A Guide to Anti-Money Laundering for Crypto Firms

AUSTRAC CEO calls for “General Uplift” in AML/CFT Program Investment

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Appearing at FINSIA’s “The Regulators” event on May 13 2022, AUSTRAC CEO, Nicole Rose, outlined the regulator’s priorities for 2022. The key focus areas pertain to high-risk, cash-intensive sectors such as pubs, clubs and betting agencies. To achieve this, AUSTRAC is focused on improving awareness around the importance of anti-money laundering and combating the financing of terrorism (AML/CFT) obligations and completing compliance assessments. Rose also highlighted the continuation and finalization of enforcement investigations of casinos as a primary area of focus. AUSTRAC is already undertaking civil proceedings against Australia’s largest casino operator, Crown Resorts

Speaking alongside senior executives from the Reserve Bank of Australia, the Australian Prudential Regulatory Authority, and the Australian Securities and Investment Commission, Rose contextualized AUSTRAC’s priorities in light of the impact of COVID-19 on financial behaviors around the world. She cited reports from the Financial Action Task Force (FATF) that detailed a spike in online banking, customer onboarding, and identity verification during the pandemic, resulting in a global reduction in the use of cash, but also an increase in the possession of digital currencies, trading of precious metals, and activity in the insurance sector and parts of the gambling sector. 

Education and information sharing

To meet these objectives, Rose stated a “general uplift” in AML/CFT program investment is necessary. AUSTRAC is committed to education and sharing financial intelligence through collaboration. . AUSTRAC’s team has visited over 450 pubs and clubs to ensure a good understanding exists of the need for compliant AML/CTF programs.  

Further consideration will also be given to the value of information sharing between casinos and law enforcement, as this could “add great value to law enforcement operations and would result in tangible disruption outcomes”. FATF guidance on private sector information sharing can be found here

Rose also noted that targeted supervision of the pubs and clubs sector will take place during the latter half of 2022. As a result, firms operating in this industry have an opportunity not to ensure their AML/CFT programs are comprehensive and risk-based, going beyond basic know your customer (KYC) policies.

Investing in technology 

To combat the increasingly large volumes of data received by AUSTRAC year on year, the regulator has prioritized the delivery of its Reporting Entities System Transformation (REST) program. The program aims to streamline the suspicious matter reporting process and enable AUSTRAC to sustainably collect the vast volumes of information required under the AML/CTF Act.

According to AUSTRAC, this improvement will:

  • Make it easier to comply with reporting obligations
  • Deliver a modern, secure and intuitive experience
  • Support firms to proactively address compliance issues before they become a serious threat; and
  • Improve data quality by alerting AUSTRAC to incorrect or non-compliant data.

Beginning in June 2021, the program is due to be finished in 2025. 

Simplified legislative frameworks

Rose also noted the need for AUSTRAC to simplify its AML/CTF legislative framework as its current complexity acts as a barrier to firms trying to comply. 

First acknowledged in the 2016 Statutory Review of the AML/CFT Act, AUSTRAC will be focusing on creating a streamlined regulatory framework that addresses contemporary challenges in the financial, criminal, and national security environments, without compromising on innovation or creativity. 

Blockchain analytic tools

An additional impact of COVID-19 was the increased uptake of distributed ledger technologies such as blockchain. To be in the best position to deal with this rise in crypto and the associated risks, Rose acknowledged the critical importance of blockchain analytic tools to detect illicit activity.

Rose also noted that while crypto-related risk typologies have risen over the course of the pandemic, criminals largely still need to convert digital currency into fiat currency to maximize their gains. 

Firms need to ensure they’re prepared for higher volumes of crypto-related transactions. Central to this is ensuring transaction monitoring tools include blockchain analysis, enabling firms to consolidate their risk management processes, and detect truly high-risk transactions and customers. 

Key takeaways

Compliance teams operating in any of AUSTRAC’s priority focus sectors should ensure they are familiar with the regulator’s extensive guidance that has been published on a host of major risks/typologies and how to handle them. All official resources can be found on the AUSTRAC website, including guidance on forced sexual servitude, the misuse of payment text fields, and suspicious crypto behaviors

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Originally published May 20, 2022, updated June 6, 2022

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