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”

Related Topics
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions