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AML & Financial Crimes 2021 Summary

Friday 19 March 2021

AML & Financial Crimes 2021 was virtual again!
Managing Director GRC Institute Naomi Burley started the morning by saying “Last year the theme was AML Governance” and the day was meant to be a continuation of that theme, but from the beginning of the congress Andrew Tuohy from the Australian Transactions and Reports and Analysis Centre (Austrac) there was an emphasis on having financial crime compliance professional who appropriate skillset to build and monitor financial compliance.  
He advised a:

  • basic level of training for financial crime compliance staff
  • sometimes that the AML officer has other tasks, but where possible they shouldn’t have other duties.  
  • Audit skills—having the right skills to audit for the AML/CTF and how they work in their organisations and they must do an in-depth audit as well. 
Tuohy stated that the Covid-19 period saw a rise in fraud-related crimes particularly with the early release of superannuation. He also highlighted that 70 per cent of the reports that come into Austrac have been referred to their law enforcement partners.  
However, the suspicious matter reporting quality remains variable. 
“There has been some defective reporting over time with some of the actions that we have been taking,” he said.  
He highlighted that the improvement of SMR is something that the financial intelligence unit is committed to helping entities with.
Other common risks that he identified affecting businesses:

  • Boards not adequately. understanding their risks (a point made in last year’s congress)
  • Not understanding what they are signing off on 
  • The reports that they are getting may not be in sufficient detail 
  • Limited reported through risk committees 
  • Complexed committee structures with the significant overlap 
Another major point that he made was that a lot of the non-compliance comes from when there has been a change in the organisation. He stressed when there has been a system change, a new product, or something has been changed in a third-party relationship, then the entity needs to go back assess that area anew.  
Tranche 1.5 
At the end of 2020 and the beginning of this year there some focus on the amendment to Anti-Money Laundering & Counter Terror Financing ACT which has been dubbed the Tranche 1.5.  
Those who have been attending GRC Institute events over the years or have been attending the AML discussing the group would be familiar with the Julian Hunn Financial Crime Risk Consultant and the Andrew Ham Executive Legal Counsel at Lawyers on Demand the unpicked what the implications of the amendments would have on the reporting entities.  
The conversation inevitably began with the question mark around Tranche 2. An intended amendment to AML/CTF Act since 2006. It is a conversation that has risen to the surface again.
“These changes provide an opportunity to review your program, and they provide an opportunity the way you have done things in the past,” Ham said. His words echo Tuohy’s words about enterprise reassessing their risks. However, in the context the change not the transitions but in the regulation.  
Hunn emphasises the importance of rechecking those third-party relationships. Especially, In the context where Austrac did not declare rules around low-risk designated services.  
The Challenge of Corporate Crime 
Jaqueline Wootton, Partner at Herbert Smith Freehills was up next looking corporate the crime the work being done in the anti-bribery laws.  
Wootton highlighted that good compliance programs are an important part of ABC compliance.  
She also echoes Tuohy’s words reassessing any changes within the organisation, and this includes reassessing after the mergers and acquisitions.  
One of the ways that Wootton says that one entity can ensure that it has the right information flows is to improve its internal complaints process.  
Whistleblowing systems are an important part of improving an anti-bribery program—a place to report a concern, raise questions, and have whistleblowing protections.  
When it comes to whistleblowing: 

  • There is a real divide between organisations that are confident in those mechanisms and those that have very few reports 
  • Whistle-blowing processes need to be respectful to the one making the complaint as well as the one who the complaint is against.  
  • Timeliness is important—but this does not mean being quick since there might be some complexity but this might expose some resourcing strains overtime. Making sure that these processes work.  
What do if a bribery allegation is made:

  • There is a need to respond quickly 
  • Every situation is fact-dependent 
  • Engaging with the stakeholders early  
  • Check the Reporting obligations, especially if there are multiple jurisdictions involved
Tackling Modern Slavery 
Kimberly Randall Executive Director of Fairsupply addressed the challenges of tackling modern slavery and more specifically how can organisations check carefully to make sure that they are not exposed to modern slavery risk.  
Some typologies that she identified were:

  • Multiple workers being paid into a single bank account jurisdiction-specific tracing
  • Multiple ATM withdrawals from ATMs from the same time and location the same location 
  • Transactions using new payment technologies 
  • Use of third parties without an apparent relationship to account holder conduct financial transactions particularly outgoing transaction-specific to sex trafficking the 
  • Customer accounts linked to escorting service 
  • Deposits into customer accounts being primarily or exclusively for third-party cash deposits
  • Bank account t activity showing a total absence of day to day travel expenses 
  • Third parties acting and demonstrating control over the account holder a cluster of bank accounts registered to the same mobile number
  • Income received and then being immediately withdrawn 
Like last year, there was again panel on embedding the RegTech solution to help with financial crime compliance. It was again chaired by Jade Third Eye.  
The panel was Chaired by Jennifer Hale…. and the panellists were Aub Chapman from Chapman Consulting and Colin Dickson the Product Manager for the Jade Third Eye.
The panel focused on the way that organisations can get the most out of using RegTech solutions. 
What was clear is that the use of technology still depends on a sound understanding of that the requirements for AML compliance.   
The panel looked at embedding technology in the context of assurance.   
Chapman stressed the importance of focussing on the three lunes of defence and understanding what they might mean for your organisation.  
On the common challenges question of using compliance software he focused what needs to happen before using software:

  • Not only assist compliance but also need be a compliance monitoring program 
  • What is the system schema?
  • What is a control framework?
Dickson highlighted that while the software might keep a record of an analyst’s actions if the analysts fail to record their own actions then the software will faithfully record the wrong thing.
He advised:

  • get advice first, work out what you want then get the software developers 
  • consider software from an auditing point of view 
  • keep it simple –software is very good with dealing with complex problems, but you should simplify the problem first and then apply simple software to solve it 
Paul Derham, Partner at Holley Nethercote, Elizabeth Jacka Group Compliance Manager at Landlease Corporation, and experienced Financial Crime compliance professional Carolyn Hanson tried to define the as it relates to AML and Financial Compliance. 
In some ways, the session was a summary of the points that were peppered through the day when it comes to having a functional financial crime compliance program. 
Hanson cautioned entities attendees to not be myopic when it comes to assessing their risks but called on the GRC professional to consider not just what impacts their organisations but pay attention to the regulatory and enforcement actions in other spaces as well.  
Summarising the Day
The end of the day got a little more interactive with game a few breakout room sessions. Paul Derham, Partner Holly Nethercote led the attendees in a game looking at what are some of the challenges of having a strong financial crime compliance framework.  
Before the last breakout session, Hanson led the discussion on AML/CTF Officer Reporting. 
One key piece of advice that she gave was the maybe the compliance professionals should structure their reporting like the annual compliance report that they must submit Austrac so that the board gets accustomed to the structure. But this also means that the compliance professionals would be collecting the data they need, in the way they need, instead of waiting until the last minute to get the information they need from across the organisation.  
She also stressed paying attention to changes that are being made along the way. 
 “It’s so easy to make changes as you go along and forget to inform the board or management,” Hanson said.