Australia is home to hundreds of banks and financial service providers, including more than 600 fintech startups, one of the world’s biggest developed economies. As a result, financial organisations like these must tread carefully within the Australian financial system’s regulatory structure to guard against money laundering and terrorist funding risks (CFT). For their part, Australia implemented new AML/CFT regulations in June 2021 due to the previous incidents involving Westpac and the Commonwealth Bank. As such, AML/CFT compliance must be a principal focus for fintech. And, the following compliance concerns in their AML program must be noted to guarantee this.
As the country’s leading financial intelligence regulator and agency charged with combating financial crimes, terrorist funding, and money laundering, Australia’s government established the Australian Transaction Reports and Analysis Centre (AUSTRAC). So, AML rules and those proposed by the Financial Action Task Force (FATF) must be followed by banks, fintech, and other financial institutions, or they risk paying hefty penalties.
AML/CFT Regulations in Australia
The Anti-Money Laundering and Counter-Terrorism Financing Act of 2006 is the leading Australian law addressing financial exploitation and money laundering. As such, services including currency exchange, payroll, and deposit-taking are on the list of businesses that must register with AUSTRAC and adhere to its rules. And if they see something unusual, they are responsible for reporting it to the authorities. As part of the current AML/CFT system, fintech must also adhere to laws on licencing and reporting.
Regarding AML/CFT Rule Revisions
In December of that year, the Australian government approved the Anti-Money Laundering and Counter-Terrorism Financing and Other Legislation Amendment Bill 2020 (the Amendment). It took the Australian House of Representatives months of discussion to bring the AML/CFT reform to the floor for a vote after a 2014 review of the primary legislation. Tranche 1.5 of the changes went into effect on June 18, 2021. And this initiative focuses on anti-money laundering (AML) measures, including cross-border payment reporting, information sharing and correspondent banking.
Rules for the AML Program Have Been Revised
- Fintech and financial institutions must do appropriate due diligence on their customers before delivering the specified service, according to AUSTRAC’s Tranche 1.5 regulation.
- Depending on the circumstances, financial institutions may depend on third-party scrutiny to comply with AUSTRAC rules.
- Banks will no longer have connections with entities that enable shell banks to utilise their bank accounts due to the new legislation. As a result, institutions must now do much more due diligence before establishing correspondent financial connections.
- Domestic and international businesses must now disclose their monetary instruments and financial relations via AML systems under the new legislation, which has simplified cross-border reporting.
- AUSTRAC has recently introduced additional exceptions to make it simpler to notify third-party organisations about suspected AML/CFT behaviour.
Upcoming Reform Reports
Many people think of the Tranche 1.5 revision as a tweak to the AML/CFT rules. And there have been rumours of a second reform, dubbed Tranche 2, although the administration has yet to make any official announcements about it. It is hoped that these changes would help bring professions with a history of money laundering and terrorist financing (AML/CFT) into compliance with the AML/CFT Act passed in 2006. It aims to eliminate money laundering and exploitation via Australia’s property markets, which are already under government supervision.