It’s difficult to tag a country as the heaven for money laundering.
However, the recent judgments by the federal Senate Inquiry have highlighted the loopholes in Australia’s AML regime and compliance efforts and concluded that the country is failing to implement the FATF recommendation on combating money laundering and other financial crimes.
The FATF’s findings on the Australian banking system aren’t satisfactory either, and that is the reason the banks may have to give extra assurance to foreign investors in the country.
However, the latest developments in the country’s efforts against money laundering raise questions about the country’s efforts to combat financial crimes despite being one of the founding members of the financial actions task force.
Why is Australia failing to comply with the FATF recommendations and AML compliance efforts completely? Is it due to an old strategy or loopholes in implementing a compliance program in financial institutions?
This blog will discuss the Australia aml regulation and the areas that need to be improved for better compliance.
A rundown of the Current AML Regulations in Australia
AML/CTF Act 2006:
The country currently imposes a series of AML legislation, and among these regulations, the AML/CTF Act 2006 is widely implemented across businesses and organizations.
Under the AML/CFT 2006 acts, organizations must report suspicious transactions and maintain robust AML/CTF programs.
Financial Transaction Reports Act 1988:
In the series, the next legislation is the Financial Transaction Reports Act, which is aimed at combating crimes related to drug trafficking,
With this act in place, certain entities are obliged under the law to report cash transactions exceeding the threshold to AUSTRAC (Australian Transaction Reports and Analysis Centre).
Privacy Act 1988:
The country has also introduced the Privacy Act 1988, which states that businesses with a turnover of more than 3 million dollars must comply with the act and report any suspicious activities within their organization.
Current Gaps in AML Compliance Efforts
Though the country has introduced a series of AML regulations to combat money laundering crimes, there are still many loopholes that encourage criminals to easily commit crimes, particularly in the gambling industry.
Recent reports on the gambling industry have proved its vulnerability.
Above all, some areas within the country are not obliged to follow the AML in Australia, and these entities include lawyers, accountants, real estate agents, trusts, and other companies.
Australia’s AML Compliance Failures with Real-life Case Examples
Complex Financial System
The monitoring system against suspicious transactions in the country isn’t effective and efficient due to the complexities of the financial system, which often gives criminals an advantage in laundering money.
The complexity could be understood by the Commonwealth Bank of Australia (CBA) case, which had to pay 700 million AUD fines for breaching the AML laws.
The regulatory body, in its report, reported that the bank was unable to report over 53,000 suspicious transactions due to less effective AML programs in place.
The reports also revealed that between 2012 and 2015, the bank was unable to report approximately AUD 625 million.
Real Estate Sector Vulnerabilities
The AML/CFT laws exempt the real estate sectors from reporting. And you know what that means? It means you are inviting criminals to come and clean up their dirty money by investing in the real estate market.
One report has extensively revealed that foreign buyers, particularly from China, have been using the Australian real estate market to clean up their illicit funds.
The best places to do such activities are the luxury properties in Sydney and Melbourne.
The report from the Australian Institute of Criminology also publicizes that up to AUD 1 billion a year is laundered in a country’s real estate market.
Beneficial Ownership Transparency
The 5th AML directive was particularly focused on the ownership structure of the business.
In the AUS, the country has been criticized for not having a comprehensive public register where all information about the beneficial owner is gathered.
The deficiency in this sector makes it easy for people investing in offshore companies to detect illegal activities.
Australia has been criticized for needing a comprehensive public register of beneficial owners, making it difficult to trace the true ownership of assets and detect illicit activities.
This was revealed in the Panama Papers 2016, which exposed almost 800 people involved in illegal activities with unauthorized ownership structures.
Technological Advancements and Digital Currencies
Since the world has seen advancements in cryptocurrencies, challenges have also emerged for compliance teams.
Due to anonymity in digital transactions related to digital currency, this department is more vulnerable to money laundering and other financial crimes.
The rise of cryptocurrencies and other digital assets poses new challenges. These technologies facilitate anonymous transactions, complicating efforts to track and prevent money laundering.
In 2020, it became the highlight when the Australian authorities arrested several individuals who were involved in drug trafficking and used Bitcoin to launder proceeds.
What’s the way forward?
Organizations running the Australian jurisdiction need to establish an internal AML compliance program first based on the recommendations and suggestions of International regulatory bodies.
Then, robust AML software should be incorporated to help detect and combat money laundering activities in real time by detecting unusual activities and reporting them to the relevant departments.