The Beat Goes On: AML Non-Compliance May Be Widespread

In recent statements to the ASX, NAB, Crown Melbourne, SkyCity Entertainment and Star Entertainment Group reported to investors that they had been referred to AUSTRAC’s enforcement team. AUSTRAC identified that the listed companies had potentially breached anti-money laundering and counter-terrorism financing laws. 

This article examines the background and context to the investigations and suggests that if these organisations have engaged in contraventions (at least of the kind previously prosecuted in the cases of Westpac and CBA), they could expect to bear the full force of the regulator.

The Australian Transaction Reports and Analysis Centre (AUSTRAC), Australia’s financial intelligence agency and regulator, has been asserting its status as a regulator – as opposed to a mere financial intelligence unit – since 2015, following its vigorous enforcement action against Tabcorp. 

It later went on to investigate and prosecute civil penalties against both Westpac and CBA for non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 AML/CTF Act 2006 (Cth) (AML/CTF Act).  Although the penalties set new records in relation to corporate civil pecuniary penalties, AML/CTF non-compliance may still be manifesting in the financial sector.

Contraventions prosecuted to date

Aspects of countering money laundering and terrorism financing are inherently complex and challenging for companies.  Reporting entities might expect leniency in relation to ascertaining and complying with these.  Others are not. 

Indeed, for the most part, money laundering and terrorism financing countermeasures prescribed by the AML/CTF Act are ascertainable via the AML/CTF Act and Rules as well as the various AUSTRAC publications and secondary resources available. 

Moreover, the general categories of contraventions alleged in AUSTRAC prosecutions to date have related to elementary, fundamental AML/CTF processes.  In the case of Westpac, for example, the contraventions related to:

1. Failing to appropriately assess and monitor the ongoing money laundering and terrorism financing risks associated with the movement of money into and out of Australia through correspondent banking relationships.
2. Failing to report International Funds Transfer Instructions (IFTIs) to AUSTRAC.
3. Failing to keep records relating to the origin of IFTIs.
4. Not passing on information about the source of funds to other banks in the transfer chain (thus depriving it) of information it then needed to understand the source of funds.
5. Failing to carry out appropriate customer due diligence on certain transactions to jurisdictions that have known financial risk indicators.

As for CBA, it:

1. Failed to report two suspicious matters within 24 hours of forming a suspicion relating to the financing of terrorism.
2. Failed to report suspicious matters either on time or at all in relation to accounts and individuals that were the subject of two further law enforcement operations.
3. Even after becoming aware of suspected terrorism financing and/or money laundering, it did not appropriately monitor its customers to mitigate and manage money laundering and terrorism financing risk, including the ongoing money laundering and terrorism financing risk of doing business with those customers.
4. Did not comply with the requirements of its own AML/CTF Act program to identify, mitigate and manage the money laundering and terrorism financing risk risks associated with its intelligent deposit machines.

Again, these breaches relate to elementary and fundamental AML/CTF Act processes, not the more complicated and/or controversial aspects of the regime.  There is no reason why reporting entities under the AML/CTF Act – especially those as well-resourced as a bank or casino – shouldn’t be expected to comply.”

– Dr Mathew Leighton-Daly, Legal Book Author, Thomson Reuters

NAB

According to its recent ASX announcement, NAB was informed by AUSTRAC that AUSTRAC identified concerns with its AML/CTF Act compliance.  In fact, AUSTRAC was concerned enough to refer the matter internally to its enforcement team.  

AUSTRAC hasn’t decided whether or not enforcement action will be taken.  It has indicated, however, at this stage (and based on work done by NAB to date), it is not considering civil penalty proceedings (it is assumed that any remedial work done to date may be an admission).  That would not preclude of course any of the other possible enforcement options AUSTRAC has at its disposal including enforceable undertakings, infringement notices and remedial directions.

Crown Melbourne, SkyCity Entertainment and Star Entertainment Group

AUSTRAC also identified potential non-compliance by Crown Melbourne including concerns in relation to ongoing customer due diligence and adopting, maintaining and complying with an anti-money laundering/counterterrorism-financing program.

Like the case with NAB, the matter has been referred internally to its enforcement team.  Crown has stated publicly that AUSTRAC’s investigation focused on Crown Melbourne’s management of customers identified as “high risk and politically exposed persons”, which is likely to include customers brought to the casino by junket operators in China. 

AUSTRAC has similar concerns in relation to Crown SkyCity Entertainment (Adelaide) and Star Entertainment Group (Sydney) (See “Money Laundering by Gambling: Regulatory Gap or Green Light?” on Legal Insight).

After the prosecutions of Tabcorp, Westpac and CBA, if Crown Melbourne, SkyCity Entertainment and Star Entertainment Groups are found to have engaged in non-compliant activities with any of the above (previously prosecuted) categories, one can only wonder how the regulators will respond.