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Regulation crucial for AML success

Regulation crucial for AML success

AS CORPORATIONS digest the Federal Government’s draft anti-money laundering (AML) bill, the regulation of the new framework is emerging as a crucial issue.Austrac, the nation’s leading financial…

AS CORPORATIONS digest the Federal Government’s draft anti-money laundering (AML) bill, the regulation of the new framework is emerging as a crucial issue.

Austrac, the nation’s leading financial intelligence unit, will be transformed into a regulatory body, responsible for enforcing and developing the new laws and experts believe its performance could make or break the regime. “If Austrac is not successful in enforcing the law, many of the efforts of the bill will struggle to get off the ground,” said Chris Cass, partner at Deloitte. “Ultimately the success of this AML law will only be as good as Austrac’s ability to police it.”

Other experts identified cultural issues at both Austrac and the Attorney-General’s department as potential problem areas. “It will be a change for Austrac,” said one senior financial services source.

“What’s going to be difficult is that Austrac is already more of a policeman than say APRA or ASIC. They will need to change their attitude to work in partnership with industry to develop the details. At the end of the day, no one wants money being laundered through their funds. We are dealing with the criminal law division of the Attorney General’s office. We are used to dealing with Treasury which has a much more collaborative approach. I think we need to see a shift there. To their credit they have already shared findings with us, but the last thing we need is for Austrac to take a really pedantic view and come down hard on someone who is trying to do the right thing.”

Others said the regulator was already going back on its word on certain issues. “There were a lot of reassurances that there would be a collaborative approach, but then they’ve come out with these fairly prescriptive rules,” said a senior banking source. “They are endeavouring to get it right, but the fruits of their labours are not the types of documents we had expected.”

The new regulator also faces many of the same problems afflicting the private sector. Australia is experiencing a chronic shortage of anti-money laundering experts and corporations are rushing to snap up those with experience. The private sector is also expected to move relatively quickly once the bill becomes law. Austrac must keep up, Cass said. “There’s been such a slow roll out of this draft bill that they’ve [the private sector] had some time to adjust to the changes that are coming up. It is the extent of the organisational change that will be the challenge for Austrac.”

Concerns are also growing over the potential transition period for the new laws. Corporations fear the government may opt for a short transition period — one year for example. “We have asked for one to three years transition time,” said the financial services source.

“If you think of FSR [Financial Services Reform], that was a two year transition period. But we think this could be potentially bigger than FSR, so we need the three years for the harder areas. The harder areas are the ongoing monitoring and due diligence of customers because we need to understand what is a normal profile of our customers before we can understand what is not normal and therefore suspicious. Building those systems will take time. Like a lot of companies, we have a lot of systems that we are trying to rationalise into new systems but it takes time to open them up and make changes.”

Cass said Chris Ellison, Minister for Justice and Customs, would be well advised to tread carefully around the transition issue. “The danger is that the minister brings in a very short transition period and people wont have time to learn and will go straight to implementation,” he said.

“There’s been so much talk about timing — estimates of between one and three years. You only have to look at the anti-terrorism laws which were given six months transition. If I had Chris Ellison here, I’d say appreciate the limited level of skill and AML knowledge in industry and appreciate the extent of the change you’re asking organisations to bring about. My view is that one year will be over challenging for business and the regulatory body.”

See Risk Management magazine for a special report on anti-money laundering.

Email This email address is being protected from spambots. You need JavaScript enabled to view it. or see www.riskmanagementmagazine.com.au

Stuart Fagg is the Editor of Risk Management magazine, Lawyers Weeklys sister publication.

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