The Australian Transaction Reports and Analysis Centre’s (AUSTRAC) legal action against the Commonwealth Bank of Australia (CBA) for contravention of anti-money laundering (AML) rules should serve as a warning to advice practitioners who could face severe fines or jail time if they were not proactive in their Know Your Customer obligations, according to an AML compliance expert.
Speaking to financialobserver, David Cassidy, managing director of regulation technology firm Kyckr, said while the smaller transaction volumes of advice firms meant they were unlikely to face action on the scale of CBA, advisers could still be held accountable for the actions of their clients through significant financial and criminal punishment.
“It’s not just about the number of transactions, it’s about the nature of the activities [that were funded], for instance if a planner engaged in something that ended up contributing to the purchase of a gun or a bomb,” Cassidy said.
“That is the optics the regulator applies to it, and it’s not just about the financial punitive outcomes – it is the case around the world that bank executives have been put in jail, because there are criminal ramifications depending on what is done.”
The comments came as Austrac initiated civil proceedings against CBA last week, alleging it had breached AML rules over 50,000 times by allowing $70 million in cash deposits that were the proceeds of crime to be washed through the bank’s intelligent deposit machines.
CBA announced on Friday it was reviewing the intelligence agency’s claim and would file a statement of defence against the alleged offences, which would carry a theoretical maximum fine of around $1 trillion.
Cassidy said the case illustrated the importance of advice firms being proactive with their Know Your Customer obligations, particularly when it came to accessing up to date information about clients and their business dealings.
“Banks track a lot of issues but the problem is they can’t action them quick enough, whereas the world of financial planning should be able to action these issues,” he said.
“When you get to the transaction stage the ambulance is already at the bottom of the cliff, whereas the ambulance at the top of the cliff is being proactive with Know Your Customer – you need to make sure the information that you are looking at is current and accurate.”
Cassidy added that many information sources being used by financial planners for KYC compliance were not regularly updated with information like business de-registrations or changes of company directors, and it was important to use a provider that actively monitored these issues.
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