AUSTRAC releases mutual banking sector money laundering and terrorism financing risk assessment

Yesterday, AUSTRAC released the Mutual Banking Sector Risk Assessment report which concluded that the mutual banking sector has a high level of vulnerability to financial crime with the main threat being money laundering and with the overall money laundering and terrorism financing risk assessed as medium.

According to the report, the mutual banking sector has particular vulnerabilities to money laundering, including:

• The types of products offered by the sector, particularly transaction accounts with high levels of cash exposure, access to international remittances, including with high-risk jurisdictions, and transactions by unknown third parties;
• A high level of non-face-to-face service delivery;
• High levels of outsourcing of customer-facing and AML/CTF processes and limited oversight/influence over the operations of third-party service providers.

AUSTRAC CEO, Nicole Rose said AUSTRAC expects the mutual banking sector will use these findings to protect their businesses and the Australian community from criminal threats.

“Money laundering and financial crime enables serious criminal activity such as drug trafficking, human trafficking and fraud which causes real life harm to our communities. The financial sector must do their part to protect the Australian community from these threats,” Ms Rose said.

“Australians are increasingly using the mutual banking sector as a trusted, community-focussed alternative to the major banks. As the sector continues to grow and consolidate, so too will its exposure to criminal exploitation.

A couple of months ago, Arctic Intelligence conducted a webinar for Australia’s mutual banking sector which included an overview of the money laundering risks and vulnerabilities facing the sector and presented the AML Accelerate solution which has been adopted by many in the sector to understand the money laundering and terrorism risk and types of controls that can be applied to help mutual banks to mitigate and manage these risks.

There are clearly still challenges in building effective financial crime risk management capabilities with some interesting statistics coming from the poling of AML professionals in this sector which showed:

• 58% of participants responded that some elements of the enterprise ML/TF risk assessment may be falling through the cracks; and
• 67% of participants responded that they had some doubts and concerns regarding the effectiveness of the controls that had been deployed

Arctic Intelligence CEO Anthony Quinn said “It is great that AUSTRAC is starting to provide detailed guidance into risk factors and typologies which are industry specific and a great resource for reporting entities.  We have been focussed on building enterprise risk assessment and control assessment capabilities that provide a robust framework for identifying and assessing money laundering and terrorism financing risks, as well as, the tools to understand the existence and effectiveness of mitigating controls that are helping clients in 15 industry sectors, including the mutual banking industry.  If there are mutual banks out there that would like to understand more about how they can strengthen their defences from financial crime risk exposures we would encourage them to get in touch.” 

To find out more about how Unity Bank has used Arctic Intelligence’s, AML Accelerate platform to improve the enterprise money laundering and terrorism financing risk assessment take a look at this case study – Read more.