13th July 2014
What Is AUSTRAC And How Does It Fight Financial Crime?
Established in 1989, the Australian Transaction Reports and Analysis Centre (AUSTRAC) is responsible for ‘detecting, deterring and disrupting’ financial crime in Australia. Headquartered in Sydney, and operating under the authority of the Financial Transaction Reports Act 1988 and the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, AUSTRAC provides oversight for thousands of Australian businesses, and generates financial intelligence for both domestic authorities and international partners.
What does AUSTRAC do?
AUSTRAC is Australia’s primary financial regulator and is tasked with providing oversight for anti-money laundering, counter-financing of terrorism, fraud, and other financial crime regulations. AUSTRAC also serves as Australia’s financial intelligence unit (FIU), collecting and analyzing AML/CFT data and suspicious activity reports (SAR) submitted by Australian financial service providers. Where suspicious activity is detected, AUSTRAC uses its resources to assist law enforcement authorities and security agencies in criminal investigations.
What transactions must be reported to AUSTRAC?
Almost all Australian financial institutions and organizations that handle large sums of money are legally required to report certain transactions to AUSTRAC. Firms are generally required to report to AUSTRAC in the following circumstances:
- Threshold transactions: Threshold transaction reports (TTR) which require amounts of A$10,000 or more to be reported to AUSTRAC within 10 business days.
- Suspicious activity: When firms detect any type of suspicious activity involving customer transactions they must submit a SAR – sometimes referred to as suspicious matter reports (SMR) – to AUSTRAC. SARs should include information about the suspicious activity in question.
- International transfers: When amounts of cash are transferred into or out of Australia, obligated entities must submit a report to AUSTRAC.
After analyzing report data, AUSTRAC may decide to investigate suspicious activity or monitor the relevant customers and accounts. Entities that must report to AUSTRAC include (but are not limited to):
- Casinos and gambling services
- Financial service providers
- Bullion service providers
- Remittance service providers
- Digital currency exchanges
Individuals must also comply with AUSTRAC money laundering reporting requirements. AUSTRAC prohibits ‘structuring’ strategies, for example, in which individuals deliberately split up financial transactions across accounts to avoid reporting thresholds. Similarly, AUSTRAC imposes cross-border reporting requirements on individuals that bring in A$10,000 or more in foreign currency into Australia. In addition to reporting requirements set out by regulations, AUSTRAC may request a range of additional information from obligated entities in order to inform its investigations.
Failure to comply with AUSTRAC AML/CFT reporting rules carries potentially serious legal repercussions, including fines and prison sentences.
How to comply with AUSTRAC regulations
In order to achieve compliance with AUSTRAC reporting requirements, firms must put a suitable AML/CFT solution in place. Following Financial Action Task Force (FATF) recommendations, AUSTRAC imposes risk-based AML/CFT regulations which means that firms must assess their customers individually to establish the level of risk they present – and then deploy proportionate AML/CFT compliance measures. With that in mind, an effective AUSTRAC risk-based compliance solution should feature the following key measures and controls:
- Customer due diligence: Firms in Australia should establish and verify the identities of their customers in order to build accurate risk profiles. Where ownership of customer entities is unclear, firms should seek to establish beneficial ownership.
- Transaction monitoring: Firms must monitor customer transactions on an ongoing basis in order to detect suspicious activity when it occurs. In addition to transactions that go beyond the reporting threshold, suspicious activity may involve unusual transaction patterns, transactions that do not match customer wealth profiles, or transactions with high-risk AML/CFT jurisdictions.
- Sanctions screening: Firms should run checks on customers and their transaction counterparties to ensure that they are not doing business with the targets of international sanctions. Firms in Australia should screen against the Australian autonomous sanctions list, and the UNSC consolidated list.
- Politically exposed persons: Elected officials and government employees are politically exposed persons (PEP) and present a higher AML risk than other customers. Accordingly, firms in Australia should screen their customers to establish PEP status.
- Adverse media: News stories can indicate that a customer is involved in financial crime before that information is confirmed by official sources. Australian firms should monitor adverse media sources from around the world, including screen, print, and online outlets, for adverse stories that involve their customers – and use that information to inform their risk profiles.
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Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.
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