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People key in laundering fight

People key in laundering fight

FRONT-LINE EMPLOYEES, not monitoring systems, will be the first defence against money laundering under the Federal Government’s anti-money laundering reforms, a US expert claimed. Robert Molloy,…

FRONT-LINE EMPLOYEES, not monitoring systems, will be the first defence against money laundering under the Federal Government’s anti-money laundering reforms, a US expert claimed.

Robert Molloy, an associate partner at IBM’s global business group based in Georgia, US, said that while banks are concerned with system upgrades and integration, there are issues around front-line staff and training. “Globally, more than 70 to 80 per cent of the suspicious transaction reports that are filed are not detected by the monitoring systems, they are detected by the front-line personnel,” he said. “The critical elements of the of the systems are not only the system’s capabilities, but the training that goes on in the front office and how those people are compensated.”

While many front-line staff in banking and financial services are trained to spot suspicious activity, spotting money launderers and terrorist financiers is another step, which may involve conflict. “They are currently compensated to sell. When you are focusing on selling that can take some of the focus away from compliance. As part of a true compliance program you have to look at the need to readjust that.”

A spokesperson for the Finance Sector Union said it was yet to form a view on the shift in role for front-line staff.

Sean Hughes, group general manager, compliance, at ANZ bank, said the staff training element of the money laundering reforms will require significant investment and is comparable in scope to the Financial Services Reform Act.

“In terms of staff training and process reengineering, these changes can be compared to the work undertaken to achieve compliance with Financial Services Reform,” he said in the bank’s submission to the Attorney General’s department on the money laundering reforms.

Molloy, IBM’s global anti-money laundering (AML) expert, said banks in Australia are concerned that the Federal Government may repeat the mistakes of its US counterpart on AML. “Most project teams are concerned about the postponement of the issuance of the final rules,” Molloy said. “This happened in the US, where the law passed in October of 2001 and the rules were promised by October 2002. They didn’t come. Then they said December, then they said March. What happened was they issued them in April 2003 and they only gave until October 2003 for compliance. When the banks raised this and said it’s not enough time, the regulator said ‘you’ve known about this for two years, why didn’t you do something?’. The project teams are concerned that the delay in the issuance of the final rules here means senior management may redirect resources to seemingly more pressing issues, only to find out that they didn’t leave sufficient time to put the systems in place.”

He added that Australia’s proposed reforms, which are based on international guidelines published by the Paris-based Financial Action Task Force (FATF), are the toughest globally. “The proposed rules as they are now configured are more comprehensive than those of any other global entity. There are good points — there are safe havens that exist, which don’t exist anywhere else,” he said.

He added that the ‘safe havens’ may offer some regulatory relief. “One says that if it’s a low or medium risk and you follow certain prescribed procedures, there is no regulatory risk, although there is always reputational risk. Secondly, if you employ an agent, and the agent doesn’t follow procedures, then the entity itself is not responsible in a regulatory sense. Elsewhere, you cannot pass on the obligation contractually.”

However, Andrew Carriline, general manager at Westpac Banking Corporation said the safe harbours actually undermine Australia’s current AML regime, the Financial Transactions Reporting Act.

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People key in laundering fight
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