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Australian financial institutions concerned about AML loopholes

Why are Australian banks and fintechs concerned about the country's AML legislation? And how can it be improved?

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October 20, 2021
AML Screening

Several of Australia’s largest banks and financial technology companies recently spoke to the country’s senate about how major loopholes in the country’s anti-money laundering legislation could be closed.

The entities involved in the discussions believe that gaps in the country’s current AML framework are causing reputational damage to Australia. Responding to an inquiry started by the senate, The Australian Banking Association, the Reserve Bank of Australia, Fintech Australia, and Bendigo and Adelaide Bank have shared their thoughts on the inadequacy of the country’s current anti-money laundering and counter-terrorism financing (AML/CFT) framework, and have suggested ways the system could be improved to make it more robust.   

Support for ‘Tranche 2’ legislation

Speaking to the senate, the organizations involved broadly stated their support for ‘Tranche 2’ legislation. If enacted, this would bring designated non-financial businesses and professions (DNFBPs) like accountants and real estate agents under similar AML/CFT laws to the ones that govern financial institutions like banks.

A move towards ‘Tranche 2’ legislation has also been repeatedly proposed by the FATF/Asia Pacific Group (APG) in their Mutual Evaluation Reports (MERs) on Australia.

How would this improve Australia’s AML/CFT rules?

DNFBPs play an important role in the financial system and they’re often referred to as ‘gatekeepers’. This is because they facilitate and often help both individuals and companies that are looking to enter the financial system. As a result, they can be crucial in preventing laundered money from entering Australia’s financial system.

At present, because these companies are not governed by the same AML/CFT laws as financial institutions, extra strain is placed on banks, emitters, and wagering companies. However, by ensuring legislation covers DNFBPs, this pressure can be alleviated, and more companies will begin to work alongside AUSTRAC and law enforcement to address financial crime. This will close loopholes and prevent large amounts of laundered money entering the financial system.  

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