Australia: Stockbrokers the new money laundering front line as illicit funds target the ASX
21 Sep 2020

A proposed change to money laundering laws could flood the stock exchange with dirty cash, experts have warned.

Financial crime authority AUSTRAC has closed public consultation on a key rule about identifying the source of funds used to buy and sell ASX stocks, which could inadvertently make it easier for criminals to move money.

The stockbrokers’ peak body said it’s “absolutely mystified” by the change.

Former AUSTRAC legislative counsel Andrew Fernbach spent a decade formulating rules like the one proposed to change and also cannot understand it.

“This is a matter of life and death,” the principal of GOVLAW said, describing the human toll of drug addiction, bribery, murder and human trafficking by criminal syndicates seeking to wash millions of dollars.

“And then these large syndicates are laundering that money, so we certainly don’t want that showing up in ASX share registries.”

The concerns come as an astonishing leak of secret bank reports show trillions of dollars of suspected dirty money are flowing through major global banks, assisting oligarchs, drug dealers and terrorists.

The investigation led by the International Consortium of Investigative Journalists has revealed JPMorgan Chase, HSBC and other big banks have defied crackdowns on money laundering, moving staggering sums of illicit cash for criminals.

Currently, a new customer must be identified — in the same way as you need to when you open a bank account — before you can start an account with a stockbroker.

There is an exception where the market is moving rapidly, but the account is effectively ‘locked’ until identification is provided.

The proposed changes would mean customers can trade shares and do not have to be identified until five days after.

Experts in the field are concerned the proposals could make it easier for criminals to launder money by buying and selling shares in traded companies — and then getting their money out.

“They [the changes] water down important safeguards, which prevent anonymous funds flowing into the ASX,” Mr Fernbach said.

“Potentially from drug trafficking or global corruption.”

Catching wolves

Anti-money laundering expert Neil Jeans helped bring down Wall Street brokers involved in shady trades, including figures put on screen in the film The Wolf Of Wall Street.

When Australia’s biggest bank faced a money laundering case over ATMs that helped crime gangs transfer money, he was the expert witness. The Commonwealth Bank copped a $700 million fine.

“By its nature money laundering and criminal activity seeks to exploit gaps and weaknesses in the system,” Mr Jeans explained.

The changes mean a stockbroker can take on a client, trade on the stock exchange for them, but not have to verify who the client is for up to five days.

“Whilst potentially well-intentioned, changes are being proposed that don’t take into account the issues that they will create for the stockbrokers'” he said.

“They will undertake a transaction and receive funds from the customer without knowing their identity.”

AUSTRAC may be trying to align Australian rules with international standards where — in limited circumstances — you can work for a client before “knowing” who they are.

“But I think the devil is in the detail,” Mr Jeans said.

“As a result, it may create a window whereby criminals can exploit the system to be able to launder money.”

By Daniel Ziffer, ABC News, 20 September 2020

Read more at ABC News

RiskScreen: Eliminating Financial Crime with Smart Technology

You can claim CPD minutes for this content, by signing up to our CPD Wallet