Research reveals major compliance blindspot with AML obligations

The research also found that 75.4 per cent of businesses believe their verification (VOI) checks alone satisfy their AML obligations, when in reality more than half of this group were failing to complete at least one of the other customer checks the law requires to risk rate customers, including screening for sanctions and politically exposed persons (PEPs), or verifying the beneficial owners of companies and trusts.

Visibl founder and managing director Kaan Yuksel noted that VOI is only the first part of initial due diligence.

“A verification tool can confirm someone is who they say they are. It can’t tell you whether that person or entity is a politically exposed person, whether a trust’s beneficial owners have been identified, or what a staff member should actually do when one of those checks comes back flagged,” said Yuksel.

Real estate agents, lawyers and accountants came under AML/CTF obligations for the first time on 1 July this year.

The research also found that small businesses were bearing the brunt of Australia’s new anti-money laundering laws.

Firms with fewer than 20 staff reported lower confidence and readiness than larger firms, and 41 per cent of all businesses surveyed cited time or cost as their single biggest compliance challenge. 

Yuksel said the research also highlighted a gap between what policies say and what’s actually happening in firms.

“A document check was never designed to fully risk rate customers or provide compliance workflows escalations. Everything AUSTRAC actually looks for sits outside that,” he said.

The report indicated that 91.8 per cent of businesses have appointed a compliance officer, 82 per cent have completed a formal risk assessment and 70.5 per cent have a written AML/CTF program but only 34.4 per cent are genuinely ready once governance and day-to-day practice are assessed together.

Visibl said the fix for businesses isn't a better verification tool, but a connected system for AML compliance where a firm's risk assessment, anti-money laundering policy and team training live together, guiding teams through the daily practices and customer verification. 

This means that staff are trained on what a flag means before they see one, decisions are well informed, and action is recorded with the reasoning behind it, the AML compliance specialist said.

"This is what the regulator expects; they don’t just want to see what action a business took, but understand the why behind it, and when policy and practice live in silos, this becomes increasingly difficult to do, consuming a lot of time and adding risk," it said.

Time and cost were named by 41 per cent of all businesses surveyed as their single biggest compliance challenge, a pressure the report found sharpest among firms with fewer than 20 staff. 

“There is a reason banks invest in large compliance teams: AML compliance is a specialised skill learned through daily practice,” Yuksel said. 

“With tens of thousands of newly regulated entities, there are not enough specialists in Australia for every firm to hire one. Software has to help close that gap, not just tick a box at the front door.”

The report noted that the industry will have a much clearer picture of compliance readiness in 12 months when the first annual AML/CTF compliance reports fall due.