‘You must help detect dirty money’: Accountants urged to be ahead of crucial AML/CTF curve

AUSTRAC, Australia’s AML/CTF regulator and financial intelligence unit, revealed its motivation for updating the current regime was to align Australia with international standards, close regulatory gaps, and combat financial crime more effectively.

With compliance and red tape continuing to burden small practice accountants and sole practitioners, many have told Accountants Daily they didn’t entirely understand the regulations, what they would require and where they would find the time to upskill their systems and processes.

Based on this feedback, Accountants Daily reached out to KPMG financial crime and forensics partner, Tim Goodrick, to break down the basic information and requirements accountants needed to be across before 1 July on a recent Under the Hood podcast episode.

Goodrick said at the big four firm, he was responsible for helping regulated businesses design, build and implement AML frameworks holistically, as well as help review these.

From the confusion and lack of clarity some SME practitioners may currently have on the regulations, Goodrick said “he gets it”, but reiterated there was an urgency to be both proactive and organised.

“It's a complex set of regulations that apply to some of the largest banks in the country and as well come July, some of the smallest accounting firms as well,” he said.

“It's one of those areas that's very difficult to implement. It has a big impact on small business and to be fair, the government needs to be conscious of that.”

“If you take the whole regulatory regime which applies to the banks and drop that on a single accounting firm and in regional New South Wales, that's not going to go down very well. It's difficult to understand, difficult to implement.”

Despite this, Goodrick said on a basic level the government had “rewritten the rulebook” of AML/CTF,  which was important as it stripped out a lot of detail to make it higher level, and a principle/risk assessment-based outcome, with a lot more flexibility on how to enforce it.

In the instance that many accountants understood the new regulations were important, Goodrick said the main purposes behind the framework and reforms were incredibly important to Australia and the integrity of its financial system.   

“The whole registry framework is really set up to do two things. One is to prevent dirty money getting into the financial system and secondly, if there is dirty money in the system, it's about identifying that and getting those reports to AUSTRAC to help law enforcement bodies and national security investigate and trace down criminal assets.”

“That's really the high-level purpose: to prevent and detect dirty money. It does set a fairly robust regulatory regime to do that. It’s a risk-based approach. It starts with entities having to do a risk assessment to understand how criminals might misuse their services to move money. That's really important.”

Goodrick added that a key area of building an AML program within a small accounting practice was making sure that all customers were properly and fully identified.

“We know that criminals love to be anonymous. That's literally what they want to do. So, identifying customers upfront, making sure you understand who they are, what their dealings are and then once they're part of your book, actually monitoring their transactions,” he said.

Those who believe compliance with the incoming regulations is not a main or current concern were also warned otherwise by Goodrick.

“To put it bluntly, there's significant penalties attached for each breach of law. It's $20 million plus for breaches of the law at a maximum size of penalty. It's big.”

“I mean they wouldn't always apply that, it's a different approach but we've seen some quite significant fines in the banking sector, for example. But that's only half the story. I think the most important factor in this regime is the fact that it's the right thing to do.”