Posted: 16 Mar. 2020 10 min. read

Banks need the right settings to implement AML measures

Deloitte Forensic and Risk Advisory Partner, Lisa Dobbin discusses how banks need the right settings to implement Anti-Money Laundering (AML) measures.

Ms. Dobbin argues that stopping the flow of illicit finance will not be possible without using real-time, innovative AML-technologies, combined with huge swathes of intelligence. 

Yet these same innovations, if they prove to be non-resilient, could open up new vulnerabilities in the system and opportunities for criminals. Every new technology inevitably brings with it an element of risk. Implementing the wrong thing, or doing so poorly, can just as easily systematise failure as success. 

Given the recent wave of major enforcements by AUSTRAC, some bank executives may be hesitant in implementing these ‘real-time, innovative AML technologies’, and opt for a more conservative or traditional approach in the medium-term, while they shore up their foundational compliance elements. 

However, these tough AUSTRAC measures are critical to ensure the financial system doesn’t become a magnet for criminals. At the same time banks need the encouragement to adopt the new technology to enhance the effectiveness of their AML - and wider – operations.

The industry is beginning to receive some of the assistance it needs through alliances like the FINTEL Alliance – an amalgamation of 28 international and domestic government and private sector members – and the expansion of consultative work being carried out by AUSTRAC.

Nevertheless, there is still further scope to help banks better comprehend the risks and implement robust risk-based frameworks as they work through the predominantly risk-based large and complex body of legislation (600-700 pages).

To do this requires a deep understanding of the unique risks faced by each organisation, and the appropriate systems and controls to manage these.

The current enforcement actions and ensuing settlements are beginning to provide more clarity on how a suitable risk-based approach will be assessed. Each time AUSTRAC launches an action, other reporting entities absorb those learnings to improve the way they address the AML requirements in their own organisation. 

But the industry still needs positive reinforcement around the right corporate culture. And that, along with even more guidance and support, can help to lift the standards across the industry.  

Risk-based approaches are needed to mitigate financial crime risk and meet regulatory requirements as they directly impact everything - from systems, to organisational structure, to skills, to culture and the way banks interact with their customers. 

Collaboration is key here. AUSTRAC will need to continue to work with the industry and encourage organisations to be transparent and have the freedom and confidence to experiment. This will ultimately help them become individually and collectively stronger. 

Reporting entities are keen to maximise the effectiveness of their investment in AML and simply avoiding litigation and penalties alone will not be enough to make this approach work. 

The most recent major bank fine of $700 million is the current benchmark for where penalties are likely to go. And the initiation of a maximum of a 15 year prison sentences for directors and executives is now in the wings.

These penalties could trigger the wrong short term behaviours, including rushed and uninformed decisioning on technology acquisition, conservative increases in regulatory reporting, or poorly considered increases in costly personnel resources.

In a constrained spending environment, this can sometimes come at the expense of tools like machine learning, real-time data-aggregation platforms, rapid automation, and text and voice analytics, all of which can help banks achieve better outcomes more efficiently.

Collaboration needs to be driven by a common, higher purpose to disrupt serious criminal activity and protect Australia’s social and economic reputation.

It is impossible for regulation to stay ahead of tech innovation. So, building a collaborative regulatory culture that encourages responsible experimentation with new technologies is key.

We are on the cusp of some real opportunities in our industry. If we can continue to align regulators, government and the regulated sector with the bigger picture - and consider what we need to do to make Australia a safe place to invest and do business - then we will see great outcomes.

A version of these comments was carried by Informa with an original interview undertaken by Amy Sarcevic (senior writer and Editor).

More about the author

Lisa Dobbin

Lisa Dobbin

Partner, Financial Advisory

Lisa leads Deloitte’s Australian Financial Crime practice, and the NSW Forensic team. She specialises in the provision of financial crime consulting services to clients in the financial services industry. Lisa’s experience includes financial crime transformation programs, regulatory response (including AML/CTF civil penalty proceedings and enforceable undertakings), remediation, regulatory change, technology advisory and independent reviews/inspections. She has supported clients domestically and offshore and has worked with a range of clients across banking, wealth management and insurance. With experience across both the investigative and advisory aspects, Lisa has advised clients on all financial crime themes (AML/CTF, sanctions, anti-bribery and corruption, market misconduct, fraud). Lisa has a background in engineering and delivering major regulatory projects and enhancing operational frameworks at major financial institutions. She was formerly a lawyer specialising in contentious financial crime and regulatory matters.