Tuesday, 9 July 2024

It comes as little surprise to those who work to combat financial crime that money-laundering and terrorism financing risk means Australia remains an attractive destination to criminals.

The Attorney-General Mark Dreyfus and AUSTRAC CEO Brendan Thomas released the National Risk Assessments on money laundering and terrorism financing at the National Press Club on July 9th and signalled the Federal Government’s position on much needed reforms.

The threat environment and our high vulnerabilities to money laundering and terrorism financing risk has ongoing high /very high vulnerabilities to money laundering and terrorism financing which detract from the effectiveness of our existing efforts. Terrorism financing remains a continuing and pervasive threat.  In the case of money laundering, legal channels, cash, luxury goods, real estate, domestic banks, casinos and remitters continue to be exploited as the preferred methods of moving illicit funds leaving Australians highly vulnerable to organised criminals.

Our ML/TF risks have not been assessed at a national level since 2014, so this is a significant step forward, one that is crucial for Australia’s upcoming Mutual Evaluation by the international body that sets AML/CTF standards, the Financial Action Task Force (FATF). The FATF’s formal assessment of our technical compliance and effectiveness in mitigating these important risks is scheduled for late 2026.

There is a lot riding on the outcome of their assessment. It will take into consideration our response to the so-called Tranche 2 reforms, which now have a painfully short timeframe to be passed into law and implemented by businesses. This is especially true for those new to the regime – lawyers, accountants and real estate agents among others.

A poor outcome from the FATF assessment could result in Australia being ‘grey-listed’. This would have a negative impact on our GDP with the IMF estimating the impact could be as much as 7.6% to.  In practical terms, this would result in increased costs of doing business with Australian companies, costs that would ultimately be borne by Australian consumers. It would also send a clear signal to the rest of the world that Australia’s anti money laundering and counter terrorism financing regime is nowhere near as robust as it needs to be.

This is not fear mongering. Leaders in this space have expressed real concern, including David Shannon, Acting Executive Secretary of the Australia Pacific Group (APG), who recently commented that there was a ‘real risk’ of Australia being included on the grey list on technical compliance alone if we were assessed today. Mr Thomas noted that the outcomes of the risk assessment would set the agenda for law enforcement, regulatory, investigative and policy agencies in combatting money laundering and terrorism financing in the foreseeable future and said “These risk assessments show the scale, ingenuity and overall threat money laundering and terrorism financing presents to Australia.”

So, what does the announcement of the National Risk Assessment mean for Australian businesses?  For regulated entities the expectation is clear that they consider the outcomes of the risk assessments and make the changes required to their existing AML/CTF framework. This is no small task. For many businesses this is uncharted territory and failure to consider relevant guidance may result in non-compliance.  

This announcement signals the start of an era of reform for Australia. These reforms are crucial to responding to the national vulnerabilities and threat environment identified in the NRA and are necessary to protect the community against financial crimes. Responding to financial crimes is an important, difficult but urgent undertaking, The National Risk Assessment and the Government’s reforms are just the first step in a long and critical journey.

As Mark Dreyfus said when releasing the NRA “It is time to give the criminals a run for their money”