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A Snapshot of the AML & Financial Crimes Congress 2020

Thursday 2 July 2020

On the last day of June, the AML & Financial Crimes Congress got off to a strong start with Richard Lee from the Australian Transaction Reports and Analysis Centre (AUSTRAC) setting out the priorities of the Financial Intelligence Agency.

The priorities ranged from the regulator’s own response to the coronavirus pandemic, to their communications with reporting entities, to keeping up with behaviour created by lockdowns that has opened new avenues for financial crime. 

On the heels of Lee’s presentation, Samantha Carroll from Ash Street looked at the oversight of by directors and the board of AML/CTF programs within organisations, as well as the responsibilities of those reporting to the boards, in a bid to find that ‘Goldilocks-like’ balance of information that is not too diluted but that gets directors engaged and asking the right questions about their programs. 

Next up was Naomi Fink from Holly Nethercote, who got a little technical, laying out the best way for organisations to letter - in the words of Andrew Ham from Lawyers in Demand - their ‘fan mail’.
Fink broke her presentation into four clear sections:

·       How to deal with a letter form Austrac;
·       What do you do when you discover there is breach in your organisation?
·       Dealing with the oversight of outsourced or third-party functions; and
·       How to be sure your program identifies changes in ML TF risk.

If there was one standout message here, however, it was about meriting the trust of the regulator. 
Just before the lunch break, Gavin Coles from Kasker Consulting did his best not to put people off their meals by showing how sanctions and sanction-busting have played a major role in the distribution of wealth in human history. 

Coles illustrated the increasing complexity of the sanction space as the world becomes more multipolar and as power groups look not only to impose sanctions on power groups in other jurisdictions but also on those within their own countries. Something as simple as an employee’s nationality can have implications for sanctions. 

After lunch, Paddy Oliver from AML Experts, looked at the governance oversight of AML programs from the perspective of an independent reviewer. Oliver stressed the importance that AML Compliance programs should not just be seen as ‘a compliance line item’. 

Like Carroll earlier in the day, Oliver also addressed the increasing overlap that AUSTRAC has with the Australian Securities and Investments Commission (ASIC) and the Australian Prudential regulation Authority (APRA). 

While there has been no direct mention of board or director involvement, ASIC and APRA have shown a keen interest in the governance failings associated with systemic breaches in the AML/CTF Act. 

Ashley Bass and Colin Dixon from the Jade ThirdEye Team were joined by Aub Chapman from Aub Chapman Consulting Services and Anne Cox from the Nelson Building Society as part of a panel discussion that looked at the onboarding and optimisation of RegTech to assist with AML/CTF programs. 

This panel examined the nuts and bolts of choosing the right vendor, as well as getting buy-in from management and the board while at the same time being in a position to leverage relevant data from all parts of the organisation and understanding the relevant obligations relevant so the right rules are set and so the process is optimised over time to improve workflow. 

Jeremy Allan from KPMG dealt with the sticky situation and issues of SMRS and tipping off. Highlighting the massive jump between the SMRs - a 95 per cent increase in SMR reporting from the 2017-2018 period and the 2018 -2019 period - Allan also indicated that AUSTRAC is receiving a lot of data that is not SMR-related. 
Recount the purpose of SMRs and the types of financial crime to be captured under this reporting, Allan showed that this is also where organisations tend to fall afoul of the legislation. 

According to Allan, the challenges lie in establishing ‘reasonable grounds’ for reporting, which can be a dangerously-subjective process, especially for those using legacy systems or for the compliance professional who does not have the investigative experience of law enforcement. 
All this, Allan said, will be covered by increased regulatory enforcement and communication by regulators like AUSTRAC. 

He also highlighted the significance of having KYC and getting your risk-rating correct in the first place, because that can affect everything else down the track.

Further, Allan noted the impact of increasing costs associated with transaction monitoring for what might appear to be small conversion rates of transactions being transformed into SMRs.
Then, there is always the challenge of balancing customer due diligence with customer experience. 

The Congress’ final panel, with Carolyn Hanson from PayPal, Anthony Quin from Arctic Intelligence and AML Solutions, and Julian Hunn from Deloitte, addressed the importance of getting the risk assessment right. Without this, the whole financial crime compliance program within the organisation runs the risk of failing to capture. 

David Golding

Friday 3 July 2020
An excellent congress. Congrats to all involved.