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Best practice strategies to enhance compliance

Strategies to enhance compliance

The strategies employed by the FIUs and AML/CTF regulators to enhance compliance fall into two main categories—dialogue between the FIU and reporting entities, and increasing the ease of submission. The countries considered in this report have all adopted aspects of both of these broad strategies for heightening compliance through non-punitive means.

Electronic filing

Electronic report filing systems are common throughout all nine countries examined. Available information suggests that electronic filing has all but replaced paper disclosures in most cases.

In 2008–09, AUSTRAC received more than 99 percent of all financial intelligence reports from regulated entities in Australia electronically through AUSTRAC Online or EDDSWeb. AUSTRAC still received paper reports from regulated businesses that submitted less than 50 financial intelligence reports, of any type, in 2008–09 (AUSTRAC 2009a).

In 2008, the United States implemented an electronic filing system for reports of suspicious activity. Reporting entities, by the end of the 2009 financial year, submitted 82 percent of SARs through the electronic system (FinCEN 2009b). FinCEN offers support to reporting businesses through publications and an e-filing help desk.

UKFIU offered several means of electronically submitting SARs in 2008–09 and reporting entities submitted 96 percent of all SARs through one of these mechanisms. UKFIU encouraged regulated businesses to file reports via SAR Online and Moneyweb (an alternate filing system which ceased to be available in early 2009). Reporting entities were able to submit reports directly into UKFIU’s database after receiving an encryption certificate (SOCA 2009b).

MLPC provides software and detailed information on its use to reporting entities in Taiwan. It received 99 percent of currency transaction reports filed in 2007 electronically (APG 2007). Singapore also received 90 percent of reports of suspicious activities electronically in 2009 (CAD 2009). JFIU Hong Kong has offered electronic filing for financial intelligence reports since at least 2007 (JFIUHK 2007).

Germany began testing an electronic filing system in 2005 (FIU Germany 2005) and anticipated that the system would be operational by 2008 (FIU Germany 2007). TRACFIN received 88 percent of STRs filed in France electronically in 2008 (TRACFIN 2008). CTIF-CFI Belgium initiated an online disclosure system in 2006 (CTIF-CFI 2009).

Feedback to industry

United States

One of FinCEN’s goals for the 2006–08 period was to increase the level of feedback given to reporting entities on their analysis of financial intelligence and risks of financial crimes. This remained a goal for the 2008–12 period, with FinCEN further aiming to use technology to improve the speed and quality of feedback to reporting entities. FinCEN has not indicated that reporting entities receive any specific information on how the SARs they have filed are used, although FinCEN provides more generalised feedback which includes:

  • an acknowledgement response to all SARs filed with FinCEN;
  • SAR Activity Reviews that include guidance on preparing reports and basic analysis of the content of SARs;
  • outreach meetings with financial institutions;
  • impact reports of new rules for reporting entities; and
  • case examples outlining how SARs are used by law enforcement agencies.

United Kingdom

UKFIU published more information on the volume and type of feedback provided to reporting entities than FinCEN in the United States. A key feature of the feedback given to reporting entities in the United Kingdom is the systematic visits and seminars conducted within each sector. UKFIU conducted 181 visits and seminars to reporting sectors in the year to October 2007 (SOCA 2007). Table 50 indicates that the accounting, banking, legal and gaming industries received the bulk of industry visits conducted by UKFIU in this period.

Table 50: UK financial intelligence unit contact with the reporting sector, 2006–07 (n)
Industry Sector-specific seminars Visits Total
Accounting 6 35 41
Banking 8 62 70
Legal 7 13 20
MSBs 1 7 8
Gaming 3 17 20
Insurance 2 10 12
Estate agents 2 5 7
Trust and company service providers 0 2 2
Factors and discounters 0 1 1
Total 181

Source: SOCA 2007

SOCA also provides more general feedback to reporting businesses with website-based guidance on producing useful SARs. Reporting entities also receive alerts to industry which detail information about the SARs regime.

Each end user of the information gathered from SARs is required to nominate a contact officer for all communications with UKFIU and the reporting sector within the partnership agreements negotiated with SOCA.

