Government must work with business and regulators in fight against crime

Since 2018, Austrac has regulated cryptocurrency exchange providers to minimise the risk of criminals using them for money laundering, terrorism financing and cybercrime. Picture: Bloomberg

It’s no surprise to Austrac that money laundering and terrorism financing have devastatingly personal consequences. In recent years, we’ve seen growing public awareness about money laundering, spurred in part by serious compliance breaches by some of Australia’s prominent banks and businesses.

Businesses are also realising the threats that organised criminals pose, not only to them, but to our communities, people’s livelihoods, the safety of our children and our national security.

These criminals, and those of us that seek to stop them, are navigating a rapidly changing financial system and advances in technologies and platforms. Criminals will exploit any gaps and use sophisticated methods to elude law enforcement efforts for their own personal greed.

The Australian Institute of Criminology estimates that the cost of serious and organised crime to Australia in 2016–17 was up to $47.4 billion.

Regardless of your view, no one regulator, business or nation state can single-handedly tackle criminal activity funnelled through the financial sector in Australia and elsewhere in the world.

The bottom line is that federal, state and territory government regulators, intelligence, law enforcement agencies and the businesses we trust with our money must work together to address vulnerabilities in our financial sector.

As regulators, we must first and foremost educate and build understanding of these threats. Businesses must invest in their financial crime compliance culture, led by senior management.

They need to not just think of compliance as a checklist, but a tool to understand their risks, harden their businesses against criminals, protect their reputation and understand the threats criminals pose. Where criminals infiltrate Australian businesses, we must work together to bring the criminals to justice.

It is only these combined efforts that lead to criminal investigations and convictions that disrupt the ability of criminals to profit from their crimes. When systems and processes do fail, Austrac will not hesitate to draw on our regulatory and enforcement powers.

Australia is part of a global financial system, and the financial services sector is offering their customers products and services barely envisaged 10 years ago.

Austrac CEO Nicole Rose. Picture: NCA NewsWire/Gary Ramage

Since 2018, Austrac has regulated cryptocurrency exchange providers to minimise the risk of criminals using them for money laundering, terrorism financing and cybercrime.

We are working with new financial business to ensure they understand their obligations from the outset and where we can reduce the costs and burden of compliance.

We are partnering with industry through Austrac’s public-­private Fintel Alliance to boost capabilities to detect financial crime where it is disguised by using multiple institutions. And our law enforcement partners have direct access to Austrac’s information, conducting 2.1 million searches in 2019-20.

In the same year, businesses submitted 165 million international funds transfer reports, 265,000 suspicious matter reports and 2.2 million reports of cash transactions over $10,000.

Tackling serious and organised crime requires a multi-pronged attack at all levels of government and across the financial services sector.

We know that proactive reporting and support from industry, continued investment in people and technologies, proactive compliance and financial intelligence can be critical in combating crime when combined with law enforcement investigations.

These combined efforts are delivering results for Australians, supporting law enforcement in combating diverse criminal activity, to dismantle domestic manufacture of methamphetamine, stop illegal sea and air supply chains, dismantle criminal syndicates and confiscate criminal assets.

They have uncovered criminal networks scamming the elderly, arrested individuals who have committed child sexual abuse, apprehended individuals making false hardship claims to other people’s superannuation, and allowed us to access critical financial information about an offender’s financial activity in response to a terrorist attack.

In recent years, record penalties have been applied in response to systemic failures in the banking sector.

However, the banking sector is not the only high-risk sector that criminals seek to exploit to launder the proceeds of their crimes, which is why Austrac continues to narrow in on other high-risk areas including money transfer businesses, cryptocurrency exchanges and casinos. All of these sectors are on notice.

We know that the Australian casino sector is at risk of criminal misuse due to the products and services they offer. We have an enforcement investigation under way at Crown casino that demonstrates the seriousness of our concerns. And we also have significant compliance work under way on the casino sector.

This raised awareness of the impact of financial crime and the need for mutual public and private sector efforts to combat it stands in stark contrast to film and television programs that have long glorified organised crime and money laundering, and perpetuated the myth that it is victimless crime.

This is far from the reality.

As regulation and law enforcement efforts are revealing the devastating real-life impact financial crime has on everyday Australians, I am buoyed by this significant shift in thinking and behaviour.

Removing profit from criminals and making it harder for them to exploit our financial system will have the greatest, long-term effect in protecting our community from harm and it requires us all to do our part.

Nicole Rose is chief executive of Austrac.