This afternoon, I will provide you with a brief overview of the biggest risks that we are focused on at AUSTRAC, our regulatory priorities and insights from our supervisory work, and an update on upcoming reform.

At AUSTRAC our aim is to make it hard for criminals to profit from their crime by strengthening our financial system against financial crime and using our intelligence to catch and disrupt them when they try. 

Despite a sustained effort across Australia’s public and private sectors, money laundering remains a serious problem for our country. 

The crimes which pose the highest money laundering threats in Australia are the profits from domestic and international illicit drugs sales, tax and revenue crime, profits from illegal tobacco sales, profits from both domestic and international scams and government-funded program fraud. 

The challenge is two fold, combating the laundering of proceeds of Australian crime and the continuing attractiveness of Australia as a location for international criminal and money laundering organisations to launder and store wealth in the Australian economy. 

Just yesterday, the Australian Criminal Intelligence Commission published their three times a year wastewater drug monitoring program report.

This report gives us a very accurate picture of the size of the illicit drug market in Australia. This market in now worth at least $16.5 billion per annum. That’s all illegal money that is being laundered through Australian economy every year, and that’s only one type of domestic crime. 

Criminals are highly likely drawn to Australia because of our population’s continued proclivity to purchase illicit drugs in large amounts.  And also the size and stability of our economy and its capacity to absorb foreign proceeds of crime, as well as the unregulated sectors of the Australian economy, like real estate, as a place to store significant illegal wealth.

Financial pathways are becoming and will continue to become increasingly complex and interconnected, with visibility of transactions diminishing as funds flow through payment systems that are not always captured by existing regulations.

The proceeds of crime generated by organised criminals needs to be placed, layered and integrated into the economy. Because of its size, diverse client base and utilisation of cash, the banking sector remains highly exposed to this risk.

Due to this risk, and despite the good work and significant investments they’ve done, the banking sector remains a focus for AUSTRAC whilst we also  increase our engagement with other parts of the economy.

The growth of digital currency and international digital currency exchanges tailoring themselves to organised crime are major risks and an increasing focus of large scale criminal activity.

AUSTRAC is also focusing our regulatory efforts on what we have assessed to be high-risk sectors. In the last year, along with banking, we have focused on gambling and remittance sectors. 

In 2024 we have had supervisory engagements with more than 100 regulated businesses in the banks and financial services sector.

We’ve seen a genuine commitment to embrace engagement with us and a willingness to receive feedback, even when that feedback might be a little challenging.

Banks increased staff awareness through a variety of methods. This saw improvement in their culture, particularly in their financial crime and AML/CTF responsibilities.

But there is still scope to further improve board oversight and understanding. Some businesses we’ve dealt with were not able to demonstrate how or what they reported to their board on AML/CTF matters. They could also not articulate the Board's appetite for money laundering or managing terrorism financing risks.

We saw programs being tailored to mitigate changing risks, but more work is needed on this in smaller banks and the non-bank lending sector.

We’ve also seen investment in new systems and technology upgrades to enhance financial crime compliance frameworks and to enhance the effectiveness of operations. And this is a positive step, but new systems take time to embed and time to test and we’re keen that businesses don’t lose focus on tackling financial crime now, while waiting for system upgrades.

We continue to see mixed quality in relation to outsourcing of AML programs. In some instances, some third party AML/CTF programs are of poor quality and not tailored to the business and its specific risks. Businesses should always remember, it can outsource elements of its AML program but your boards can not outsource its liability to ensure that the program works and that it’s done well.

We’ve also had increased focus on non-bank lenders, corporate bookmaking, smaller casinos, Crypto exchanges and digital currency more generally as well as Gold bullion dealers and the results in those areas are a mixed bag.  You can expect to see more activity on those areas in the not too distant future.

The financial services sector needs to remain vigilant of evolving risks and trends. We issue guidance and provide education on emerging crime types and it’s vital that your businesses review these and adapt your monitoring systems as needed.

We know 2025 may be a significant period of change as businesses prepare for the proposed reform of the AML/CTF regime.

We are committed to supporting you through this process. To assist, we are making significant internal changes at AUSTRAC, including a new Education and Industry Engagement Branch, a new Data Division and other investments and changes in the way that we regulate that will be hand in glove with industry to make sure they’re prepared for those changes.

A fundamental principle of Australia’s Anti Money Laundering regime is the role of industry as the front line of defence against money laundering risks.

Fighting financial crime requires cooperation. Only together can we fight this massive problem.