France

France has not released as much information in English on the feedback systems between TRACFIN and reporting entities as other countries, making gauging the level of interaction less accurate. TRACFIN’s annual report, however, contains some information intended for a reporting audience in the form of sanitised cases.

TRACFIN informs reporting entities when a report of a suspicious transaction is submitted to judicial authorities. Reporting entities, however, do not receive any additional information on the final decisions of any cases stemming from an initial report. Prior to the Mutual Evaluation of France, TRACFIN was also not advised of the judicial outcomes of these cases. French legislation was amended around this time to require authorities to inform TRACFIN of such outcomes. TRACFIN’s annual reports contain aggregated information for cases passed onto judicial authorities (eg see TRACFIN 2008).

Favarel-Garrigues, Godefroy and Lascoumes (2008) report informal exchanges between TRACFIN and banking compliance officers that result in TRACFIN agreeing to a system that differentiates genuinely suspicious transactions from those that have been reported by a bank just to avoid attention from the banking regulator. Some of the survey respondents in the study by Favarel-Garrigues, Godefroy and Lascoumes (2008) reported excellent informal communication channels with TRACFIN, while others found gathering information in this manner more difficult. TRACFIN has indicated that it is attempting to emphasise direct contact between its employees and reporting entities, but has not released specific strategies for doing so in English-language publications.

Hong Kong

Hong Kong’s JFIU has published detailed guidelines for identifying transactions that could be considered suspicious and offers advice on how to gather as much information as possible about those conducts such transactions. JFIUHK provides a letter of receipt to all reporting entities who have lodged a report. The acknowledgement letter contains a reference number for the report, which must be included in all future correspondence and indicates whether the reporting entity is permitted to continue dealing with the client in question. Each reporting entity also receives a second letter detailing the outcome of any investigation (FATF-GAFI 2008b).

Taiwan

MLPC adopted operational guidelines that include a directive to provide feedback to reporting entities (no. 9; MJIB 2006). MLPC staff conducted 195 anti-money laundering lectures in 2006, presenting to 12,040 participants. It conducted a comparable number of lectures in previous years (see Table 51; APG 2007).

Table 51: Money Laundering Prevention Centre contact with the reporting sector, 2003–07
Year Lectures held Attendees
2007 128 8,007
2006 195 12,040
2005 131 15,488
2004 109 7,087
2003 166 12,833

Source: APG 2007; MJIB 2008

MLPC’s feedback to reporting entities includes recommendations for written commendations for individuals and entities who have reported transactions that directly assisted an investigation. MLPC made 31 such recommendations between 2002 and 2005 (APG 2007). Negative feedback is provided to the supervisory institutions responsible for imposing sanctions if they are not necessary.

MLPC further holds a conference for compliance officers in the banking industry every two years to give and receive feedback and to discuss developments in anti-money laundering trends and techniques. MLPC also organises a seminar for law enforcement bodies, staff of MLPC and other government agencies, and financial supervisory authorities to discuss problems associated with the legislation.

Germany

AML/CTF legislation in Germany obligates the FIU to regularly notify reporting entities of types and methods of money laundering and terrorism financing. The Germany Money Laundering Act further requires the public prosecutor’s office to notify FIU Germany of the outcomes of criminal proceedings tied to a STR.

FIU Germany provides general feedback publically on noteworthy cases stemming from reports, such as those submitted in high volumes, as well as trends and typologies. The FIU publishes quarterly newsletters outlining case studies

Singapore

STRO in Singapore conducts outreach sessions with law enforcement agencies and business groups to gather feedback and to provide information. CAD (housing STRO) reported expanding their outreach activities to more sectors in 2009 (CAD 2009).

Australia

Australian regulated businesses do not receive specific feedback about the reports submitted or the detailed outcomes of cases. AUSTRAC publishes an annual typologies report that contains sanitised information about non-concluded matters, current investigations and concluded cases.

AUSTRAC conducted 800 industry-awareness sessions between 2006 and 2009 (AUSTRAC 2009g). The regulator also reports further engagement with businesses through media releases and interviews, presentations and other speeches, mail outs and emails, and outbound call campaigns, but has not reported the frequency with which these additional tools are used.

