AUSTRAC sets sights on non-bank lenders
The watchdog will closely monitor businesses in the growing sector to ensure compliance with anti-money laundering and counter-terrorism laws.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) says it will target non-bank lending compliance with Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) laws, as a result of the sector’s “rapid and significant growth”.
The agency, which is responsible for monitoring financial transactions to identify money laundering, organised crime, tax evasion, welfare fraud and terrorism financing, had “concerns about AML/CTF compliance and significant variation in compliance levels between reporting entities in these sectors”.
According to the RBA, the growth of the non-bank lending sector has been driven mostly by mortgage lending, averaging around a 15 per cent yearly growth rate since 2015.
However, these lenders, including fund managers, wholesale funders, insurance companies and other intermediaries, received less oversight than traditional banks, which constrained authorities’ ability to detect suspicious activity.
AUSTRAC outlined its plans to increase scrutiny on the non-bank lending sector in a priorities statement for 2024, released on Wednesday. It would also be targeting digital currency exchanges (DCEs), payment platforms and bullion over similar compliance concerns.
Acting CEO Pete Soros said: “These priorities signal our ongoing intent to work with businesses to embed a culture of vigilance, ensuring everyone at every level is aware of the threat of financial abuse and criminal exploitation.”
“Criminals target businesses with weak anti-money laundering settings, which is why AUSTRAC’s regulation, through education and supervision, is crucial to safeguarding Australia’s communities and financial systems from financial harm.”
AUSTRAC said the AML/CTF “compliance culture” of businesses depended on the effectiveness of board and senior management oversight, culture and risk management practices, transaction monitoring and the existence of outsourced arrangements.
Businesses that outsourced their AML/CTF functions were prone to using generic programs, “insufficiently tailored to meet the requirements of the reporting entity”, it said, recommending boards to proceed with caution in line with their risk appetite and undertake due diligence to minimise the risk of non-compliance.
AUSTRAC said it would also continue monitoring areas known as “enduring priorities”.
These included helping businesses understand the need to mitigate and manage money laundering and terrorism financing risks through education and ensuring accurate and timely reporting, with international funds transfer instructions, threshold transaction reports and suspicious matter reports sources of information for AUSTRAC’s intelligence activities.
High-risk sectors such as banking, gambling and remittance would also receive continued scrutiny next year due to their exposure to criminal threats and “widespread vulnerabilities” that stemmed from their use of cash and scale of operations.
Although AUSTRAC’s priorities report highlighted certain sectors, Mr Soros said “all industries sectors should expect interaction and engagement from AUSTRAC” next year.
He added that if it identified emerging issues or serious non-compliance, it would “promptly intervene to address such matters”.
That might result in increased engagement, assessment, notifications and in some cases AUSTRAC enforcement action, he said.
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