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Seven key themes set to shape regulatory enforcement risk

Anti-money laundering

Key regulatory and enforcement developments – 2022

2022 saw a 100 per cent increase in the number of civil penalty proceedings commenced by AUSTRAC1 to date, with three proceedings commenced in the calendar year against entities in the casino sector. Prior to 2022, AUSTRAC had only commenced three civil penalty proceedings since it was established in 1989.2

The casino civil penalty proceedings followed multiple public inquiries at state level into the casinos between 2020 and 2022, with the catalyst of these inquiries being media allegations concerning the alleged failure to control money laundering risks.

AUSTRAC has also demonstrated its willingness to use its broader range of powers in 2022, concluding enforcement investigations into two banks with the acceptance of an enforceable undertaking in each case, and ordering external audits into a number of reporting entities' compliance with the AML/CTF regime across a range of sectors. AUSTRAC has also commenced an enforcement investigation into an entity in the online corporate book making sector.

In New South Wales, 2022 saw the completion of the NSW Crime Commission's Inquiry into money laundering in pubs and clubs, with a series of recommendations made to reduce the money laundering risks associated with electronic gaming machines.

Likely regulatory and enforcement developments – 2023

In 2023, in addition to progressing the civil penalty proceedings on foot, AUSTRAC is likely to continue its focus on online corporate bookmakers. AUSTRAC has also communicated its intention to focus on the crypto3, remittance4 and pubs and clubs sectors.5 The banking sector is also likely to remain an area of focus, with greater scrutiny applied to banks outside of the big four. While AUSTRAC CEO, Nicole Rose, has emphasised that the regulator's goal is to move away from enforcement and create a culture of co-operation and compliance,6 we do not expect to see any let up in enforcement activity for the foreseeable future.

AUSTRAC has been active in publishing guidance for the sector, including risk assessments,7 and consulting on guidance on enhanced customer due diligence8, employee due diligence9 and de-banking of high risk customer segments.10 It has also flagged its intention to publish further guidance for reporting entities.

The next mutual evaluation of Australia's AML/CTF regime by the Financial Action Task Force will commence in 2024, and is likely to lead to increased pressure on the government to adopt the 'Tranche 2' reforms over the next year11, bringing the real estate, accounting and legal services sectors within the AML/CTF regime. The proposed creation of a public register of beneficial ownership is likely to facilitate increased intelligence gathering by AUSTRAC and other enforcement agencies in the years to come.12

At state level, we expect to see further movement towards a cashless gaming environment in casinos and other gaming environments.

Key regulators and enforcement agencies in this area

The key regulators in this area are AUSTRAC, the AFP, Australian Sanctions Office, Australian Tax Office, ASIC, the CDPP, and in respect of gaming, the state casino and gaming regulators.

In the financial services sector, AUSTRAC cooperates closely with the Australian Prudential Regulation Authority in relation to management of AML risk, and more generally with ASIC, which will often investigate potential breaches of directors' and officers' duties where a major failure in AML/CTF risk management has occurred.

 

Key sectors of focus

Banking, casinos and gaming, remittance providers, crypto and pubs and clubs.

Footnotes

  1. AUSTRAC, or the Australian Transaction Reports and Analysis Centre, is Australia's financial intelligence unit and the regulator responsible for overseeing compliance with the requirements of Australia's anti-money laundering regime

  2. See https://www.austrac.gov.au/lists-enforcement-actions-taken.

  3. See AUSTRAC CEO Nicole Rose - Speaking notes at ACAMS 2nd Annual AML & Anti-Financial Crime Conference Australasia (Media Release, 20 June 2022), available here https://www.austrac.gov.au/news-and-media/our-recent-work/austrac-ceo-nicole-rose-speaking-notes-acams-2nd-annual-aml-anti-financial-crime-conference-australasia; AUSTRAC, 'AUSTRAC CEO Nicole Rose – Speaking notes at FINSIA 'The Regulators' event' (13 May 2022), available here: https://www.austrac.gov.au/news-and-media/our-recent-work/nicole-rose-speaking-notes-finsia-regulators-event;

  4. See AUSTRAC, 'AUSTRAC CEO Nicole Rose – Speaking notes at FINSIA 'The Regulators' event' (13 May 2022), available here: https://www.austrac.gov.au/news-and-media/our-recent-work/nicole-rose-speaking-notes-finsia-regulators-event;

  5. Ibid.

  6. Commonwealth, Legal and Constitutional Affairs Legislation Committee, 8 November 2022, 39 (Nicole Rose), available HERE. 

  7. AUSTRAC, 'Australia's Major Banks – Money Laundering and Terrorism Financing Risk Assessment' (Sept 2021), available here: https://www.austrac.gov.au/sites/default/files/2021-09/Major%20Banks%20ML_TF_Risk%20Assessment%202021.pdf.

  8. AUSTRAC, 'Consultation on guidance on enhanced customer due diligence and employee due diligence and training' (November 2022), available here: https://www.austrac.gov.au/consultations/consultation-guidance-enhanced-customer-due-diligence-and-employee-due-diligence-and-training.

  9. Ibid.

  10. AUSTRAC, 'Consultation on draft guidance: Providing financial services to customers that financial institutions assess to be higher-risk' (9 November 2022), available here: https://www.austrac.gov.au/consultations/consultation-draft-guidance-providing-financial-services-customers-financial-institutions-assess-be-higher-risk.

  11. Commonwealth, Legal and Constitutional Affairs Legislation Committee, 8 November 2022, 34-35 (Nicole Rose) available HERE.; AUSTRAC, 'AUSTRAC CEO Nicole Rose - Speaking notes at ACAMS 2nd Annual AML & Anti-Financial Crime Conference Australasia' (20 June 2022), available here: https://www.austrac.gov.au/news-and-media/our-recent-work/austrac-ceo-nicole-rose-speaking-notes-acams-2nd-annual-aml-anti-financial-crime-conference-australasia.

  12. Treasury Consultation, 'Multinational tax integrity: Public Beneficial Ownership Register' (7 November 2022), available here: Multinational tax integrity: Public Beneficial Ownership Register | Treasury.gov.au