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Key themes shaping Australian regulatory enforcement risk in 2024
Key themes shaping Australian regulatory enforcement risk in 2024

Anti-money laundering/ counter-terrorism financing (AML/CTF)

Key regulatory and enforcement developments in 2023

AUSTRAC experienced another active year in 2023, marked by significant enforcement and regulatory scrutiny of reporting entities. The year saw the continuation of the three enforcement proceedings brought against the casino industry, with civil penalty proceedings resolved in one case.1 AUSTRAC also dipped into its wider enforcement toolkit, accepting the highest number of enforceable undertakings in a single year since 2010, with three external audits being completed during the year also. This intensified enforcement activity prompted closer collaboration with other regulators, notably APRA.

In light of the next mutual evaluation of Australia's AML/CTF regime by the Financial Action Task Force, the Attorney General's Department also commenced a consultation into extending the AML/CTF regime to other gatekeeper professions, including lawyers, accountants, real estate agents and precious metal and stone dealers (the 'Tranche 2' reforms), and the simplification of the current AML/CTF regime.2

What are the likely regulatory and enforcement developments in Australia in 2024?

To kick off 2024, we expect further consultation on the AML/CTF regime simplification and the Tranche 2 reforms, and the long-anticipated release of draft legislation implementing the extended and amended regime. Following the legislation's passage, new Tranche 2 entities will have a grace period to adopt relevant AML/CTF policies and processes, which we anticipate will stretch into 2025.

In December 2023, AUSTRAC published its enforcement priorities for 2024.3 AUSTRAC highlighted that the banking, gambling and remittance sectors remain 'high risk', and that its continued focus will be on ML/TF risk assessment, AML/CTF programs, accurate and timely reporting, and high-risk sectors. In addition, AUSTRAC foreshadowed increased regulatory activities in relation to digital currency exchanges, payment platforms, bullion, and non-bank lenders and financiers. Entities in the payment platforms and bullion sectors were subject to enforceable undertakings in 2023.4

Notably, AUSTRAC stated that a focus of its enforcement work will be the joinder of individuals in proceedings against reporting entities where an individual is in any way concerned in, or party to, a contravention of a civil penalty provision of the AML/CTF Act. While board and senior management oversight and accountability has long been an area of focus in AUSTRAC's enforcement action against reporting entities, this is the first time AUSTRAC has expressed an intention to focus on commencing proceedings against individuals. The potential implications of this approach, particularly its intersection with ASIC's focus on enforcement of directors' and officers' duties in the context of AML/CTF failures (or under the BEAR and FAR regimes), remains uncertain. It is likely to have an impact on how AUSTRAC investigates non-compliance, and underscores the need for ensuring appropriate AML/CTF governance and oversight.

AUSTRAC also emphasised the importance of AML/CTF systems and controls being appropriately tailored to a reporting entity's business, particularly in relation to transaction monitoring and outsourcing of AML/CTF functions.

AUSTRAC published extensive guidance in 2023, and committed to further 'meaningful guidance and practical education' to support the proposed legislative reforms. With the appointment of a new AUSTRAC Chief Executive Officer, reporting entities can expect continued regulatory scrutiny and no slow-down in enforcement.5

Who are the key regulators in relation to this area?

The key regulator in this area is AUSTRAC, and in respect of gaming, the state casino and gaming regulators.

AUSTRAC cooperates closley with ASIC, which will often investigate potential breaches of directors' and officers' duties where a major failure in AML/CTF risk management has occurred, as well as APRA, for entities captured by prudential regulation.

What are the key sectors of focus?

Building on AUSTRAC's 2024 priorities, we anticipate that banking, digital currency exchanges, payment platforms, bullion, and non-bank lenders and financiers will be the sectors of focus for AUSTRAC. The predicted Tranche 2 reforms will also extend AUSTRAC's focus to gatekeeper professions, such as lawyers, accountants and real estate agents.

Footnotes

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

  2. Attorney-General's Department Consultation on Modernising Australia's anti-money laundering and counter-terrorism financing regime, see https://consultations.ag.gov.au/crime/aml-ctf/

  3. See https://www.austrac.gov.au/sites/default/files/2023-12/AUSTRAC%20Regulatory%20Priorities%202024.pdf

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

  5. Attorney-General's Department, Appointment of AUSTRAC Chief Executive Officer, https://ministers.ag.gov.au/media-centre/appointment-austrac-chief-executive-officer-15-12-2023#:~:text=I%20am%20pleased%20to%20announce,and%20Analysis%20Centre%20(AUSTRAC).

  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