On the 3rd of August, Australia’s financial intelligence and regulatory agency (AUSTRAC), initiated civil penalty proceedings in the Federal Court against the Commonwealth Bank of Australia (CBA) for serious and systemic non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). AUSTRAC’s action alleges over 53,700 contraventions of the Act. This article looks at what the CBA did wrong and briefly summarises the act for those that may not be familiar with its purpose, scope and operation. In particular, Agilient looks at the implications for non-profits and charities. Such organisations don’t immediately come to mind when thinking of money laundering and counter-terrorism financing.
In summary, according to AUSTRAC the CBA contraventions were:
- The CBA did not comply with its own AML/CTF program, because it did not carry out any assessment of the money laundering and terrorism financing (ML/TF) risk of IDMs before their rollout in 2012. CBA took no steps to assess the ML/TF risk until mid-2015 – three years after they were introduced.
- For a period of three years, CBA did not comply with the requirements of its AML/CTF program relating to monitoring transactions on 778,370 accounts.
- CBA failed to give 53,506 threshold transaction reports (TTRs) to AUSTRAC on time for cash transactions of $10,000 or more through IDMs from November 2012 to September 2015.
- These late TTRs represent approximately 95 per cent of the threshold transactions that occurred through the bank’s IDMs from November 2012 to September 2015 and had a total value of around $624.7 million.
- AUSTRAC alleges that the bank failed to report suspicious matters either on time or at all involving transactions totalling over $77 million.
- Even after CBA became aware of suspected money laundering or structuring on CBA accounts, it did not monitor its customers to mitigate and manage ML/TF risk, including the ongoing ML/TF risks of doing business with those customers.
The AML/CTF Act is important because it provides the means to help detect and deter money laundering and terrorism financing. It also provides financial intelligence to revenue and law enforcement agencies. It imposes five key obligations on regulated businesses:
- Enrolment—all regulated businesses need to enroll with AUSTRAC and provide prescribed enrolment details
- Establishing and Maintaining an AML/CTF Program — to help identify, mitigate and manage the money laundering and terrorism financing risks a business faces
- Customer Due Diligence — identifying and verifying the customer’s identity, and ongoing monitoring of transactions
- Reporting — notifying authorities of suspicious matters, threshold transactions and international funds transfer instructions
- Record Keeping — businesses are required to keep records of transactions, customer identification, electronic funds transfer instructions and details of AML/CTF programs.
The AML/CTF Act was developed in close consultation with industry stakeholders from 2004 to 2006. The AML/CTF Act regulates financial, gambling, remittance and bullion sectors that provide designated services listed in the AML/CTF Act. The AML/CTF Act sets out general principles and obligations. Details of how these obligations are to be carried out are set out in the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (AML/CTF Rules). The AML/CTF Act implements a risk-based approach to regulation. Businesses must meet the minimum obligations set out in the AML/CTF Act and AML/CTF Rules. Beyond that, each business must assess the risks of potential money laundering or terrorism financing when providing a designated service to a customer. Obligations such as ‘know your customer’, transaction monitoring and ongoing customer due diligence are all designed to assist regulated businesses to identify suspicious matters and report them, regardless of their own perceptions of risk.
The AML/CTF does not just impact on big business. Non-profit organisations’ financial operations are also at risk of being misused by other individuals or organisations to finance or support terrorist activity. The consequences of becoming involved in terrorist financing are significant, and can include loss of reputation, status and donor confidence.
Non-profit organisations are traditionally cash-intensive and regularly transmit funds from supporters between jurisdictions. They also often operate under less formal regulation, which exposes the sector to an elevated risk of criminal and terrorist abuse. As a result of these risks, the Financial Action Task Force has included non-profit organisations in its recommendations to help combat money laundering and terrorism financing. Individuals or organisations, including non-profit organisations, may face criminal penalties if they provide financial support to terrorists, terrorist organisations or acts of terrorism. There are two lists maintained by the Australian Government in relation to terrorism financing that non-profit organisations should be aware of. The first is a list of terrorist organisations under Division 102 of the Criminal Code Act 1995. The Department of Foreign Affairs and Trade maintains a consolidated list of persons and entities which are subject to a targeted financial sanction imposed by a resolution of the United Nations Security Council. Penalties apply under the Charter of the United Nations Act 1945 for making resources available to a designated individual or organisation.
What can Agilient do to assist non-profit organisations in preventing their operations from being misused for terrorism financing?
- Build awareness of the risk of being misused for the purpose of terrorism financing.
- Outline best practice principles which non-profit organisations can undertake to reduce this risk.
- Assist charities to understand and comply with legal requirements in relation to terrorism financing.
- Provide checklists to assist in protecting charities and non-profit organisations against the risk of terrorism financing.
For further information and assistance for your organisation relating to terrorism finance prevention and anti-money laundering please contact Agilient.
The Agilient Team