30 Oct 2019
A wave of mergers among member-owned financial institutions is leaving the sector more exposed to criminals attempting to launder money, the financial intelligence agency Austrac says.
The watchdog on Wednesday published a risk assessment of the $113.6 billion mutual banking sector, concluding it is at “medium” risk of being used for money laundering and terrorism financing.
It also said mutuals, which are owned by members, had a “high level of vulnerability” to financial crime, though this was mainly due to the nature of banking products, such as the fact banks deal with large amounts of cash. Austrac is working on a separate risk assessment of other banks, which has not yet been published.
The key threat facing mutuals was money laundering, the report said, noting there had been “substantial” reporting to Austrac of “suspicious” transactions, such a large or frequent cash transactions. Less than half of the “suspicious matter reports” lodged by mutuals and examined by Austrac related to terrorism financing.
In explaining its “high” risk rating for vulnerabilities in the sector, Austrac cited mutuals’ high exposure to cash; the fact many services are delivered without staff being present (such as through ATMs); and high levels of outsourcing of their anti-money laundering compliance processes.
Austrac chief executive Nicole Rose said the financial sector must “do their part” to protect the community from criminal activity that was facilitated by laundering cash.
“Australians are increasingly using the mutual banking sector as a trusted, community-focussed alternative to the major banks,” Ms Rose said in a statement.
“As the sector continues to grow and consolidate, so too will its exposure to criminal exploitation. Mutuals are working closely with Austrac on their compliance, and provide us with a wealth of intelligence from the sector, giving us a full picture with which to build the resilience of Australia’s financial system against criminal exploitation.”
By Clancy Yeates, The Sydney Morning Herald, 30 October 2019
Read more at The Sydney Morning Herald
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