Australia: Room to improve AML/CTF systems and controls - Our take on the AUSTRAC risk assessment

In July this year, AUSTRAC released its latest money laundering and terrorism financing (ML/TF) risk assessment which focuses on the securities and derivatives sector. Similar to past risk assessments released by AUSTRAC, this risk assessment has a broader application to the financial services industry as a whole.

Below, we outline a number of findings from the report along with our recommendations. We suggest that you consider whether these findings are relevant to your business and make changes to your Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) program, Risk Register and mitigating controls where appropriate.

Customer risk

The assessment highlights that the 'occupation of your clients' deserves greater scrutiny as part of the risk assessment. The customer occupations most likely to be the subject of Suspicious Matter Reports (SMRs) are occupations in the finance industry and managers or directors of businesses. Interestingly, customers who list their occupation as 'unemployed' constitute 35% of SMRs.

  • is also a responsible entity under AML/CTF legislation;
  • is subject to oversight by other regulators (e.g. ASIC or APRA); or
  • has strong internal governance arrangements and controls in place, including detailed compliance programs, employee screening and accountability mechanisms

Establish source of funds

Establishing source of funds is often a difficult task, which is required by the AML/CTF laws, especially with offshore based customers. However, this risk can be mitigated. AUSTRAC expects that when on boarding a customer, information about the savings and earnings of a customer should be obtained and updated annually, the amount of funds a customer could deposit based on their stated wealth and income should be calculated and customers should provide copies of bank statements of general transaction accounts used to fund their trading accounts.

Cybercrime should continue to be of high focus

Over the last 6 - 12 months, we have seen attention on cybercrime. The results of the risk assessment support this focus on cybersecurity and resilience. Fraud was the most common offence reported in SMRs (over 51% of SMRs) and half of these were enabled by cybercrime.

In particular you should be aware of the most common instances of fraud such as:

  • fraudulent instructions from hacked email accounts;
  • trades and fund transfers from hacked online trading accounts;
  • accounts set up with stolen or fraudulent identification documents; and
  • the fraudulent use of credit cards.

Other crimes not just Anti-Money Laundering

The securities and derivatives industry in general is very focused and has a great awareness of anti-money laundering. However, this has come at the expense of other risks such as terrorism financing (<1% of SMRs) and tax evasion (2% of SMRs). The industry should ensure their processes and procedures are in place identify these risks also. Despite the low percentages of SMRs, you shouldn't be complacent about the potential risk of terrorism financing. AUSTRAC believes that an increased awareness of this risk over time may result in an increased detection and reporting in the future.

With regard to tax evasion, intelligence of partner agencies indicates the threat may be more significant than reported for AML/CTF purposes. AUSTRAC reasons that the low instances of SMRs for tax-related offences is due to customers using offshore service providers to create corporate structures that conceal beneficial ownership of shares to evade taxes.

Risk in providing time critical services

If your business needs to provide its service or execute a trade quickly, this may stretch your ability to properly consider a customer's profile and potentially identify suspicious behaviour. We suggest you consider and document your risks and mitigating controls so the business is aware of and comfortable with the risks they may encounter.

Risk in third party transactions

If there are third parties involved in the transactions of your customers, such as brokers, you may not have the full picture of customer's trading activity and open positions which creates risks. We suggest that you consider these risks and the extent to which they may affect your business. We also suggest that you document and implement mitigating controls such as requiring further information of the customer.

Third party payments and off-market transfers

There is a major risk if payments can be made to third parties that are not the client. This requires significant supervision if you do provide this service to clients. We recommend that further due diligence be undertaken with regard to this third party, in particular to satisfy yourself that this is not fraudulent activity.

This risk also applies to conducting off market transfers. The purpose of the transfer may be to move funds to a foreign jurisdiction to launder funds, or to avoid tax, or to illegally transfer ownership. We recommend that you have in place extra due diligence if the receiving party is not your customer.

Services provided by an online delivery channel

Financial services provided online have a high delivery channel risk, particularly if the entire business is conducted online or via email without face-to-face relationships, there is a great potential for fraud.

If you do offer your services online, we recommend ensuring you consider the following controls to mitigate the risk as suggested by AUSTRAC:

  • call back customers to check that the actual customer was requesting the transaction;
  • where possible, have frequent communication with customers to get to know their financial situation and preferred methods of transacting; and
  • take proactive steps to prevent fraudulent transactions such as by setting up electronic alerts identifying the location of IP addresses and legitimacy of email addresses and warn customers about email domains they use, to help them detect fraud.

Use of cash risk

Use of cash is a significant indicator of money laundering, particularly in today's digital economy. Although most in this industry don't accept cash, you may still be vulnerable to associated risks. If your client deposits funds in an account and transfers them between multiple accounts for no significant reason, this may be considered suspicious. If relevant to your business, consider mitigating controls such as limiting the number of accounts a client can list on your service.

Independence of independent reviews

As you will be aware, AML/CTF programs are required to be independently reviewed internally or externally. In the report, AUSTRAC found that there were inadequate independent reviews. We recommend that you give thought to whether your independent reviews are truly independent. If your internal reviews are undertaken by your AML/CTF compliance officer who drafts, updates and enforces the AML/CTF program, AUSTRAC may not consider these independent.

Next Steps

Regardless of what sector of the industry your business is in, if you are caught by the AML/CTF laws, you should review your AML/CTF program. You should have regard to the findings that we have outlined above and amend your program accordingly. In addition, you should ensure that these findings are communicated to your staff and that suspicious matters are raised appropriately to AUSTRAC.

Your AML/CTF officer should consider how many SMRs your organisation has raised with AUSTRAC in the last 12 months. If you haven't submitted any or many SMRs, it may be possible that your AML/CTF procedures are not adequate.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.