The environment impacting AUSTRAC in 2015–19
The financial sector
The financial sector, comprising more than 14,000 regulated entities and $4.4 trillion in assets, is at risk from criminal abuse. Criminal activity relies on concealing and laundering illicit financial flows. Countering money laundering and terrorism financing contributes to a safer and more secure Australia.
The financial sector is rapidly evolving. The global financial system continues to expand, providing increasing opportunity to obfuscate financial flows, while innovation and technology is creating new opportunities to exchange value and thereby further complicating the mission to counter money laundering and terrorism financing.
Fraud and corruption, including criminal infiltration of financial institutions, undermine Australia’s economic integrity and government revenue.
The dynamic environment brings challenges, but also the opportunity for a new collaborative relationship with the financial sector, and domestic and international partners, to protect the integrity of the future financial system.
The threat of terrorism
Terrorism financing is a risk to Australia’s national security, financial system, commercial organisations and not-for-profit organisations.
Primarily, terrorism financing is a national security risk as it can directly enable terrorist acts both in Australia and overseas. Terrorism financing is largely motivated by international tensions and conflicts. Communal and sectarian links between groups overseas and individuals in Australia drives Australian involvement in terrorism financing.
Even an unwitting association with terrorism financing involving small amounts of money could damage the reputation of Australian financial institutions, companies and not-for-profit organisations and harm Australia’s global reputation.
Organised crime groups are continually adapting their business models to explore low risk, high profit opportunities.
The result is that serious and organised crime diverts funds out of the legitimate economy, undermines the profitability of lawful business and erodes Australia’s revenue base.
Effectively combating these crimes will be dependent on law enforcement’s ability to operate in an increasingly interconnected and globalised financial environment, facilitated by the digital economy and international trade.
This is a challenge faced by all nation states and influences the ability of us and our partners in the pursuit of achieving our collective purposes.
In April 2015 the body which sets global standards for AML/CTF measures, the FATF, released a Mutual Evaluation Report of Australia. It assessed Australia’s compliance against the international standards and included an assessment of the effectiveness of the country’s AML/CTF regime.
In addition, the Attorney-General’s Department (AGD) is leading a review of the AML/CTF Act. The report on the review of the Act will be provided by AGD to the Australian Government by the end of 2015.
The review of the Act and the mutual evaluation provide a unique opportunity to:
- change the paradigm regarding the information we collect
- create the basis for a new partnership with stakeholders (specifically industry)
- streamline the domestic AML/CTF regime and reduce, where possible, the regulatory burden.
Increasing levels of intelligence
There is a growing demand for financial intelligence to support law enforcement, national security and revenue objectives.
AUSTRAC intends to improve our ability to proactively influence and shape our environment, and more closely align to whole-of-government priorities and initiatives during 2015-16 and the forward years.
As noted earlier, our purpose is to regulate industry effectively, discover ML/TF threats and risks, provide an understanding of these threats and risks, and respond in partnership with others.
We either proactively or reactively disseminate intelligence to a variety of partners that may be useful in supporting their efforts to curb criminal behaviour.
It is often hard to measure the results of our efforts as we are dependent on the feedback of our partners in noting our contribution to outcomes. Our performance framework is being developed to recognise our contribution as opposed to the outcomes of others, often of which we have limited or no influence.
Better regulation agenda/efficiencies
The Government has committed to better regulation and reductions in red tape for individuals, businesses and community organisations, driving productivity increases and improvements in efficiency. AUSTRAC will continue to support the Government’s efforts in all of these areas.
On 1 July 2015 AUSTRAC commenced the implementation of a new strategic framework, supported by a change program and new leadership and governance frameworks.
To deliver in line with our vision, we will embed:
- new relationships
- flexible ways of working
- a culture of innovation and empowerment, and
- a new operating model that supports a financial intelligence focus.
In 2016-17, we will need to continue to evolve to meet the demands the future will bring. We will need to be highly adaptable and responsive to keep pace with technology, financial models and consumer patterns, and criminal patterns. An increased risk appetite, coupled with responsibility will empower our people to create new opportunities and the agency to exercise new uses of its powers.
Our new operating model will be supported by a new governance framework. This model will lay the foundations for our success in future years and ensure that internally we maximise the alignment of our capabilities and functions.