By Manish Ghiya, Principal, Compliense Advisors
AUSTRAC recently released the Money Laundering (ML) and Terrorism Financing (TF) National Risk Assessments 2024 (ML NRA and TF NRA).
ML NRA | The ML NRA aims to enhance the understanding of ML tactics and trends at a national level. It presents risk ratings across a range of predicate offences, and sector/channel vulnerabilities. Australia remains an attractive destination for storing and integrating criminal proceeds, i.e., laundering illicit funds. The NRA will be instrumental in framing robust countermeasures and bolstering Australia’s defenses against these illicit activities.
Broad ML risk outlook | Among the many illicit money-generating crimes listed in the ML NRA, illicit drugs, tax and revenue crimes, and government-funded programs top the chart and pose a ‘high’ risk with an increasing threat outlook. Threats from crimes such as scams, pure cybercrime, identity fraud, corruption and bribery, and superannuation fraud pose a ‘medium’ risk, but also have an increasing threat outlook.
The report notes that among other professional service providers, financial advisors are embedded in criminal business models enabling ML.
The report highlights threats and vulnerabilities, and some of these, particularly related to stockbrokers (SB) and securities dealers (SD) are as follows. AUSTRAC has also highlighted some of these points in its industry outreach events:
• The extent of observed ML by SB and SD is relatively low. However, the sector is exposed to a range of inherent ML risks. These include exposure to high-risk customers and jurisdictions, and complex and increasingly remote online service delivery channels.
• Vulnerabilities include the volume and speed of transactions, coupled with the increasing use of online services and trading platforms, which also create additional challenges for transaction monitoring.
• They are unlikely to become highly attractive to criminals seeking to launder large volumes of illicit funds. However, there are scenarios where SB and SD either wittingly launder funds on behalf of criminal clients, or could be exploited by customers to generate criminal proceeds.
• There are instances of under-developed AML/CTF systems and controls among some sector entities. The report also flags low volumes of SMR by SB and SD. AUSTRAC has emphasised that SMR reporting by this sector is an important mechanism to detect and report potential suspicious matters.
TF NRA | The TF NRA notes that Australia’s TF environment is small scale and low value, and the domestic threat has receded in recent years. TF funds primarily flow out of Australia, rather than into the country, implying that TF linked activities primarily involve raising and remitting funds rather than their use domestically.
Methods like self-funding, and fundraising through social media and crowdfunding are high risk channels / modes of raising funds.
Terrorism financiers prefer proven and readily available methods to move funds over complex schemes. These include methods involving banking, remittance and online payment services. The overall risk of SB and SD being exploited for moving TF funds is rated very low.
However, even though the risks are low, a robust compliance framework to detect and mitigate the risk of TF linked funds and transactions is critical and regulatorily required.
Integrating the ML/TF NRA | As a practical step, Reporting Entities (RE) must consider the NRAs, when developing or updating their ML/TF risk assessments. This is something that AUSTRAC has emphasised as well. The risk assessment should, in turn, inform your AML/CTF program and compliance framework. Changes to the risk assessment should also reflect in your training and awareness programmes.
The industry specific risk assessments published by AUSTRAC (eg: the Securities and Derivatives Sector Risk Assessment 2017) must also be considered in your risk assessment.
Even while assimilating the NRA or industry-specific risk assessment with your risk assessment, the principles of a risk-based approach, and risks and mitigants in the context of the size, nature, and complexity of your business continue to be relevant.
Note: The above article is for general informational purposes only and does not constitute professional or legal advice. Please seek specific advice for your situation.
Compliense Advisors is an AML and FinCrime compliance and risk management advisory firm, and we can assist in your AML/CTF compliance obligations. Write to us on [email protected]. Visit our website for more such knowledge resources (including another article on the above subject). If you liked this update, sign up for new articles and updates.
