Arctic Intelligence Responds to Proposed AML/CTF Reforms

On 20 April 2023, the Attorney General’s Department (AGD) announced a public consultation on proposed reforms to Australia’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regime. The proposed reforms include expanding the existing AML/CTF law to capture additional ‘tranche-two’ high-risk entities, including lawyers, accountants, trust and company service providers, real estate agents and dealers in precious metals and stones.

On 3 June 2023, ahead of the 16 June deadline for submissions, on behalf of Arctic Intelligence, Anthony Quinn (pictured) (Founder/CEO) submitted a comprehensive paper outlining his vision for these proposed reforms And the salient points included in the submission are mentioned below and the AGD is urged to take expeditious action on the matter.

“Since 2007 successive Australian governments have shown a lack of political will, making Australia one of only five countries (out of 200) yet to take action to extend our AML/CTF laws,” Anthony said. -times have failed.”

This reluctance to act has undoubtedly made Australia an attractive destination for organized criminals, with large-scale money laundering causing the Australian economy to lose around AUD$60.1 billion a year according to the Australian Crime Commission.

“In recent years, we have seen a significant increase in the value and volume of drug imports, an increase in drug addiction, gang and domestic-related violence and additional pressure on emergency services and court systems”, says Quinn .

Simplifying the AML/CTF Act

arctic intelligence Supports simplification of the AML/CTF Act so that the rules and guidelines are easy to understand. There are several ways to update the Act to make it easier for organizations to comply.

Anthony said, “We would welcome the use of more prescriptive language for the AML/CTF Act to provide more clear timelines to reduce complex legal jargon, so that there is no room for misinterpretation. “

Expansion of Concierge Businesses

According to Quinn, extending AML/CTF laws to gatekeeper businesses such as lawyers, accountants, real estate agents and trust and company service providers is one of the most important areas that needs attention. In 2015 itself, the Financial Action Task Force (FATF) in its last Mutual Evaluation Report (MER) heavily criticized the Australian government for its lack of action, recognizing that money laundering could occur through gatekeeper businesses.

“But ArcticWe already support lawyers, accounting firms and real-estate firms in countries that have regulated these sectors for years, Quinn said. He believes it should simply be a matter of bringing Australia into line with international standards.

Extension to dealers of high-value goods

Interestingly, dealers in high-value goods are notably absent from the consultation paper from the attorney general’s department, which Quinn says is a significant omission. “This is surprising in view of the irrefutable evidence that organized criminals launder criminal proceeds through luxury car dealers, boat dealers, art and antiquities dealers and luxury goods dealers and the AGD’s predecessor, the Department of Home Affairs A detailed publication has been made in the comprehensive paper done. paper He highlighted the significant risks faced by high value goods dealers due to exploitation from organized criminal networks.

Arctic strongly advocates that AGD reconsider its position and include high-value goods dealers in the expanded laws. Doing so will demonstrate Australia’s commitment to protecting the integrity of the financial system, ensuring regulations are fit for purpose and also meet international standards set by the FATF.

Quinn says, “Given how many years behind Australia is compared to international peers, we recommend that all industry sectors have a maximum of 12 months to implement reforms, with the same time frame set for all sectors be done.”

annual risk assessment

Arctic also believes that it is necessary for most businesses to undertake an annual enterprise-wide risk assessment (EWRA), and more often, for high-risk businesses.

“Most businesses are repeatedly faced with internal and external environmental changes. To meet such a rapid pace of change, risk assessments must be done at least once a year to be effective,” said Quinn.

In his role in founding a business providing regulatory technology (regtech) solutions to support global businesses in assessing, Quinn has spoken to hundreds of companies that do not have the capability or capacity to meaningfully meet EWRA .

“Not only do many companies not have the right tools to conduct an EWRA and rely on spreadsheets, but many companies conduct their evaluations manually over time, meaning data is out of date before an evaluation is completed Is. Many businesses lack the knowledge to develop logical, explainable and defendable methodologies, often inheriting risk models that are not fair or easy to understand,” cautioned Quinn.

Importance of independent review

Another significant shortcoming in Australia’s current AML/CTF laws is that there is no mandatory minimum requirement for reporting entities’ AML/CTF programs to be subject to independent review. “The independent review helps assess the design and operational effectiveness of programs, including whether regulated entities comply with AML/CTF legislation, regulations and guidance,” said Quinn.

The AUSTRAC guidelines, for example, allow the reporting entity to decide when a review is necessary based on the size and type of business, complexity and ML/TF risk level. “It simply doesn’t go far enough,” says Quinn, who knows of several companies that haven’t completed any independent reviews since the law took effect 17 years ago.

“Our specific recommendations are that the laws be more prescriptive and specifically state that all businesses must independently review their AML/CTF programs at least every two years, or that casino, crypto, money remitter and cash Annual review should be done for high risk industries like intensive. Sector”, said Quinn.

Arctic recommends that review findings be reported to AUSTRAC using an online portal, so that the regulator can track completion rates within specified time frames and impose penalties on entities that fail to initiate independent reviews.

an opportunity to improve

According to Quinn, AGD has a significant opportunity to improve the level of AML/CTF compliance in Australia and to address the general level of apathy. “Especially among gatekeeper businesses, which resist the adoption of AML/CTF reforms overall, in contrast to the international community, 95% of which implemented legislation for gatekeeper businesses years ago”, says Quinn.

Because Australia is so remote from the international community, with many major financial services and gaming firms experiencing systemic AML/CTF non-compliance, Arctic advocates a “big bang” approach, with 12- New laws are introduced simultaneously. Month Implementation Period.

“Organised criminals are making billions and laundering the proceeds of their crimes such as drug importation, fraud, human and wildlife trafficking, causing immeasurable social harm to everyday Australians. If the government is serious about financial crime prevention, they will implement these reforms without delay,” said Quinn.

Given that minimal progress has been made since the last FATF report in 2015, Australia is also at real risk of being added to the FATF grey-list, which would mean increased monitoring, a formal commitment and the removal of strategic deficiencies within the consensus. To work actively with FATF. Time limit to avoid being “black-listed”. If this were to happen, the implications from a reputational point of view could be highly damaging, calling into question Australia’s effectiveness in tackling financial crimes such as corruption, money laundering and terrorist financing.

Arctic Intelligence is a multiple-award winning regtech that specializes in enterprise-wide financial crime risk assessment used by hundreds of companies worldwide who either use AML Accelerate PlatformDesigned for small- to medium-sized businesses or risk assessment platformBuilt for large businesses with a fully configurable platform and real-time dashboard reports.

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