Anti-money laundering software company First AML provides top tips for vulnerable accounting industry to a successful transition to Tranche 2

According to the United Nations it is estimated that between 2 and 5% of global GDP is laundered each year, equating to up to $2.9 trillion (AUD).

Australia is largely vulnerable to the crime, having been referred to by experts as a ‘major international hub’ for laundering illicit funds, and leading anti-money laundering software company First AML says the Labor party’s lag to fulfil its promise of implementing Tranche 2 reforms has only made matters worse.

“An absence of a regulatory framework is heavily problematic,” says CEO Milan Cooper. “Given Australia’s vulnerable state, both financial and non financial institutions alike are an easy target for money laundering.

“Accountants are at the frontline of this as the industry remains a popular avenue for financial criminals, who seek to leverage the industry’s prestige and firm/client relationships to launder money and give their illicit funds a veil of legitimacy.”

A question of ethics

Cooper says the real impacts of money laundering cannot be ignored. Misconduct and poor regulation has very real consequences that impact more than just a business. To neglect to tighten anti-money laundering laws is to allow billions of dollars made through activity such as terrorism, human, drug and animal trafficking, and child exploitation to funnel through the Australian economy.

Recent data by First AML shows that accountants want to be on the right side of history, challenging common assumptions that compliance is only motivated by the risk of fines or reputational damage.

Results revealed that accountants place more value on the ethical side of anti-money laundering compliance with 79% focusing on ethical customer onboarding. This was followed by the need to prepare for the anticipated Tranche 2 implementation (70%) and a desire to reduce siloed documentation (64%).

A waiting game no longer

Australia’s current money laundering regulations are far behind the rest of the developed world. The bar is set low for financial professionals and the absence of regulatory frameworks places an onus on firms/individuals to exercise discretion. Cooper says that regardless of how long we have to wait for Tranche 2, it is inevitably coming and our ethics should not be compromised in the meantime.

“Compliance to money laundering or financial crime regulations shouldn’t just happen because it’s something being imposed on businesses. To prepare processes that adequately adhere to regulation, we can learn from countries where tighter AML regulation was implemented many years ago, and yet there are still aspects of Know Your Customer (KYC) that are catching firms off guard.”

First AML’s tips for a successful transition to Tranche 2

  1. Avoid incomplete sources of wealth information:

Criminals use sophisticated processes to conceal the sources of their illicit funds. While this often comes from payslips and bank accounts, there are often more complex customer cases that require difficult digging. Despite the hassle, it is essential that you know where your customers obtain their funds and wealth to conduct transactions or make investments to fulfil KYC requirements.

  1. Create a Culture of Compliance

To ensure the compliance of your staff, think of it like a mental attitude shift that needs to occur. Too often the idea of committing to AML requirements is viewed as a box-ticking exercise rather than an effort to safeguard against criminal risk. Beginning conversations around ethics will shift this view and ensure that staff have moral reasons to comply. If you’re all on board it will save your business a lot of trouble down the road.

  1. Outsource AML processes

Despite the massive effort to comply, by firms in legislated countries, there have still been many cases of AML breaches. This means that money, time and resources are often wasted. As a result, many firms are deciding to outsource the grunt work of their AML compliance work to ensure efficiency and effectiveness. Doing so allows firms to rest easy and avoid the downfall that comes from AML breaches.

This article was developed in collaboration with First AML, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.