AUSTRAC Updates

AUSTRAC orders audit of Afterpay’s compliance with financial crime legislation

AUSTRAC has ordered the appointment of an external auditor to Afterpay Pty Ltd (Afterpay) to examine its compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the AML/CTF Act).

This action has followed a period of ongoing engagement with Afterpay where AUSTRAC has identified concerns with its compliance.

The external auditor will examine Afterpay’s:

  • Governance and oversight of decisions related to its AML/CTF framework

  • Identification and verification of customers

  • Suspicious matter reporting obligations

  • AML/CTF program, including the development of its money laundering and terrorism financing risk assessment

AUSTRAC Chief Executive Officer, Nicole Rose PSM said the buy now, pay later sector has experienced rapid growth in recent years and this appointment reminds new financial services businesses that they have obligations under the AML/CTF Act and they must take these seriously.

“The audit will help identify if Afterpay has developed and implemented the systems and controls it needs to ensure it complies with its obligations. These laws are in place to protect businesses, the financial system and the Australian community from criminal threats,” Ms Rose said.

AUSTRAC is committed to educating emerging financial services businesses to assist them to meet their obligations and fight financial crime.

The audit will be used to determine the extent of any compliance issues and whether further regulatory action concerning Afterpay is required.

“AUSTRAC will continue to work with Afterpay to assist the company to mature and strengthen its compliance processes, staff training and suspicious matter reporting,” Ms Rose said.

“But we will not hesitate to take action where an organisation is failing to appropriately protect itself and Australia’s financial system from criminal activity.”

The extent of the auditor’s examination is determined by AUSTRAC and will be at Afterpay’s expense. A preliminary audit report must be provided to AUSTRAC within 60 days.

About AUSTRAC

AUSTRAC uses financial intelligence and regulation to disrupt money laundering, terrorism financing and other serious crime.

AUSTRAC’s dual regulatory and intelligence functions work hand in hand to protect Australia’s financial system.

Serious crime is motivated by profit, and no matter the size, almost all criminal acts leave a financial trail and AUSTRAC has the right tools and expertise to follow these trails.

Our regulatory function ensures we get high quality data and entities comply with their obligations. It requires the financial sector to put in place systems and controls that protect them from criminal abuse, while also reporting on financial transactions and suspicious activity.

This provides AUSTRAC’s intelligence analysts with the information they need to identify risks and develop intelligence products that support law enforcement and national security operations and investigations.

Media contact:
media@austrac.gov.au
Ph: (02) 9950 0488

Link:

AUSTRAC media release

AUSTRAC launches campaign against illegal money transfer dealers

AUSTRAC has launched a campaign targeting illegal money transfer dealers.

Money transfer dealers that have not registered with AUSTRAC and are operating illegally are at a high risk of having their services abused by criminals groups and do not have the same level of risk protections in place as registered money transfer businesses.

Money transfer businesses that are not a financial institution such as a bank or credit union offer a valuable service to their customers and communities by allowing them to send money to family and friends overseas.

In 2018/19 individuals and businesses reported $60 billion worth of international funds transfer instructions sent and received by people in Australia using registered money transfer services. In the same year there were around 17.3 million transactions reported through Australia’s registered remittance sector.

AUSTRAC CEO, Nicole Rose, said unregistered money transfer dealers represent a real threat to Australian communities as they are used as havens for criminals to move money to fund their criminal activities.

“Money laundering enables criminal activity that causes real harm to Australians, such as human trafficking, child exploitation, illegal firearm sales and drug trafficking.

Registered money transfer businesses play an important role in protecting Australia’s financial system from criminal abuse. 

They are required to put in place appropriate safeguards to harden and protect their business against criminals who try to use them to launder their dirty money. Supporting unregistered money transfer dealers can potentially attract criminals into a community,” Ms Rose said.

To raise public awareness of the risks posed by illegal money transfer dealers, AUSTRAC is conducting a community campaign. AUSTRAC staff will be visiting communities and registered businesses across Australia to talk about the threat that unregistered money transfer dealers pose, and how people can anonymously report suspected unregistered dealers. Community members are being encouraged to use registered money transfer businesses listed on AUSTRAC’s website.

The campaign will see a series of town hall meetings held in Sydney, Melbourne, Perth and Brisbane to raise awareness of the community risks associated with unregistered money transfer dealers throughout September to November.

“Dealers who are providing an unregistered money transfer service must stop now and contact AUSTRAC to begin the registration process,” Ms Rose said.

There are large penalties for businesses who fail to register with AUSTRAC, including fines of up to $420,000, seven years’ jail, or both.

