The recent AUSTRAC order in Australia and the RBI's penalties in India highlights the critical importance of embedding legal compliance and risk management at the highest levels of banking and finance.
On 2 May 2025, the Reserve Bank of India imposed aggregate penalties of ₹2.524 million on 5 Indian Banks for multiple breaches of RBI directives on cybersecurity, KYC norms, internal-account operations and interest-subvention schemes. This intervention by the RBI underscores the regulator's intent to not just expose gaps in governance and controls but address any signs of complacency among banks regarding customer onboarding and internal operations that may violate anti-money laundering (AML) regulations.
On 15 May 2025, Australian Transaction Reports and Analysis Centre (herein after "AUSTRAC") directed Mercedes-Benz Financial Services Australia to appoint an external auditor after finding that the financier had classified nearly all customers as low risk, lacked any system to detect and escalate suspicious transactions, and maintained inadequate monitoring of customer activity. From a compliance viewpoint advising non-bank lenders and captives, all of these actions (or non- actions) by the financial services highlights not only is the organisation reviewing the customers they are onboarding but it is not monitoring their activities either.
As a Compliance Professional here are some immediate steps you can adopt in your organisation to fortify legal compliance and risk management and avoid such scenarios:
- Codify Incident-Response Protocols
In large organsations where every employee is made accountable for specific roles and responsibilities, it is important to have a robust incident-response plan that maps each stage of a cybersecurity or AML/CTF event from initial detection through containment, investigation, remediation, and post-mortem review considering the regulatory timelines (typically within six hours for severe cyber incidents).
- Continuously Invest in Automation
Automation must be integrated across all facets of monitoring within banks to effectively manage the growing volume of transactions and the increasing complexity of financial crime. Advanced technologies, particularly behavior analytics, enable the detection of anomalies that can be mapped to regulatory thresholds and rule-based frameworks. These tools support the identification of red-flag indicators such as unusual transaction velocities, round-sum transfers, and activities linked to high-risk jurisdictions. Partner with RegTech vendors to deploy behaviour-analytics platforms that automate both transaction monitoring and regulatory filings.
- Elevate Governance and Reporting
Compliance and risk management should no longer sit as advisory functions, they must occupy decision-making seats at the board table. The CRO/CCO must own a live compliance dashboard that aggregates key metrics such as alert volumes, case-closure times, KYC revalidation rates, and audit findings further presenting them in a concise, actionable format. Monthly reviews of this dashboard by senior management foster an environment where compliance performance is as rigorously tracked as financial results. Moreover, tying a portion of executive compensation to compliance KPIs (for example, timely remediation of audit findings or reductions in false positives) aligns incentives and reinforces that legal and regulatory adherence underpins long-term value creation.
- Regulatory Change Management
A structured horizon-scanning mechanism ensures assessment of newly introduced or revised AML/CTF directives, translating regulatory changes into actionable items with deadlines incorporated into the audit calendar, monitoring parameters recalibrated, and training programmes refreshed, ensuring that compliance anticipates regulatory shifts rather than simply reacts.
- Continuous-Improvement Loop
After each audit or major incident, convene a "lessons learned" session with Legal, Compliance and Operations to produce a prioritized action register completing with owners, deadlines and escalation paths. Feed the resulting insights back into your risk-scoring models, monitoring thresholds and training curricula so controls evolve alongside emerging risks.
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.
