AUSTRAC CEO Nicole Rose - Speaking notes at FINSIA 'The Regulators' event

Thank you to FINSIA for the invitation to be here today. 

As many of you may know, AUSTRAC has a slightly different focus than that of my Treasury portfolio colleagues. Located within the Home Affairs portfolio, we tend to view our work through a law enforcement and national security lens, as opposed to the more traditional economic focus.

Accordingly, for those of you not as familiar with our work, I hope this will give you a slightly different perspective.

As anti-money laundering and counter-terrorism financing (or AML/CTF) regulator and Australia’s financial intelligence unit, our focus is on protecting the financial system through our strong education and regulation of industry, and contributing financial intelligence to broader national security and law enforcement priorities.

As AML/CTF regulator, AUSTRAC regulates more than 16,000 reporting entities across the financial, bullion and gambling sectors and, given our size, less than 200 in our regulatory arm, a risk-based approach underpins where we direct our resources and what areas we will prioritise at any given time. 

For 2022, this means a particular focus on:

  • Education to raise awareness of risks and AML/CTF obligations to nearly 300 pubs and clubs as well as bullion dealers, betting agencies and bookmakers, remitters and RegTech/AML advisors.
  • Compliance assessments for pubs and clubs, banks, remitters, digital currency exchanges, superannuation fund trustees, and financial service intermediaries.
  • Continuation and finalisation of enforcement investigations of casinos.

So, how are we seeking to achieve this? 

A continued focus on AML/CTF uplift to ensure industry is appropriately investing in, and overseeing compliance programs.

Following our filing civil penalty proceedings against Crown in March, we continue to investigate non-compliance among various Australian casinos.

As has been our experience with the banking sector, there is a need for a general uplift in investment of AML/CTF programs by the sector to mitigate the significant risks posed. While there is still more work to be done in the banking sector, it is much, much improved and I congratulate the sector for the approach and commitment shown.

The information able to be reported by casinos could add great value to law enforcement operations and would result in tangible disruption outcomes. This is something we will continue to explore with the sector.

Concurrently, we are heavily investing in the education of pubs and clubs - both on the ramifications of money laundering in their venues, and the need for compliant AML/CTF programs.

Right now, we have education visits underway to pubs and clubs across the Eastern states, in cities and regional areas, reaching over 450 venues to date and involving our state regulatory partners, with staff from these organisations joining us on those visits.

AUSTRAC is arming pubs and clubs across the country with the tools to recognise and prevent money laundering on their premises, launching a nation-wide campaign to prevent criminal infiltration of ‘Your Local’.

And then, in the latter half of the year, we will undertake targeted supervision of the pubs and clubs sector.

Secondly, technology. The volume of data received by AUSTRAC has increased significantly over the past 5 years, for instance suspicious matter reports have increased 318 per cent from 78,000 in 2016-17 to almost 310,000 in 2020-21.

Accordingly, we continue to invest in an improved engagement and reporting capability for industry through the delivery of our Reporting Entities System Transformation or REST Program. The Program will deliver a modern, secure and intuitive experience that enables reporting entities to more easily comply, report and interact with AUSTRAC and I thank industry involved for their willingness to work with us to ensure the system meets their needs.

Thirdly, and something I am particularly focussed on, is the continued simplification and improvement of our legislation.

Our legislation is complex and we do have an appreciation of this when entities are endeavouring to comply. 

Simplifying the AML/CTF legislative framework is vital as highlighted in the Statutory Review and subsequent Inquiries. For industry, it will make obligations clearer and easier to understand, and reduce compliance costs.

Given Australia’s regime places the responsibility on industry to identify and manage their own risks, we acknowledge the importance of undertaking genuine and wide ranging consultation with industry on reform.

And lastly, how we support ongoing focus on our priorities whilst managing the impact of the pandemic and international unrest.

As all in this room know, the COVID pandemic has had a significant impact on financial behaviours around the world. In particular, the Financial Action Task Force (FATF) – the body responsible for setting global AML/CTF standards – has not surprisingly, reported that customers are conducting a larger volume of transactions remotely, which has led to an increase in online banking, customer on-boarding and identity verification.

This includes a global reduction in the use of cash, but an increase in the acquisition of digital currencies, trading of bullion, and activity in the insurance sector and parts of the gambling sector.

The increasing uptake of distributed ledger technologies such as blockchain, creates some financial crime risks as transactions are either pseudonymous, (wallet names only) or, anonymous. It is also these traits which make these technologies so appealing to criminals.

Blockchain analytic tools are a critical part of AUSTRAC's, law enforcement's and businesses' abilities to detect illicit activity by tracing transactions on the blockchain.

At present, criminals mostly still need to convert digital currency to fiat currency to realise the full benefits of digital currency proceeds of crime.

AML/CTF regulation mitigates some of the risks posed by digital currencies, by requiring service providers dealing with digital currencies to undertake due diligence on their customers and report suspicious matters to AUSTRAC, among other things.

And sanctions - the war in Ukraine and subsequent sanctions against Russian businesses and individuals has resulted in additional responses required by many of us.

I hope that gives you all a better understanding of not only AUSTRAC’s priorities in the coming financial year but of our challenges and the ever changing law enforcement and national security landscape.