What does it mean that the Australian anti-money laundering watchdog has been flooded with self-disclosures?

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is experiencing a spike in companies disclosing breaches to anti-money laundering (AML) rules. But experts believe more needs to be done.

Nicole Rose is the chief executive at AUSTRAC. In an interview with the Sidney Morning Herald, she said the regulator is going to have a “very busy” year ahead.

It now warned that is likely to take more action against Australia’s big financial institutions.

AUSTRAC is the regulatory watchdog for organizations like banks, money remittance firms, online payments platforms and casinos.

The news comes as the country is dealing with the fallout of the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

It was launched in 2017 after a series of stories about the banking sector circulated in the press.

One of them was about the Commonwealth Bank of Australia. The bank was accused of ignoring money laundering for drug syndicates, terrorism financing and statutory reporting.

The bank eventually agreed to pay a AUS$700m fine for the breaches to the rules in June 2018. Rose sis now linking the rise of reports to that case.

Another result of the Royal Commission was that Australia’s government set aside roughly $390m to support financial regulators in March this year.

Anthony Quinn, founder of Arctic Intelligence, the RegTech company specializing in anti-money-laundering compliance, wrote on LinkedIn that the news raised a few questions.

“Why has there only been a handful of enforcement activity in 13 years, when the level of ‘self-reported’ breaches is at an all-time high?” he wrote. “Levels of compliance are very low and levels of apathy are very high.”

Quinn also asked why there is “still no independent AML review requirement in Australia?” “There are clearly widespread non-compliance issues and who knows how long the self-disclosed breaches have been festering away for,” he continued. “Surely, it must be time to mandate independent AML reviews every [two] years like in New Zealand, to have a qualified and independent person conduct control design and effectiveness testing – these self-disclosures could just be the tip of the iceberg.”

Moreover, he questioned how big the percentage of the “reporting entities are actually self-disclosing breaches of the AML laws”, saying that many “small reporting entities are relying on flying under the radar given the historical lack of enforcement activity.”

Similar sentiments were recently shared by Wayne Byres, chairman of the Australian Prudential Regulation Authority. He recently pushed the nation’s financial services leaders to step up and take responsibility for their actions at the 2019 Banking and Finance Oath Conference in Sidney.

Josh Frydenberg, Australia’s treasurer, recently told business leaders that they were “on notice” as the “public’s tolerance has been exhausted” after the commission.

In early August, RegTech Analyst reported how the RegTech sector could have a role to play in building up the trust the banking sector lost after the commission.

Speaking exclusively with RegTech Analyst, Dilip Mohapatra, founder of RegTech company Cognitive View, said that companies using the technological solutions could enable them to “better manage risk and ensure compliance by increasing the efficiency and effectiveness”.

Investors

The following investor(s) were tagged in this article.