To find out more about the issue of unregistered money transfer dealers, visit www.austrac.gov.au/moneytransfer

Media contact:

media@austrac.gov.au 
Ph: (02) 9950 0488  

Consequences for unregistered remittance dealers

Example 1: 

Ms Smith runs a Sydney-based business that receives money from people in her community, including friends and family, and makes it available to their relatives overseas. At the same time, her business also receives money from overseas and makes it available to her friends and family in Australia. It is a requirement for a business conducting this activity to be registered with AUSTRAC. Failure to do so can result in fines of up to $420,000 or potential jail time, or both.

Example 2:

Ms Green occasionally provides a money transfer service for people in her community from her home. The money transfer instructions she receives from her community typically involve her customers’ family members overseas.  Ms Green does not have an Australian Business Number and charges a low fee for her money transfer services.  Ms Green uses a registered money transfer provider to send and receive the money she accepts for and distributes to her community.  Ms Green must register with AUSTRAC even though she earns little money from her activities, only accepts a small number of money transfer transactions per year and uses the services of a registered money transfer service provider. Failure to do so can result in fines of up to $420,000 or potential jail time, or both.

Example 3:

Mr Jones runs a Melbourne-based business that offers money transfer services for customers under two different business arrangements. He provides money transfer services in his capacity as a registered affiliate of a money transfer network provider and provides money transfer services under his own business name, “Mr Jones money transfer services”, using his own money transfer systems and platforms. In these circumstances, Mr Jones must separately register his “Mr Jones money transfer services” business with AUSTRAC as an independent money transfer provider. Failure to do so can result in fines of up to $420,000 or potential jail time, or both.

Link:

AUSTRAC media release

AUSTRAC issues $252,000 infringement notice to Compass

AUSTRAC has issued a $252,000 infringement notice to Compass Global Holdings Pty Ltd (Compass) for failing to report international funds transfers between 2018 and 2019.

Entities regulated by AUSTRAC, such as money transfer dealers, banks and casinos, are required to submit International Funds Transfer Instruction (IFTI) reports to AUSTRAC on time.

This is a requirement under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).

Information reported by the financial sector provides AUSTRAC with vital intelligence that enables AUSTRAC and its partners to combat crime.

AUSTRAC is working with Compass to address concerns that it does not have adequate systems and processes in place to identify, mitigate and manage money laundering and terrorism financing risks.

AUSTRAC Chief Executive Officer, Nicole Rose PSM said that the reporting of money flowing in and out of Australia is critical for AUSTRAC to detect criminal activity like money laundering, to protect the Australian community from serious crime.

“Money laundering funds and enables terrorism and serious organised crime that causes harm to Australians such as human trafficking, drug trafficking, child exploitation and illegal firearm sales,” Ms Rose said.

Money transfer businesses are a major part of Australia’s financial system, with individuals and businesses reporting $60 billion worth of international funds transfer instructions sent and received by people in Australia using registered money transfer services in 2018/19.

In the same year, there were around 17.3 million transactions reported through Australia’s registered remittance (money transfer) sector.

“AUSTRAC is working with Compass, to ensure they understand their compliance obligations. Where businesses don’t comply with the law, AUSTRAC will not hesitate to take action to protect Australia’s financial system and the community from criminal activity,” Ms Rose said.

In August, AUSTRAC launched a national, community focussed campaign to target illegal money transfer dealers that have not registered with AUSTRAC. The campaign will raise awareness among money transfer businesses of the risks posed by illegal money transfer businesses.

AUSTRAC’s enforcement powers

AUSTRAC has a range of enforcement powers available, which include:

  • issuing infringement notices

  • issuing remedial directions, which require a reporting entity to take specified action to ensure compliance

  • accepting enforceable undertakings detailing the specific actions a reporting entity will commence or cease in order to comply with the AML/CTF Act

  • seeking injunctions and/or civil penalty orders in the Federal Court

  • referring a matter to the Commonwealth Director of Public Prosecution for possible criminal prosecution.

About AUSTRAC

AUSTRAC uses financial intelligence and regulation to disrupt money laundering, terrorism financing and other serious crime.

AUSTRAC’s dual regulatory and intelligence functions work hand in hand to protect Australia’s financial system.

Our regulatory function ensures we get high quality data and entities comply with their obligations. It requires the financial sector to put in place systems and controls that protect them from criminal abuse, while also reporting on financial transactions and suspicious activity.

This provides AUSTRAC’s intelligence analysts with the information they need to identify risks and develop intelligence products that support law enforcement and national security operations and investigations.

Media contact
media@austrac.gov.au
Ph: (02) 9950 0488

Link:

AUSTRAC media release

AUSTRAC orders audit of PayPal Australia’s compliance with financial crime laws

AUSTRAC has ordered the appointment of an external auditor to examine ongoing concerns in regard to PayPal Australia’s compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the AML/CTF Act).

These concerns relate to PayPal Australia’s compliance with its International Funds Transfer Instruction reporting obligations, which require regulated entities to report the transfer of funds or property to or from Australia.

