NAB may face heavy penalties after admitting money-laundering breaches

Hot on the heels of Westpac’s announcement three weeks ago that it has provisioned hundreds of millions of dollars for additional remediation costs and a potential fine by AUSTRAC, over its failure to report “a large number” of International Funds Transfer Instructions (IFTIs) it was NABs turn to make an announcement.

In its annual report released on Friday, NAB said it may have been involved in a breach or alleged breach of laws governing bribery, corruption and financial crime. It had self-reported “a number” of issues to AUSTRAC, and was currently investigating and remediating a number of counter terrorism and anti-money laundering breaches. 

“Given the large volume of transactions that the group processes, the undetected failure of internal AML/CTF controls, or the ineffective implementation or remediation of compliance issues, could result in a significant number of breaches of AML/CTF obligations and significant monetary penalties.” the bank said in its annual report.

Anthony Quinn, founder and CEO of Arctic Intelligence said “On a weekly basis now, we are seeing regulated financial and non-financial institutions, self-reporting to their shareholders that they expect to be penalised over breaches of AML/CTF laws.  At the heart of these compliance deficiencies, we continuously see two underlying issues

The first is that many organisations fail to understand their vulnerabilities to financial crime, but where they do, often fall down in the implementation and maintenance of effective procedures and controls that are proportionate to their risks.  

The second issue is that many organisations have gone for far too long without having a thorough and comprehensive independent review to test the design and operational effectiveness of controls, so by the time these have been discovered, analysed and either self-reported or discovered by the regulators these have manifested into chronic and systemic issues.”

Quinn said “This is yet another timely reminder for reporting entities to get their houses in order on their ML/TF risk assessments and ensure systems, procedures and controls are implemented that are appropriate and proportionate to risks and not become complacent.  

The lack of a formal mandatory independent audit of AML Programs is a major weakness in Australia’s AML/CTF regime and as a result we are now seeing the results of this with massive issues that could have been going on unreported for years and years.  It is long overdue that AML audits are mandated at least every two-years.”

If you are a reporting entity and want to understand how you can strengthen your defences and improve your financial crime risk management framework then please contact the Arctic Intelligence team.