Under anti-money laundering compliance laws, governments across the globe supervise their financial services industries to ensure businesses uphold laws designed to obligate the identification and reporting of their clients’ suspicious transactions. Such businesses include banks, brokers, lenders, FX traders, real estate agents, lawyers accountants and more. The suspicious ‘activity’ may involve a client’s verbal instruction to buy or sell assets or a financial transaction of another type.
These laws are commonly referred to as anti-money laundering and countering financing of terrorism or AML/CFT for short.
Government divisions with oversight of AML/CFT laws are referred to as AML Supervisors. AML Supervisors are responsible for carrying out AML Supervision across the financial services sectors.
The objective of AML Supervision is to ensure businesses are complying by having systems in place with capability to identify and report suspicious activity undertaken by their clients.
In some countries, such as Australia, it seems in recent times the AML Supervisor, AUSTRAC, is succeeding in prosecutions against banks. Australia’s prosecutions for AML compliance breaches have included the Commonwealth Bank; Westpac is currently in court and now it looks like HSBC is also in hot water with AUSTRAC. Australia is however yet to introduce the activities of professional services into their principles based, AML/CFT laws. These services are considered a high risk to unwittingly facilitating ML/FT and are commonly known as transactions undertaken by ‘gatekeepers’.
Gatekeepers include lawyers, accountants and real estate agents. The ‘gatekeeper’ term refers to the ability for financial criminals to access accounts and services through representation of a third party professional. Organised and sophisticated criminals prefer this gatekeeper approach as they get to avoid direct contact with the financial institution to whom the gatekeeper is engaging with. By avoiding the need to respond to letters, emails and face-to-face interaction, criminals gain benefits by accessing services and products they might not otherwise have been able to. This opaque trail assists organised crime groups to work under the radar and have greater chance of avoiding detection. The financial institutions to whom the gatekeepers are dealing with, may be oblivious to whom the transaction represents.
When Australia’s parliament finally closes that loophole, with over 100,000 entities to monitor, Australia’s AML supervisory framework is likely to move from a labour intensive model to a technology based model.