AUSTRAC is required to annually self-assess its performance against six KPI’s, introduced by the Australian government to reduce unnecessary regulatory burden on the community.
We look at how AUSTRAC assessed its performance throughout the 2020-21 financial year as outlined in a recent report, and what the results mean for you and your business.
AUSTRAC’s self-assessment against the six KPIs
KPI 1: Not unnecessarily impeding efficient operation of regulated entities
AUSTRAC assesses that it has fully achieved this KPI throughout the reporting period by:
- Supporting legislative reform to reduce regulatory costs.
- Using its powers to exempt some entities from anti-money laundering and counter-terrorism financing (AML/CTF) compliance and reporting obligations to provide regulatory relief, for example in unique circumstances where reporting could put a business in a position of competitive disadvantage.
- Improving the annual compliance report to make it quicker and easier to complete.
KPI 2: Clear, targeted and effective communication with regulated entities
AUSTRAC assesses that it has fully achieved this KPI throughout the reporting period by:
- Regular outreach and engagement with reporting entities through published guidance, for example guidance documents to specifically support Regulatory Technology (RegTech) businesses.
- Informing entities of emerging threats to inform their internal risk assessments and influence reporting behaviour. In 2020-21, AUSTRAC released risk assessments of Junket Tour Operations in Australia and of Australia’s non-bank lending and financing sector. Separate to the industry-based risk assessments, AUSTRAC published three financial crime guides to assist industry’s understanding of particular crime risks including Australia’s illegal wildlife trafficking trade, fraud against the national Disability Insurance Scheme, and a specific money laundering method known as “cuckoo smurfing”.
KPI 3: Actions undertaken by AUSTRAC are proportionate to risk
AUSTRAC assesses that it has fully achieved this KPI throughout the reporting period by:
- Taking a risk-based approach to regulation and compliance. This approach allows AUSTRAC to reduce regulatory burden for reporting entities with a proven record of positive compliance, to focus on the areas of greatest risk, and to address the most significant areas of compliance concerns.
- Ensuring enforcement actions are proportionate and tailored. An example is AUSTRAC seeking a civil penalty order in the Federal Court against Westpac for its failure to comply with AML/CTF obligations. Westpac agreed to pay a $1.3 billion civil penalty, which represents the largest civil penalty imposed in Australian history. This penalty is proportionate to the misconduct as it reflects the seriousness of Westpac’s actions and acts as a deterrence amongst other entities.
KPI 4: Compliance and monitoring approaches are streamlined and coordinated
AUSTRAC assesses that it has fully achieved this KPI throughout the reporting period by:
- Using data to monitor existing reporting entities on compliance. AUSTRAC ensures that regulatory matters that involve non-compliance are centrally received, recorded, assessed and escalated before being reviewed by a cross-agency board.
- Improving vetting systems for quicker registration processes. This work included updating Standard Operating Procedures and forms, mapping workflows for team functions, and developing new monitoring profiles.
KPI 5: Transparency in dealings with regulated entities
AUSTRAC assesses that it has fully achieved this KPI throughout the reporting period by:
- Enabling open conversations with the community and industry to build awareness. An example is InBrief, which is AUSTRAC’s quarterly newsletter produced specifically for registered entities.
- Providing regulatory insights to reporting entities and forums. For example, AUSTRAC attended quarterly meetings with AML/CTF regulators from Canada, New Zealand, the United Kingdom and the United States to enhance the sharing of approaches and building of regulatory capabilities.
- Ensuring transparency in performance reporting through corporate plans, Portfolio Budget Statements and annual reports.
KPI 6: Contribution to continuous improvement of regulatory frameworks
AUSTRAC assesses that it has fully achieved this KPI throughout the reporting period by:
- Enhancing the AML/CTF capability of third-party consultants and RegTechs who support AUSTRAC’s broader regulated population.
- Sharing lessons with international partners. During the year AUSTRAC delivered 143 training courses across Australia and overseas to 1,200 employees from AUSTRAC, law enforcement, industry and international FIUs. These courses included the Financial Intelligence Analyst Course and open source intelligence training.
How reliable is AUSTRAC’s self-assessment?
AUSTRAC is also required to seek external stakeholder validation of its assessment against the KPIs, and the majority of the respondents were supportive of AUSTRAC’s self-assessment.
AUSTRAC invited 15 industry associations and bodies who represent a cross-section of its reporting entities to undertake a survey in relation to its regulatory performance for 2020-21.
Nine bodies responded to the survey, with the following results:
- 76 percent of respondents strongly agreed or agreed with AUSTRAC’s self-assessment.
- 24 percent neither agreed nor disagreed.
Key takeaways
AUSTRAC is being held accountable by the Australian government to ensure that it is not creating unnecessary red tape for businesses and individuals. It is required to report annually on its performance against six KPIs, which includes seeking external stakeholder validation and publishing the results.
The results for the 2020-21 financial year indicate that AUSTRAC is performing well in terms of minimising unnecessary burden on the community, while pursuing its main goal of combatting abuse of Australia’s financial system and preventing serious and organised crime.
