The anti-money laundering regulator has reported a 70 per cent increase in suspicious matter reports (SMRs) in the wake of landmark cases against Commonwealth Bank and Tabcorp.
The Australian Transaction Reports and Analysis Centre’s annual report tabled on Thursday shows SMRs – which requires the banks and reporting entities to identify suspicious transactions – jumped from around 70,000 to 126,000 last financial year.
The annual report also reveals an increase of 22 per cent in reports from industry across the board from 112.53 million to 136.22 million, or more than 370,800 reports to the regulator a day.
“AUSTRAC’s enforcement actions, combined with our wide range of education activity and collaboration with industry, can all be attributed to this increase in both the quantity and quality of reporting,” the regulator said.
The radical spike comes as the star witness for AUSTRAC in their case against CBA, Neil Jeans, has spoken for the first time about the case, revealing new details including that AUSTRAC wrote to the bank in December 2015 to warn about the bank’s Intelligent Deposit Machines (IDMs).
“AUSTRAC actually wrote to all the banks and said we are concerned about the vulnerability of IDMs based on the intelligent and SMRs and TTRs [Threshold Transaction Reports] we are receiving,” Mr Jeans said. “That is a trigger the CBA should have taken notice of.”
The CBA case, launched shortly after CBA announced a $9.23 billion profit, was settled in June this year for $700 million in relation to 53,000 breaches of the law, after AUSTRAC was first alerted when inquiries were made about the other side of two TTRs where CBA had not filed any report.
Cash volumes up exponentially
Mr Jeans said there were a number of triggers that should have alerted the CBA, including that physical cash running through bank’s IDMs went from $100 million a month when they were introduced six years ago to $1.7 billion a month.
Mr Jeans warned the main challenge for banks was “getting the right information into the right hands to make the right decisions”.
There was also an element of technological failure when the data from two systems were merged and the account identifiers that would normally trigger automated monitoring were lost.
“They didn’t do a risk assessment when they launched their product,” Mr Jeans said. “There was a significant move away from tellers to these IDMs. The volumes went up exponentially. That volume should have been a trigger,” Mr Jeans, an independent expert who has worked for NAB, UBS and ABN Amro.
“[CBA] also took a policy decision not to file an SMR if one had previously been filed in the previous three months of a similar nature,” Mr Jeans revealed.
Head of financial crime intelligence at Thomson Reuters, Nathan Lynch said there had been an uptick in SMRs around the world after regulators took on big cases.
“The big-stick approach definitely works,” he said. “One of the dangers with enforcement cases is that they can trigger an increase in what we call ‘defensive reporting’. It’s an offence to fail to report suspicious matters but there’s no equivalent offence in over-reporting.”
ACCC’s $170m in penalties
The spike comes after The Australian Financial Review revealed that real estate agents, lawyers and accountants had won a reprieve from tough new anti-money laundering measures with the federal government delaying a planned crackdown on the professions.
Australia has been promising to introduce comprehensive “tranche 2” laws, with the support of both major political parties, since 2006 but the Department of Home Affairs confirmed that Australia would instead pass “phase 1.5” laws as a transitional step to clarify aspects of Australia’s money laundering offences.
On Thursday a number of regulators tabled their annual report including the Australian Competition and Consumer Commission, which reported it had secured nearly $170 million in penalties for breaches of competition and consumer law last financial year.
The ACCC recorded its highest penalty in the Yazaki cartel case of $46 million and secured penalties of around $10 million each against Telstra, Ford and Apple for consumer protection issues.