Training provided to industry

A number of FIUs reported providing training or assisting to train key officers in reporting entities. The sector-specific seminars run by SOCA in the United Kingdom are conducted as an education tool for money laundering reporting officers. FIU staff in Germany also attended training sessions for compliance officers in some banks and with the securities authorities in 2006. They also ran additional training lectures.

MLPC of Taiwan offers formal and informal training to reporting entities. The material offered encompasses assistance on submitting reports, providing typologies and presenting case studies. TRACFIN in France provides similar assistance in the form of typological information for training programs.

Feedback from industry and the availability of financial intelligence units to industry

The United States, United Kingdom and Hong Kong report formal processes for seeking feedback from reporting entities and others.

United States

In 2007, FinCEN surveyed reporting entities receiving SAR Activity Reviews, users of the electronic filing system, users accessing Bank Secrecy Act information and recipients of other analytical products. The 2007 surveys revealed that 94 percent of respondents were satisfied with the electronic filing system, 91 percent of users of the Regulatory Resource Centre information online rated the advice given as understandable and 70 percent of recipients of SAR Activity Reviews considered them highly valuable (FinCEN 2007).

United Kingdom

UKFIU seeks feedback from end users of SARs through a questionnaire sent out twice a year. Reporting entities contribute to the SARs Committee, the body overseeing the SARs system in the United Kingdom and the SARs Vetted Group concerned with the operational activity of the system. The British Bankers’ Association, Institute of Chartered Accountants of England and Wales, and the Law Society for England and Wales are on the Committee.

Hong Kong

Reporting entities that have registered for electronic report submission in Hong Kong are able to provide feedback to JFIUHK through the report submission system. JFIUHK have not indicated the extent of this feedback or any evaluative outcomes.

Conclusion

This report has provided a preliminary review of the different approaches to addressing the problem of money laundering and the financing of terrorism in a selection of nine countries from North America, Europe, Asia and Australia. Although the largest countries are represented, this review is not a complete analysis of international responses, nor is it representative of the entire global response to AML/CTF regulation. Rather, it was designed to present comparative statistics from a variety of countries with differing legal and regulatory traditions to show how they have approached the implementation of the FATF-GAFI Recommendations. Further, the review incorporated an analysis of the extent of data availability and examined the comparative sizes of the regulated sectors in different countries and the extent of compliance and enforcement activity.

Future comparative studies of this nature should aim to provide:

  • more complete information on the legal structure and mechanisms of the anti-money laundering regimes;
  • the profiles and volumes of businesses regulated for anti-money laundering;
  • the compliance activities of those businesses and the regulatory and criminal enforcement in each country; and
  • the strategies adopted to increase compliance as well as increase the quality of financial intelligence generated by the anti-money laundering regimes.

This would entail undertaking in-depth qualitative research with the regulators and industry associations in each country. In the case of non English-speaking locations, multilingual research would be necessary and access to business and government statistical collections. As is apparent from this review, the challenges of conducting such research are considerable, as public source material provides only a limited view of the situation. Problems also exist within individual nations where data is not being collected, or is collected in varying formats using different data fields, categories and definitions. The FATF-GAFI Mutual Evaluations provide a good deal of uniformly collected and comparable information, but often these reports are incomplete. While regulators and FIUs also collect considerable amounts of data from the regulated sectors in annual compliance reports, these are not readily available or are collected using non-uniform categories across countries.

Ideally, a single repository of AML/CTF compliance and regulatory data should be established, although in practice, the resources required for this would be prohibitive. At present, therefore, it is perhaps sufficient that FIUs, law enforcement agencies and regulators maintain a dialogue to develop the use of harmonised data recording practices for the key variables of policy importance. The present report has provided a basis for international comparison of anti-money laundering regimes across countries of interest by outlining the approaches taken to common aspects to anti-money laundering systems, identifying potential measures of performance of those systems and the current best practise strategies for increasing compliance by business and increasing the quality of the intelligence received by regulators and the law enforcement community. The present report provides an indication of the areas requiring most attention for discussion in the years ahead.