Austrac hits State Street with $1.2m fine over AML/CTF breach

The financial crimes regulator says the financial services company failed to disclose a number of international money transfers.

State Street has been fined $1.2m by Austrac. Picture: Getty Images

Austrac has hit American asset manager State Street with a $1.24m infringement notice for failing to report international money transfers on 99 individual occasions.

Under financial rules, facilitators of international money transfers must report funds sent overseas to the financial crimes regulator in order to prevent the transfer of funds for illegal purposes.

In a statement, State Street acknowledged the reporting failure and said it was working with Austrac and an independent expert to address the issue.

“This infringement notice relates to a failure to report certain incoming international funds transfer instructions, as required by Austrac of financial institutions operating in Australia,” the statement issued by State Street said.

“We have been working with the regulator on this issue, having identified and self-reported the deficiencies in our IFTI (international fund transfers instruction) reporting process.

“We have reviewed our IFTI reporting systems and controls and have worked with an independent consultant to develop a remediation plan to address the issue.”

State Street said the fine did not impact any of its clients financially or in a business sense and the integrity of the transactions was not in question.

“We take our obligations under Anti-Money Laundering and Counter-Terrorism Financing legislation extremely seriously,” the spokesperson said.

“There is no suggestion that the transactions in question were suspicious nor that there were deficiencies in State Street’s customer due diligence.”

Austrac CEO Nicole Rose said it was critical international money transfers were reported to keep money being used for illegal activity like the funding of terrorist activity.

“Because the most sophisticated criminal syndicates operate across national borders, information about international funds transfers can provide a key piece of the puzzle for our law enforcement partners,” Ms Rose said.

“Businesses are the first line of defence in protecting the community and our financial system from criminal abuse so it is critical for AML/CTF compliance and risk management to be embedded into everyday business practices to protect customers and businesses from criminals.”

The Australian understands that State Street’s international fund transfer instruction failures were disclosed to Austrac during 2019 and 2020.

Each individual breach of the AML/CTF act carries a fine of $12,600.

The infringement notice against State Street follows a much bigger alleged breach in 2019 when it was revealed Westpac failed to report over 19.5 million international transfers over five years, resulting in the resignation of former CEO Brian Hartzer and Chairman Lindsay Maxsted.

It was also alleged that some of Westpac’s international money transfers that failed to be reported were linked to the sexual exploitation of minors in The Philippines.

Westpac has set aside $900m in expectation of the fine it is to eventually pay the regulator and has signalled a withdrawal from its Pacific Islands remittance business.