Australia: AUSTRAC insights: Common failures in anti-money-laundering and counter-terrorism financing programs

Last Updated: 7 April 2017
Article by Michael Chaaya and Peter Anderson

Last month, Tabcorp incurred a $45M civil penalty for failing to meet its obligations in relation to anti-money laundering and counter-terrorism financing. If anyone was in any doubt as to the serious consequences of failing to meet their obligations arising from the AML/CTF Act, then the Tabcorp case will have surely removed it.

In the same month, AUSTRAC issued an insights paper detailing common errors reporting entities are making. AUSTRAC has ascertained this information through its compliance monitoring and the self-reported breach notification processes [1]. In light of the Tabcorp case, all reporting entities should be reviewing their AML/CTF programs to ensure the errors and failings highlighted by AUSTRAC are not occurring in their business.


A large proportion of the failings AUSTRAC found related to a small number of common approaches taken by reporting entities to their AML/CTF compliance programs. These deficiencies included:

  1. failing to tailor generic assessments templates;
  2. change management processes not considering AML/CTF risks;
  3. point in time assessments rather than continuous assessment;
  4. a failure to focus on terrorism financing risk;
  5. use of vague language in policy and procedure documents;
  6. a failure to monitor outsourcing arrangements or automated processes;
  7. a lack of independence in the review of AML/CTF programs; and
  8. a lack of board oversight stemming from the process being undefined.

As a result of these common deficiencies, AUSTRAC is looking for reporting entities to improve their AML/CTF compliance programs in the following four key areas:

  1. ML/TF risk assessments;
  2. applying a risk-based approach to AML/CTF risks;
  3. regular review of outsourced and automated functions; and
  4. governance of AML/CTF obligations.

While using a template off-the-shelf risk assessment tool can be useful, reporting entities must tailor any such tool to their own business. In undertaking the AML/CTF risk assessment, the reporting entity needs to understand the inherent AML/CTF risks arising from:

  1. its designated AML/CTF services (including how they can be used for ML/TF purposes)
  2. its customer profiles;
  3. how its services are provided (such as in person, remotely or anonymously); and
  4. the foreign jurisdictions in which customers can access or use its designated services.

Reporting entities are required to take a 'risk-based approach' in designing their AML/CTF programs. Using a 'risk-based approach' means that organisations must develop programs that manage the AML/CTF risks that are inherent in the designated services they provide and the environment in which they provide them. Each reporting entity therefore must tailor its AML/CTF program for its own business. The benefit of this approach is the flexibility it provides reporting entities in how they design their AML/CTF programs. However, this flexibility comes with a responsibility to ensure the AML/CTF program is adequate for the AML/CTF risks faced by the organisation.

A common failing detected by AUSTRAC was the use of vague language in describing the processes and controls put in place to manage AML/CTF risks. Often these were merely a copy of the language of the AML/CTF Act. AUSTRAC cite the example of a transaction monitoring program that consisted of "...reviewing customers' transactions. Unusual transactions will be escalated to the compliance officer who will consider lodging a suspicious matter report, where appropriate." This policy failed to describe how the monitoring was to be carried out or which indicators would make a transaction suspicious. Clearly, staff using the policy would have no basis upon which to comply with it on a consistent, relevant or thorough basis. Policies, processes and procedures need to be practical, fit for purpose, detailed, clear and tailored to the specific ML/CF risks faced by the organisation.


A common issue with outsourcing and automation is that both are prone to point-in-time assessments with no ongoing monitoring or review to ensure the required outcomes continue to meet the relevant obligation. Nor can it ensure changes within the business are being taken into account.

Reporting entities need to make sure outsourcing and automated processes are well documented, regularly reviewed and periodically tested or reconciled against source data to ensure changes in the business (such as staff, product channels, products, customer base or systems) are taken into account.

A number of reporting entities have discovered long-running breaches of their obligations when a system change (particularly a system upgrade) has triggered a review. These organisations were then faced with reporting long-running systemic breaches. Reporting entities need to regularly ensure their controls, systems and processes are operating effectively to avoid systemic risk.


AUSTRAC found a number of common governance issues stemming from:

  1. a lack of independence in the review process where the designers of the AML Program are also engaged to review its operation;
  2. the board oversight process, including the procedure to be used, not being documented; and
  3. a failure to update the entities enrolment details with AUSTRAC.

Reporting entities should ensure their AML/CTF programs adequately cover these processes.


The AUSTRAC Chief Executive, Paul Jevtovic says the Tabcorp civil penalty, "serves as a stark reminder to all reporting entities that there are serious consequences for non-compliance with the AML/CTF Act." All reporting entities should consider the areas identified by AUSTRAC in their insights paper, to ensure their AML/CTF programs are meeting the organisations AML/CTF obligations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Chambers Asia Pacific Awards 2016 Winner – Australia
Client Service Award
Employer of Choice for Gender Equality (WGEA)

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions