AUSTRAC’s 2024 Regulatory Priorities: New sector focuses and more responsibility for boards

Australia’s anti-money laundering and counter-terrorism financing regulator – AUSTRAC – has released its statement of 2024 regulatory priorities. AUSTRAC’s priorities are divided into two categories: “enduring priorities” and “increased regulatory focuses”. All regulated entities should pay close attention to this recent insight from AUSTRAC into what it intends to home in on during the next year.

AUSTRAC’s enduring priorities are:

• Mitigating and managing money laundering and terrorism-financing risk.
• Ensuring that reporting entities have effective AML/CTF programs setting out how they will comply with the AML/CTF Act and AML/CTF Rules.
• Ensuring that relevant matters are reported to AUSTRAC. In particular, international funds transfer instructions, threshold transaction reports and suspicious matter reports.
• Closely monitoring high risk sectors, namely banking, gambling and remittance.

AUSTRAC’s areas of increased regulatory focus for 2024 are the following sectors:

• Digital currency exchanges.
• Payment platforms.
• Bullion.
• Non-bank lenders and financiers.

AUSTRAC’s enforcement powers in review

In the past few years, we have seen AUSTRAC reserve its power to commence court proceedings seeking civil penalties for the most serious and consequential of breaches.
Since 2020, AUSTRAC has sought (and obtained) civil penalty orders in the Federal Court of Australia in two instances:

• $1.3 billion against Westpac in September 2020, the largest civil penalty in Australian history; and
  
  
• $450 million against Crown Melbourne and Crown Perth in 2023.

There are currently two proceedings filed by AUSTRAC before the Federal Court against SkyCity Adelaide Casino and Star Casino related entities respectively.

This tendency of AUSTRAC to only litigate the few largest matters within its enforcement ambit each year is likely to continue in 2024. The vast majority of regulated entities should expect that any enforcement action by AUSTRAC will consist of either infringement notices, remedial directions, or accepting enforceable undertakings.

In particular, since 2022 AUSTRAC appears to have been relying more on enforceable undertakings as its preferred enforcement power. In 2022 and 2023, AUSTRAC accepted as many enforceable undertakings as it did in the 11 years between 2010 and 2021 – signalling a major uptick in its use of this power. The fact of enforceable undertakings being voluntarily agreed to by regulated entities does not necessarily mean that this is an insubstantial power. Recent undertakings agreed with AUSTRAC have imposed serious and long-term obligations on the parties giving the undertakings. This may reflect the desire of boards to avoid civil penalties in circumstances where the Court seems to be prepared to impose extremely large penalties in appropriate cases.

Other focuses for 2024

Board members may be liable for civil penalties

Of critical importance to boards, AUSTRAC states that it may consider joining individuals to proceedings against reporting entities where an individual is in an way concerned in, or party to, a contravention of a civil penalty provision of the AML/CTF pursuant to s 174 of the AML/CTF Act. Given AUSTRAC’s statement that this will be a focus of its enforcement work, boards must be proactive to ensure their organisation’s AML/CTF compliance frameworks and processes are effective.

Transaction monitoring

Section 41 of the AML/CTF Act requires reporting entities to develop and maintain effective transaction monitoring programs to identify unusual or suspicious customer transaction, which can lead to the submission of an “suspicious matter report” to AUSTRAC. This obligation has been flagged by AUSTRAC as something being missed by many regulated entities, and should therefore be expected to be an area of enforcement focus in 2024.

Outsourcing AML/CTF functions

It is common for regulated entities to outsource certain AML/CTF functions to consultants and service providers. However, in this update AUSTRAC reminds businesses that responsibility for compliance with AML/CTF obligations cannot be outsourced to third parties. Boards must sill satisfy themselves that their organisation’s obligation under the AML/CTF Act are being complied with.

Proposed reform to AML/CTF legislation

The proposed reforms to the AML/CTF legislation (as set out in the Attorney General’s Department’s consultation paper dated 20 April 2023) would capture additional entities including lawyers, accountants, trust and company service providers, real estate agents and dealers in precious metals and stones (known as “tranche two entities”). Australia, along with China, Haiti, Madagascar and the United States, are the only five out of 200 jurisdictions that do not regulate tranche two entities. If passed, these reforms will bring the number of entities reporting to AUSTRAC from 17,000 to approximately 100,000.

Also, the establishment of the National Anti-Corruption Commission (NACC) from 1 July 2023 by the National Anti-Corruption Commission Act 2022 (the NACC Act) gives AUSTRAC obligations under the to refer certain issues to the NACC for potential investigation.

Throughout 2024, businesses can expect to see further updates on the development of the proposed legislative reform, including a second consultation paper during Q1 2024. Both those entities which are presently regulated, and also proposed tranche two entities, should keep an eye on the development of AUSTRAC’s remit given the importance of AML/CTF regulation to industries being shaped by new technologies – especially FinTech, Payments and Blockchain businesses.

Bird & Bird are uniquely equipped to advise on all aspects of AML/CTF compliance and enforcement. Reach out to our experts to discuss further.