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Consequence refers to the potential impact or harm that ML/TF and predicate crimes may cause. Money laundering in the superannuation sector has consequences for superannuation fund members, individual superannuation funds and the sector as a whole, and the broader Australian economy. Terrorism financing, though small in the sector, has very significant consequences, including sustaining terrorist groups, and potentially enabling terrorist acts in Australia and overseas.

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Superannuation fund members

The direct financial cost to the member of ML or predicate crimes may be mitigated as there are compensation arrangements applicable to APRA-regulated super funds in the case of fraud or theft. However, there are still some financial and indirect consequences for members, including:

  • undetected losses from accounts of members, including disengaged members
  • reduced retirement benefits
  • emotional distress
  • loss of confidence in the superannuation system.

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Superannuation funds and the superannuation sector

The severity of consequences will differ between funds depending on the extent to which they can understand and assess ML/TF risks, identify and submit SMRs, and have effective internal controls and strategies in place to combat the various criminal threats outlined in this assessment.

As such, the most significant consequences of ML and associated predicate crimes will likely be borne at the individual fund level. This could include:

  • continual erosion of the financial performance of the fund due to crime-related losses
  • increased fraud insurance premiums
  • increased costs associated with combating criminal attacks
  • increased administrative costs in reviewing potentially thousands of transactions upon the discovery of a fraudulent/criminal transaction
  • increase to the Operational Risk Financial Reserve
  • potential adverse impact on earnings
  • reputational damage to a fund following an attack, resulting in decreased membership and damage to the brand
  • public relations costs associated with regaining community trust
  • increased regulatory action.

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Australian economy

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

  • loss of savings from stolen superannuation holdings
  • widespread loss in confidence in the superannuation system, with flow-on implications for Australians’ retirement holdings
  • undetected criminal activity, thereby providing a safe haven for the proceeds of crime
  • increased reliance on the Government Age Pension.

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National security and international consequences

Terrorism financing, though currently small in the superannuation sector, is judged to have moderate consequences, both in Australia and overseas, including:

  • sustaining and enabling the activities of Australian FTFs
  • potentially enabling terrorist acts both in Australia and overseas
  • harming Australia’s global image.

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Last modified: 31/10/2016 07:59