International Funds Transfer Instructions reported by the financial services sector provide AUSTRAC with vital intelligence that enables AUSTRAC and its partners to combat serious crimes such as child sex exploitation.

AUSTRAC Chief Executive Officer, Nicole Rose PSM said the AML/CTF regime is in place to protect businesses, the financial system and the Australian community from criminal threats.

“Regulated businesses like PayPal Australia, who facilitate payments and transactions for millions of Australian customers every year, play a critical role in helping AUSTRAC and our law enforcement partners stop the movement of money to criminals and terrorists,” Ms Rose said.

“PayPal is an important partner in the fight against crime. However, when we suspect non-compliance AUSTRAC will take action to protect the Australian community.”

The external auditor must report to AUSTRAC within 120 days of being appointed and will examine PayPal Australia’s compliance with its:

  • AML/CTF Program obligations

  • International Funds Transfer Instruction (IFTI) reporting obligations

  • Record keeping obligations.

The outcomes of the audit will assist PayPal with its compliance, but also inform AUSTRAC whether any further regulatory action is required.

“We will continue to work closely with PayPal during this process to address any compliance concerns,” Ms Rose said.

The extent of the auditor’s examination is determined by AUSTRAC and will be at PayPal Australia’s expense.

AUSTRAC’s enforcement powers

AUSTRAC has a range of enforcement powers available, which include:

  • issuing infringement notices

  • issuing remedial directions, which require a reporting entity to take specified action to ensure compliance

  • accepting enforceable undertakings detailing the specific actions a reporting entity will commence or cease in order to comply with the AML/CTF Act

  • seeking injunctions and/or civil penalty orders in the Federal Court

  • referring a matter to the Commonwealth Director of Public Prosecution for possible criminal prosecution.

About AUSTRAC

AUSTRAC uses financial intelligence and regulation to disrupt money laundering, terrorism financing and other serious crime.

AUSTRAC’s dual regulatory and intelligence functions work hand in hand to protect Australia’s financial system.

Serious crime is motivated by profit, and no matter the size, almost all criminal acts leave a financial trail and AUSTRAC has the right tools and expertise to follow these trails. 

Our regulatory function ensures we get high quality data and entities comply with their obligations. It requires the financial sector to put in place systems and controls that protect them from criminal abuse, while also reporting on financial transactions and suspicious activity. 

This provides AUSTRAC’s intelligence analysts with the information they need to identify risks and develop intelligence products that support law enforcement and national security operations and investigations. 

 

Media contact:
media@austrac.gov.au
Ph: (02) 9950 0488

Link:

AUSTRAC media release

Cybercrime Squad and AUSTRAC remind digital currency exchanges of reporting obligations

This is a joint media release between the NSW Police Force and AUSTRAC.

The NSW Police Force and the Australian Transaction Reports and Analysis Centre (AUSTRAC) are reminding digital currency exchange providers to be aware of their obligations following amendments to Commonwealth legislation last year.

 

In April 2018, amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 were introduced, which included expanding the scope of the Act to include regulation of digital currency exchange providers.

 

These changes included registering with AUSTRAC, verifying customer identity, reporting suspicious matters and over-threshold cash transactions; and complying with record-keeping requirements.

 

AUSTRAC National Manager for Regulatory Operations, Dr Nathan Newman, said AUSTRAC worked closely with digital currency exchange providers to prepare them for these laws, which are in place to protect industry from criminal exploitation and in turn, the Australian community.

 

“Digital currency exchange providers have had adequate time and opportunity to comply with these new laws and AUSTRAC has already refused the registration of two digital currency exchange providers. We continue to actively monitor the sector’s compliance,” Dr Newman said.

 

“It’s important that digital currency exchange providers meet their obligations so we can identify any instances of criminal activity using their services to launder money, fund terrorism or commit other serious crimes.”

 

Cybercrime Squad Commander, Detective Superintendent Matt Craft, said this is a timely reminder to those who deal in digital currencies to ensure they are meeting their obligations.

 

“While cash is still ‘king’, digital currencies are fast becoming the preferred choice for organised criminal networks involved in money laundering, funding terrorism, and cybercrimes,” Det Supt Craft said.

 

“These amendments were implemented to ensure digital currencies were being monitored in the same ways as cash exchanges and transfers.

 

“Any information about illicit activity by digital currency exchange providers that is provided to our squad – whether related to organised crime, terrorism, or technology-enabled crime – will be actively pursued in partnership with AUSTRAC.

 

“Let this be a warning to digital currency exchange providers: if you fail to comply with your obligations, your actions will not go unnoticed.”

 

Det Supt Craft added that an increase in popularity of Dark Net marketplaces will also mean increased targeting by law enforcement.

 

“Given the perceived anonymity of the Dark Net, Australian criminal groups are starting to favour the online environment to conduct illicit business,” Det Supt Craft said.

