ARTICLE
15 January 2025

New Sector- Specific Lists of Suspicious Activity Indicators Published by AUSTRAC – Non-bank Lenders and Financiers

SG
Sophie Grace Pty Ltd

Contributor

Sophie Grace is a leading Australian firm specialising in both compliance and legal services to participants within the financial services and credit industries. We have serviced Australian and international clients across the financial sector for over a decade. From obtaining the required licences to operate your business to the provision of ongoing compliance support, many businesses have benefited from Sophie Grace’s extensive knowledge in the financial and credit space. We take pride in our ability to offer tailored solutions to a broad range of businesses whilst keeping business practicalities and obligations to regulators at the forefront of our minds when delivering services and advice. Our consultancy services can equip you with assistance and clarity in your business endeavours.
AUSTRAC has recently published new lists of suspicious activity indicators that are sector-specific to assist reporting entities.
Australia Finance and Banking

AUSTRAC has recently published new lists of suspicious activity indicators that are sector-specific to assist reporting entities to identify potential money laundering ("ML"), terrorism financing ("TF") and other serious and organised criminal activity.

This article provides a summary of the new indicators for non-bank lenders and financiers.

Are you captured as a non-bank lender or financier?

If you provide one or more designated services as prescribed in the AML/CTF Act, you must enrol with AUSTRAC as a reporting entity and there are a range of obligations imposed by the AML/CTF Act along with the AML/CTF Regulations that you must comply with.

Item 6 and Item 7 of Section 6 of the AML/CTF Act prescribe the following designated services:

  • Item 6 – making a loan, where the loan is made in the course of carrying on a loans business;
  • Item 7 – in the capacity of either lender for a loan or assignee of the lender for a loan, allowing the borrower to conduct a transaction in relation to the loan, where the loan was made in the course of carrying on a loans business.

The above definitions capture non-bank lenders and financiers for both loans issued under the National Consumer Credit Protection Act 2009 ("NCCP Act") and loans that are not captured by the NCCP Act such as commercial loans. It's a common misconception that only consumer loans are caught by the AML/CTF Act, however it is clear from section 6 of the AML/CTF Act that this is not the case. If you are carrying on a loans business and are unsure if the AML/CTF Act is applicable to you, the obligations you must comply or what you need to do if you have operated without the appropriate enrolment with AUSTRAC, please contact us.

What do you need to do?

We have included below a summary of the suspicious activity indicators that non-bank lenders and financiers should be alert to. If any of these indicators are identified by your entity, you must consider lodging a suspicious matter report with AUSTRAC within the appropriate timeframe:

  • In relation to terrorism financing, within 24 hours; or
  • In relation to money laundering or other matters, within 3 business days.

For any reporting entities that provide designated services as a non-bank lender or a financier, we encourage you to:

  1. Review the new indicators above and consider their applicability to your organisation and risk assessment;
  2. Consider if any changes are required and make these changes to your risk assessment;
  3. Incorporate the applicable indicators into your red flag indicator sheet or any other manuals forming part of the AML/CTF Compliance Program;
  4. Consider and build any measures to mitigate these risks; and
  5. Provide training to your staff members in relation to the indicators, as well as any other updates made to your AML/CTF Program, to ensure your front, middle and back office staff members are able to identify the presence of any of these indicators in their day to day role.

If you would like to seek compliance or legal advice in relation to the incorporation of these indicators into your existing AML/CTF Compliance Program, please contact us.

1567878a.jpg

Customer Identification and Behaviour Indicators
Customer Identification (ID) Indicators Customer Behaviour Indicators
A customer:

  • whose ID document cannot be authenticated

  • provides ID information that is false, misleading, vague, or cannot be verified

  • refuses or is reluctant to provide ID information or documents

  • has inconsistencies in information across different identification documents

  • has sources of wealth or sources of funds that are unexplained and/or inconsistent with their profile

  • is overly secretive about their source of wealth or funds or has difficulty providing evidence of their source of wealth or funds

  • appears to be known to law enforcement or associates with criminals, based on open source information
A customer:

  • makes an unusual enquiry to staff about whether they report to government authorities

  • requests that their transaction is not reported to AUSTRAC

  • appears nervous, overly defensive when asked questions, evasive, or leaves without the service being provided. For example, they don't want to proceed if they have to provide ID

