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In this section:

The consequences of ML/TF activity in the sector are assessed as minor. Consequence refers to the potential impact or harm that ML/TF and other financial crimes may cause. Financial crime in the financial planning sector has consequences for customers, individual financial planners, financial institutions, and the broader Australian economy.


There are financial and indirect consequences for customers in this sector. These could include:

  • financial losses from accounts
  • emotional distress
  • loss of private information and identity theft.

Financial planning sector

The severity of the consequences caused by ML/TF will differ for financial planners and institutions depending on the extent to which they understand and assess ML/TF risks, identify and submit SMRs, and have effective controls and strategies in place to combat the various criminal threats outlined in this assessment.

Consequences for financial planners could include:

  • crime-related financial losses and subsequent erosion of financial performance (particularly for independent or unaligned financial planners who may have limited capacity to spread risk and/or absorb losses)
  • increased costs associated with combating criminal attacks, in particular IT security costs to build cyber resilience
  • increased fraud insurance premiums
  • increased administrative costs in reviewing accounts upon the discovery of a fraudulent/criminal activity
  • reputational damage to a financial planner or institution following an incident, resulting in loss of customers and/or damage to the brand
  • for planners who do not report suspicious matters, the possibility of implication in facilitating criminal activities
  • for planners who commit offences, potential personal liability either from civil action by aggrieved victims or criminal prosecution by law enforcement authorities.

Consequences for the financial planning sector as a whole include:

  • loss of confidence in the financial planning sector by both customers and by product issuers/other financial institutions that accept customer referrals from financial planners
  • public relations costs associated with regaining community trust
  • increased regulatory action
  • increased risk of legal action and compensation for customer losses arising from failed AML/CTF controls.

Australian economy

Financial crimes in the financial planning sector have the potential to impact the broader Australian economy, including:

  • undetected criminal activity, thereby providing a safe haven for the proceeds of crime, particularly for funds originating offshore
  • loss of savings or investments from stolen funds
  • weakened AML/CTF compliance for product issuers that rely on customer due diligence carried out by financial planners
  • reduced government revenue from welfare fraud and tax evasion
  • damage to Australia’s international economic reputation in relation to the security and safety of investing in Australian financial products and other assets.

National security and international consequences

The national security and international consequences of TF in the financial planning sector is assessed as minor, given the relatively low level of TF activity currently observed. However, financial planners must remain vigilant to this threat, as undetected TF activity could have significant consequences.



Last modified: 21/12/2016 11:26