Cleaning up launderers

Financial services businesses, ranging from banks to stockbrokers and superannuation funds, have been warned they need to start preparing for new laws designed to counter money laundering.

The federal government has finalised its anti-money laundering legislation after more than two years of drafting and consultation, and last month the enforcement agency Austrac released detailed rules and regulations.

The legislation has wide scope, covering any business that potentially could be used for money laundering activities.

Initially it will apply to financial services businesses, including banks, building societies and credit unions, as well as gaming companies and bullion dealers.

It will extend to stockbrokers, fund managers, superannuation funds, financial planners, particularly where they are responsible for opening client accounts, insurance companies and to a lesser extent mortgage brokers.

Over the next two to three years, the new regime will also cover real estate agents, jewellers, accountants and lawyers.

Preparing for the new laws will be an expensive exercise, with some of the big banks spending an estimated $100 million.

In addition, Austrac has received additional funding of $139 million over four years.

KPMG forensic director Matt Fehon said many businesses had been waiting for the legislation to be finalised, and that point had arrived.

“The message is that now it is set in stone,” Mr Fehon said.

Businesses covered by the new regime need to develop an ongoing work program to ensure their systems and their people were ready.

Upgrading information technology systems would be a necessary step, with extra staff training also required.

“While an organisation may strive to adhere to the legislation and improve its systems, they may not capture the information; unknowingly they may be the subject of a laundering event,” Mr Fehon said.

“The real challenge is to train their staff. A lot of the investigations that have come about have been a result of the human factor; people have identified something that isn’t right.”

Associate director financial services Andrew Reynolds said the federal government’s original proposal was highly prescriptive in terms of specifying the types of services that would have to be reported.

The current legislation prescribes 71 services that need to be monitored and possibly reported, but also incorporates a risk-based approach based on an assessment of the type of transaction and the type of counterparty.

“The risk-based approach allows increased flexibility,” Mr Reynolds said. “It’s based on your assessment and your methodology for applying the legislation.”

For instance, the ability of individuals to choose their superannuation fund and transfer money between accounts could make superannuation a higher-risk sector.

Mr Reynolds said launderers would target businesses they believed were less stringent.

“The launderers know that banks aren’t soft targets and haven’t been for some time,” he said.