AUSTRAC assesses Money Laundering and Terrorism Financing risks for the Australian banking sector

AUSTRAC assesses Money Laundering and Terrorism Financing risks for the Australian banking sector

AUSTRAC has produced four risk assessments for Money Laundering and Terrorism Financing (ML/TF) in the Australian banking sector for major domestic banks, other domestic banks, foreign subsidiary banks and foreign bank branches in Australia.

2021-11-17

Following engagement with bank representatives and industry experts, and analysis of transaction reports and partner agency intelligence reports, the four new ML/TF risk assessments offer insights into ML/TF activity in the subsectors and details of key risks each subsector is exposed to.

Major banks

The AUSTRAC risk assessment found that major banks face a high risk of ML as the subsector has a very large customer base with customers in high-risk categories, high exposure to cash, increases in remote service delivery channels and high exposure to foreign jurisdiction risk.

Red flags for cash-related ML risks include successive cash deposits at ATMs to the same account by different individuals, and use of the same mobile number for verifying deposits to multiple beneficiaries.

Other domestic banks

Other domestic banks are also exposed to individuals charged with money laundering-related offences, as well as members of serious and organised crime groups.

Common concerns include unexplained wealth, where the source of funds could not be determined and was inconsistent with the customer’s profile; multiple transactions when one transaction would suffice; and rapid or complex movement of funds through multiple accounts.

Foreign bank branches

The average value associated with money laundering in the foreign bank branches subsector is much higher than other banking subsectors.

Clients with complex company ownership structures and intricate onshore and offshore banking arrangements are assessed to be the highest risk for money laundering.

Risk factors include obscuring beneficial ownership or source of funds; receipt of high-value international transfer of funds, and rapid and complex movement of funds between multiple companies linked by shareholders; trusts and beneficial owners and companies moving funds to high-risk and tax secrecy jurisdictions.

Foreign bank branches often follow AML/CTF programs that are developed by the head office, and may not always be suitable for the Australian market.

Foreign subsidiary banks

Money-laundering for foreign subsidiary banks predominantly relates to cash and transaction account-based services.

Suspicious transaction activity includes multiple transactions (potentially without economic rationale); and large and unusual transactions and activity inconsistent with a customer’s profile.

The subsector’s large retail banking footprint enables customers to place cash directly into the financial system, and offers multiple products and services that enable fast and efficient movement of funds.

Red flags include unclear source of funds; multiple large cash transactions, particularly in a short period of time; and multiple third-party deposits.

Risk mitigation strategies

  • Remain vigilant of key criminal trends in Australia

  • Perform a risk assessment where a new system is introduced, or where there is a change in a system, product or service

  • Tailor off-the-shelf risk assessment tools to be business specific and reflect the risks posed

  • Understand the customer’s source of funds and wealth, expected account activity, ownership structure and associated and controlling parties

  • Proactively detect higher-risk customers, and have elevated risk mitigation strategies for Politically Exposed Persons (PEP)

  • Perform high-quality investigations for the submission of Suspicious Matter Reports (SMR) to AUSTRAC

  • Provide appropriate staff training and screen employees.

How we can help

Whichever banking subsector your business falls into, our teams are across anti-money laundering and counter-terrorism financing (AML/CTF) regulations in Australia and highly experienced in conducting reviews and providing recommendations for your AML/CTF program.

Reach out to our experts for:

  • an obligation free discussion regarding your current program

  • an AML/CTF gap analysis

  • a full review of your AML/CTF program, and expert recommendations.

2021 Click here to download

Contacts

Jonathan Thomas

E jthomas@sw-au.com

Laura Toscano

E ltoscano@sw-au.com

Sean Wong

E sewong@sw-au.com