Austrac cracks down on digital currency exchanges, payment platforms

Digital currency exchanges, payment platforms, non-bank lenders and gold traders will be under enhanced scrutiny by the financial crimes regulator in the coming year.

Digital currency exchanges, payment platforms, non-bank lenders and gold traders will be under enhanced scrutiny by the financial crimes regulator in the coming year, the Australian Transaction Reports and Analysis Centre said.

Austrac said its regulatory priorities for 2024 would continue its focus on getting banks, money transfer businesses and those in the gambling sector to understand and mitigate the money laundering and terrorism financing risks they face.

Scrutiny by the financial crimes agency in previous years has resulted in heavy penalties for serious and systemic breaches of anti-money laundering and counter-terrorism financing (AML/CTF) laws, including $1.3bn on Westpac in 2020, $700m on CBA in 2018, and $450m on Crown earlier this year.

The regulator, which has been criticised in the past for being too soft and too slow to combat organised crime, is nonetheless Australia’s most feared regulator because of the heavy fines and costs of its action.

The agency has also taken Star Entertainment and SkyCity to court for serious breaches of AML/CTF laws.

The financial crimes regulator, Austrac, has its priorities set for 2024.

In its priorities document, Austrac said its focus next year will also be on individuals who might be involved in or contribute to breaches, warning the agency is willing to sue them along with the companies.

Acting chief executive Pete Soros said Austrac wanted to engage with businesses early to identify areas of improvement before they become bigger or systemic problems.

But if the anti-money laundering regulator identified “emerging issues” or serious noncompliance with ML/CTF laws, it would “promptly intervene”, which would result in more scrutiny, assessments, notifications and in some cases enforcement action.

“Criminals target businesses with weak anti-money laundering settings, which is why Austrac’s regulation, through education and supervision, is crucial to safeguarding Australia’s communities and financial systems from financial harm,” he said.

“These priorities signal our ongoing intent to work with businesses to embed a culture of vigilance, ensuring everyone at every level is aware of the threat of financial abuse and criminal exploitation.”

The increased focus on digital currency exchanges, payment platforms, non-bank lenders and gold traders was a result of “rapid and significant growth in these sectors” as well as concerns about AML/CTF compliance. Austrac’s own intelligence and concerns of its “partner agencies” had also led to the increased focus on those sectors, it said.

Partner agencies include the ACCC, ASIC, FIRB, the ATO, federal and state police departments, the Attorney-General’s department, and the department of Home Affairs, among others.

“Of particular concern are examples where the compliance culture has led to compliance failures not being adequately identified, remediated, and reported to senior management and the board,” Austrac says in the priorities document.

“A culture which encourages avoidance or ‘compliance window dressing’ is a risk to the financial system, the reporting entity and its management.

“In appropriate cases, AUSTRAC may join individuals in proceedings against reporting entities where an individual is in any way concerned in, or party to, a contravention of a civil penalty provision of the AML/CTF Act.”

Mr Soros said the priorities help the agency focus on areas which will have the most impact, but all sectors should “expect interaction” and engagement from the agency.

When Austrac officials “come knocking” they will first scrutinise board and senior management oversight of culture and risk management practices, effective transaction monitoring and managing outsourcing arrangements.

The level of engagement will depend on the level of risk those companies or industries present, as well as the company’s particular circumstances, and ranges from collaboration, education and guidance, through to supervision and enforcement action, it said.