 

“With police and our partners proactively targeting this space, I’ll assure these networks that their anonymity is no longer guaranteed.”

 

More information about digital currency exchange providers’ obligations under the Act is available at: http://www.austrac.gov.au/digital-currency-exchange-providers.

 

Anyone with information about non-compliant digital currency exchanges or the facilitation of serious and organised crime is urged to contact Crime Stoppers: 1800 333 000 or https://nsw.crimestoppers.com.au. Information is treated in strict confidence. The public is reminded not to report crime via NSW Police Force social media pages.

Contact:

NSW Police Force Media Unit (02) 8263 6100
AUSTRAC Media (02) 9950 0488

Link:

AUSTRAC Notice

AUSTRAC and CBA agree $700m penalty

An agreement has been reached today between AUSTRAC and the Commonwealth Bank of Australia (CBA) for a $700 million penalty to resolve Federal Court proceedings relating to serious breaches of anti-money laundering and counter-terrorism financing (AML/CTF) laws.

The parties will jointly approach the Federal Court seeking orders to this effect. It is anticipated that a hearing on penalty will be scheduled in the coming months.

If agreed by the Federal Court this will represent the largest ever civil penalty in Australian corporate history.

AUSTRAC’s enforcement action against CBA followed exhaustive investigations into CBA’s AML/CTF compliance and risk management practices, particularly in relation to its Intelligent Deposit Machines (IDMs). 

These investigations, undertaken in partnership with the Australian Federal Police, NSW Police Force and Western Australia Police, identified that CBA’s IDMs were being used to launder the illicit proceeds of crime. 

In reaching today’s agreement, CBA has admitted it contravened the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) on 53,750 occasions. 

In summary, CBA accepted that:

  • it failed to carry out an appropriate assessment of the money laundering and terrorism financing (ML/TF) risks of its IDMs prior to October 2017
  • it failed to complete the introduction of appropriate controls to mitigate and manage the ML/TF risks of IDMs prior to April 2018
  • it failed to provide 53,506 threshold transaction reports to AUSTRAC on time for cash transactions of $10,000 or more through IDMs from November 2012 to September 2015, having a total value of about $625 million
  • for a period of three years, it did not comply with the requirements of its AML/CTF program relating to monitoring transactions on 778,370 accounts
  • it failed to report suspicious matters on time, or at all, involving transactions in the tens of millions of dollars
  • even after it 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.

AUSTRAC’s CEO, Nicole Rose PSM said this outcome sends a strong message to industry that serious non-compliance with the AML/CTF Act will not be tolerated.

“As we have seen in this case, criminals will exploit poor business practices to launder the proceeds of their crimes,” Ms Rose said. 

“This has real impacts on the everyday lives of Australians and puts the community at risk by increasing opportunities for terrorists to support attacks here and overseas, and enabling organised crime groups to peddle drugs to our families and friends.

“We know that businesses are the first line of defence in protecting the community and our financial system from criminal abuse, and it is critical for AML/CTF compliance and risk management to be embedded in business strategy and practices.

“I hope this result alerts the financial sector to the consequences of poor compliance, and reinforces that businesses need to take their obligations seriously.”

Ms Rose added that AUSTRAC’s focus is to work collaboratively with and support industry to deter criminal activity and welcomed CBA’s decision to commence work on a Program of Action to address their AML/CTF compliance failings.

“We will continue to work collaboratively with CBA as it progresses this work and I am encouraged by the manner in which CBA has handled these negotiations.

“We want compliance to be voluntary, and even taken on with enthusiasm, however we will not shy away from using our enforcement powers where necessary. In the end our role is about protecting the community and we take this role seriously.”

Links:

AUSTRAC Press Release

Statement of Agreed Facts and Admissions

Are you a digital currency exchange provider?

21 December 2017

On Thursday 7 December 2017 Parliament passed the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017 (Amendment Act). Royal Assent was granted on 13 December 2017. Any changes will come into effect from the date of Proclamation, which is expected to be 1 April 2018.

The Amendment Act expands legislation to include regulation of digital currency exchange providers. This regulation will be in the form of mandatory registration and compliance obligations, including:

  • customer identification and due diligence
  • adopt and maintain an AML/CTF program, which includes requirements to identify, manage and mitigate money laundering and terrorism financing (ML/TF) risk 
  • suspicious matter reporting
  • threshold transaction reporting 
  • record-keeping requirements.

What happens next?

AUSTRAC is drafting AML/CTF Rules that will be released shortly for public consultation, as follows:

  • 15 January 2018 – Draft Rules will be published on AUSTRAC’s website for public consultation. 
  • 13 February 2018 – Draft Rules public consultation period will close.

More information

AUSTRAC will keep you updated as information and guidance becomes available. We will also advise you when your obligations will commence from.

Link:

AUSTRAC Notice