that may lead to vulnerabilities in Australia’s financial system,” he said.
Criminals and terrorists target businesses with weak anti-money laundering and counter-terrorism financing settings, which is why continued industry engagement is crucial, he said.
“The annual compliance report helps AUSTRAC assess whether financial services providers are complying with our laws and identify problem areas that may lead to vulnerabilities in Australia’s financial system,” Thomas said.
AUSTRAC has been actively pursuing legal actions against serious offenders in the gambling space, with court proceedings ongoing against entities like SkyCity Adelaide and The Star Entities.
Penalties in the billions of dollars are expected to be dished out.
How can AUSTRAC punish non-compliance with AML rules?
Enforcement actions available to AUSTRAC include:
- civil penalty orders
- enforceable undertakings
- infringement notices
- remedial directions
AUSTRAC can also issue a written notice requiring firms to appoint an external auditor to review money laundering/terrorism financing risk management or AML/CTF compliance or undertake a money laundering financing risk assessment.
AUSTRAC can also refuse, cancel or suspend the registration of remittance service providers and digital currency exchange providers if they “pose an unacceptable risk of money laundering, terrorism financing, people smuggling or other serious crime”.
What are AUSTRAC’s priorities?
Businesses, particularly financial services firms, should expect no let up from Australian enforcement officials who are following up promises with action in cracking down on dirty money.
“In the past few years, we have seen AUSTRAC reserve its power to commence court proceedings seeking civil penalties for the most serious and consequential of breaches,” said Jonathan Ellis partner at law firm Bird & Bird.
AUSTRAC levied the highest civil penalty in Australian history, AUS$1.3bn on Westpac Bank in 2020 for a litany of compliance failings. The regulator said banking, as a high-risk sector, should be vigilant and continue to enhance its compliance functions.
The regulator will continue its focus on tackling money laundering and terrorism financing; ensure that organizations have effective defences and compliance programs; comply with all reporting obligations and continue to monitor international funds transfer instructions as a priority.
“The vast majority of regulated entities should expect that any enforcement action by AUSTRAC will consist of either infringement notices, remedial directions, or accepting enforceable undertakings,” said Ellis.
Since 2022, AUSTRAC has been utilising enforceable undertakings as its preferred enforcement power, Ellis said.
In 2022 and 2023, AUSTRAC accepted as many enforceable undertakings as it did in the 11 years between 2010 and 2021, which indicates a significant shift in trend.
“The fact of enforceable undertakings being voluntarily agreed to by regulated entities does not necessarily mean that this is an insubstantial power,” Ellis said.
“Recent undertakings agreed with AUSTRAC have imposed serious and long-term obligations on the parties giving the undertakings. This may reflect the desire of boards to avoid civil penalties in circumstances where the Court seems to be prepared to impose extremely large penalties in appropriate cases.”
Australia is proposing to tighten AML laws to capture a broader range of entities, including lawyers, accountants, trust and company service providers, real estate agents, and dealers in precious metals and stones.
Should the amendments pass, AUSTRAC will expand its regulatory net to around 100,000 organizations, up from 17,000.
CUBE comment
Australia’s financial enforcers are backing up tough talk with action; handing out penalty notices and fines to organisations that failed to follow AML procedures.
Having given notice in its annual report that it would pursue such actions, there can be no doubt that AUSTRAC will continue to probe for gaps in compliance coverage and use its powers where it sees areas of weakness.
Those who do not heed the warnings can expect eye-watering financial penalties.
As AUSTRAC continues to expand its powers and hand down tougher penalties for non-compliance, there has never been a more imperative time for Australian firms to embrace automation within regulatory change management.
From horizon scanning to automatic updating of internal policies and controls, Automated Regulatory Intelligence puts compliance functions on the front foot by eliminating time-consuming manual tasks and delivering a broad array of operational efficiencies.
Talk to CUBE today to learn more about Automated Regulatory Intelligence and begin the journey toward transformed compliance.