A massive rise in the number of transactions reported to financial crimes agency AUSTRAC has been partly driven by institutions submitting unnecessary reports of varying quality because they are petrified of being handed billion-dollar fines.
Since the financial intelligence regulator steamrolled Commonwealth Bank in mid-2017 for more than 50,000 breaches of the law, including the failure to deliver 149 suspicious matter reports, AUSTRAC has seen a 258 per cent increase in the number of SMRs filed.
The nature and quality of the reports being filed by institutions, however, ranges from comprehensive to useless as banks and others unleash a blizzard of paperwork on the same regulator responsible for squeezing a $1.3 billion fine out of Westpac, just to maintain a veneer of compliance with the law.
AUSTRAC’s national manager of intelligence partnerships, David Hawkins, said while the regulator held no concerns about the defensive or over-reporting of transaction threshold reports or international funds transfer instructions, it was evident other reporting channels were being inflated with junk.
“What we are talking about here is around SMRs … that’s where you see some defensive reporting,” Mr Hawkins said.
“Our reporting has shot up incredibly over the last four years. We received 265,000 SMRs a year, in the previous financial year, and that was a 258 per cent increase over a four-year period. So that’s quite an exponential lift there and of course some of that would be defensive.”
AUSTRAC’s national manager of intelligence partnerships was speaking on a panel of experts that explored the shifting landscape of Australia’s anti-money-laundering and counter-terrorism-financing activities. Australia is considered a world leader in AML-CTF, with its approach to circulating typologies or transaction patterns of suspected criminal activities thought to be a key contributor.
The obligation of just how many details a financial institution needs to provide the regulator with to accompany an SMR remains unclear, however, leading some institutions to take part in what is known as “defensive reporting”. This is where institutions bury the regulator in paperwork hoping to “wash their hands” of the matter.
By James Frost, 9 November 2020, published on The Australian Financial Review