{"id":1296,"date":"2019-06-27T10:07:52","date_gmt":"2019-06-27T10:07:52","guid":{"rendered":"https:\/\/hub.findingsimple.com\/au\/posts\/tabcorp-afterpay-who-will-austrac-turn-to-next-legal-insight"},"modified":"2022-08-03T16:03:58","modified_gmt":"2022-08-03T05:03:58","slug":"then-tabcorp-now-afterpay-who-will-austrac-turn-to-next","status":"publish","type":"post","link":"https:\/\/insight.thomsonreuters.com.au\/legal\/posts\/then-tabcorp-now-afterpay-who-will-austrac-turn-to-next","title":{"rendered":"Then Tabcorp, Now Afterpay: Who Will AUSTRAC Turn to Next?"},"content":{"rendered":"\n

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is well known as Australia\u2019s financial intelligence agency. It was perhaps not as well known for its regulatory responsibility \u2013 at least before 2015 \u2013 for the anti-money laundering and counter-terrorism financing regime created by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006<\/em> (Cth) (AML\/CTF Act) and Rules.<\/h4>\n\n\n\n

Any doubt as to AUSTRAC\u2019s status as a regulator, however, was removed in 2015 when the AUSTRAC CEO made an application in the Federal Court against Tabcorp for a pecuniary penalty for breaches of the AML\/CTF Act. Now, AUSTRAC\u2019s latest focus is the buy now, pay later start-up, Afterpay Pty Ltd (Afterpay), In the midst of Afterpay\u2019s shares continuing to dive, this article will explore AUSTRAC\u2019s power and the laws it seeks to ensure are not being broken by institutions such as Afterpay and Tabcorp, leaving one to wonder, who is next on the watchdog\u2019s hit list?<\/p>\n\n\n\n

The Anti Money-Laundering and Counter-Terrorism Financing Act<\/h2>\n\n\n\n

Australia\u2019s financial crime control law reflects the recommendations made by the international and inter-governmental body, the Financial Action Task Force. One key component of the Australian regime is the AML\/CTF Act.<\/p>\n\n\n\n

The AML\/CTF Act aims to combat money laundering and the financing of terrorism via imposing a number of obligations on the financial sector, gambling sector, remittance (international money transfer) services, bullion dealers and other professionals or businesses (known as \u201creporting entities\u201d) that provide particular services (known as \u201cdesignated services\u201d).These obligations include collecting and verifying certain \u201cknow your customer\u201d (KYC) information about a customer’s identity when providing those services.<\/p>\n\n\n\n

The AML\/CTF Act and Rules together implement a principles-based and risk-based approach to regulation. This means that reporting entities determine how they meet their obligations based on their assessment of the risk of whether providing a designated service to a customer may facilitate money laundering or terrorism financing.<\/p>\n\n\n\n

RELATED: <\/strong>Corporate Social Responsibility from the Progressive Era to the Banking Royal Commission<\/a><\/p>\n\n\n\n

What happens when entities breach this regime?<\/h2>\n\n\n\n

In cases of non-compliance with the AML\/CTF Act, the AUSTRAC Chief Executive Officer (CEO) may apply for civil penalty orders under s 176 of the AML\/CTF Act. If the Federal Court is satisfied that a reporting entity has contravened a civil penalty provision, then the Federal Court may order a pecuniary penalty to be paid to the Commonwealth.<\/p>\n\n\n\n

Case study: Tabcorp and the $45 million penalty<\/h2>\n\n\n\n

On 16 March 2017, the Federal Court ordered that Tabcorp pay a massive $45 million pecuniary penalty for breaches of the AML\/CTF law. This penalty was the highest ever civil penalty in Australian corporate history. The penalty was applied for as a consequence of Tabcorp failing to:<\/p>\n\n\n\n

  1. have a compliant AML\/CTF program for over 3 years to manage the risk of money laundering and terrorism financing;<\/li>
  2. give AUSTRAC reports about suspicious matters on time or at all on 105 occasions;<\/li>
  3. identify a customer who collected $100,000 in winnings; and<\/li>
  4. enrol with AUSTRAC on time.<\/li><\/ol>\n\n\n\n

    More generally, AUSTRAC considered that Tabcorp\u2019s corporate culture was indifferent to a meaningful AML\/CTF compliance and risk mitigation.<\/p>\n\n\n\n

    The Tabcorp matter preceded an application for a pecuniary penalty against the CBA the same year. In August 2017, the AUSTRAC CEO made an application for a civil penalty against CBA. On 20 June 2018, the Federal Court ordered CBA to pay an incredible $700 million pecuniary penalty for its breaches of the AML\/CTF law. The CBA matter involved more than 53,000 contraventions of the AML\/CTF Act. These contraventions fell into the following categories:<\/p>\n\n\n\n