  • and/or their activity is the subject of law enforcement enquiries

  • appears nervous, overly defensive, or evasive when questioned

  • appears to be directed by a third party, or makes a transaction in a branch while accompanied, overseen or directed by third party
Money Laundering Inidcators
A customer:

  • has unusual transaction patterns or frequency of transactions. For example, multiple payers make loan repayments, or payments are sent to and/or received from foreign jurisdictions to which the customer does not have an obvious link (for example, no known family, friends or business relationships)

  • applies for loans and/or makes early loan payouts or large value loan repayments that are inconsistent with their profile, or with no reason provided

  • makes rapid transactions in and out of offset or loan accounts

  • transfers goods or funds internationally without a clear reason

  • has incoming payments that are inconsistent with their profile

  • makes large value deposits into their account over a short period

  • uses cash repayment options excessively or unexpectedly, inconsistent with their profile. For example, an individual customer changes from direct debit to frequent small cash repayments, or a small business customer changes from electronic payments to large cash repayments

  • makes regular or frequent structured cash payments

  • makes or receives rapid transfers to or from third parties

  • receives deposits from unknown parties, foreign jurisdictions, different domestic locations, or via cheques in the name of unrelated parties
Tax Crime, Fraud and Scams
Tax Evasion Indicators Identity and Loan Fraud Indicators
A customer:

  • is unable to provide sufficient documentation to verify information provided in their applications

  • whose business appears to be running at a loss but is potentially concealing cash income

  • provides information on their application that indicates they work full time for cash payments, but they also receive government benefits

  • claims to have no or very limited expenditure for living expenses and works cash-in-hand jobs
A customer:

  • provides ID and/or loan supporting documents that appear to be falsified. For example the company or employer listed does not exist, unusual or missing letterhead, inconsistent use of fonts etc.

  • applies for multiple loans, credit cards, and/or finance products within a short period of time

  • whose first payment defaults

  • has inconsistent or invalid personal details. For example, disconnected mobile numbers or multiple IP addresses

  • Customer immediately transfers funds from a newly-opened account to cryptocurrency exchanges, particularly to peer-to-peer cryptocurrency networks

  • Other indicators include:

  • Multiple customers use common details across numerous applications, e.g. ID numbers, address, phone number, other contact details, IP address, customer photograph, etc.

  • Brokers or third party providers have a significant increase in the number of customer applications
Welfare Fraud Indicators Scam Indicators
A customer:

  • has transactions that are inconsistent with the typical profile of someone receiving government benefits. For example, higher volume and/or higher amount of transactions

  • provides information on the loan application that is inconsistent with the corresponding government benefit income statement. For example, income, marital status, home ownership, rental payments, employment status, or number of dependants, etc.

  • receives government benefits without withdrawing the funds, possibly indicating they may have access to other undeclared sources of income

  • is subject to enquiries from Australian Government departments responsible for social welfare and human services activities
A customer:

  • changes their details immediately following loan, credit card, or financing approval. For example, change of residential address, frequent changes to customer phone number

  • has online activity that is inconsistent with their history or profile. For example, rapid change in customer's geographic location, registration of new devices, deregistration of previous device, deposits or withdrawals in different jurisdictions

  • reports that they are victim of a scam, or there is a notification of scam activity on the customer's account, such as from another financial institution.
Terrorism, National Security and International Crime Indicators
Terrorism Financing Indicators Proliferation Financing Indicators
A customer:

  • uses loan drawdown facilities for small amounts citing the reason for withdrawal as 'support payments'

  • makes donations to small charities linked to extremist ideologies



Open Source information:

  • indicates a customer is has links to terrorist groups or terrorism activities

  • indicates a customer displays extremist ideologies (for example, social, political, environmental etc.)


A customer:

  • is matched through screening against an Australian or international sanctions list



Corporations:

  • sharing directors and management, addresses, emails, phone numbers and financial infrastructure with other entities in their networks

  • obfuscating their identities and activities by: using aliases and transliteration of company names, using subsidiaries or branches or using third-country nationals in corporate ownership structures.

  • registering in jurisdictions with opaque corporate registers where information on ultimate beneficial ownership is not easily accessible

Further Reading

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.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More