Funds flows through the alternative remittance sector represent the primary source of income for millions of people across the globe. Many Australians utilise these services to send money internationally at low cost.
Despite the role of alternative remitters in promoting financial inclusion, these services are considered by law enforcement agencies and anti-money laundering regulators in Australia and internationally to be vulnerable to abuse and exploitation by criminal and terrorist groups for money laundering and terrorism financing purposes.
A number of Australian banks have taken decisions to cease providing banking services to alternative remitters. These decisions have been taken in response to concerns about the perceived reputational, money laundering and terrorism financing risks associated with the sector. In some cases, these decisions are related to requirements imposed by international correspondent banks.
The regulation of alternative remitters by AUSTRAC
As Australia’s anti-money laundering and counter-terrorism financing regulator, AUSTRAC is responsible for supervising the compliance of alternative remitters with the provisions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). These activities are designed to strengthen the sector against criminal abuse.
AUSTRAC takes seriously its role as regulator and has a strong focus on high risk alternative remitters. The AUSTRAC Chief Executive Officer (CEO) has the power to refuse, suspend, impose conditions upon or cancel the registration of a remitter where the CEO is concerned that the continued registration of a remitter may pose an unacceptably high level of money laundering, terrorism financing or people smuggling risk. The AUSTRAC CEO has exercised these powers on numerous occasions against a range of entities.
Over time, these actions will reduce the risk of the remittance sector being used by rogue operators and improve the sector’s reputation to the benefit of those alternative remitters operating legitimate businesses.
AML/CTF obligations for banks
AUSTRAC is also responsible for supervising the compliance of banks with the AML/CTF Act.
Australia’s AML/CTF framework has been developed in response to the recommendations of the Financial Action Task Force (FATF), the global standard-setter for combating money laundering and terrorism financing.
Consistent with this framework, banks are required to develop risk-based systems and controls tailored to the nature, size and complexity of their business and proportionate to the level of money laundering and terrorism financing risk. Individual banks must determine how to meet these obligations. This approach recognises that banks are best placed to assess and manage the risk posed by their own customers and the products and services they offer.
In AUSTRAC’s view, alternative remitters represent varying degrees of risk to banks. With appropriate AML/CTF systems and controls in place, banks should be able to manage high risk customers, including alternative remitters.
AUSTRAC encourages banks to continue to assess the particular risks relating to their customers in line with the risk-based approach. Further, AUSTRAC encourages banks to engage with alternative remitters on measures that the sector could take both immediately and in the longer term to meet banks’ internal risk standards.
AUSTRAC will continue to work with alternative remitters and banks in conjunction with other Government agencies to address the complex set of issues underlying this problem.