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Introduction

In 2009, the AIC undertook a survey of businesses that were, at that time, regulated under Australia’s AML/CTF legislation. The aims of the survey were to determine:

  • perceptions of the risk of ML/TF faced by these businesses;
  • the processes they use in the compliance areas of customer identification and transaction monitoring;
  • the estimated costs of compliance with the regime; and
  • the perceptions of the necessity and effectiveness of the regime and of the effectiveness of compliance.

The survey focused on the experience of businesses with the AML/CTF regime in Australia in the 12 months prior to 30 June 2009 and also on expectations of how these aspects might change during the two year period from 1 July 2009 to 30 June 2011. This timeframe refers to the initial period of implementation of AML/CTF legislation by the Australian Government and the responses described herein refer to that period alone.

Specifically, the survey examined the following areas:

  • information about respondents’ business sector, staffing and turnover;
  • AML/CTF procedures and software used for pre-employment screening of staff, due diligence and KYC;
  • extent and effectiveness of customer identification and due diligence;
  • extent and effectiveness of transaction monitoring and reporting;
  • views concerning under- and over-reporting to AUSTRAC;
  • current and future compliance costs;
  • effectiveness of the AML/CTF regime and opinions about the extent to which the regime is onerous;
  • views about how the regime could be improved; and
  • current and future perceptions of ML/TF risks.

This report describes the results of the survey and where appropriate, integrates this information with the findings of previous surveys conducted by consultancy practices and government agencies.

In addition to conducting the survey, 10 individuals from businesses that completed the questionnaire agreed to participate in face-to-face interviews. These individuals worked in pubs and clubs, a credit union, a cash delivery business, a mortgage lender, a private equity firm and a currency exchange service. In addition, a representative from an Australian Government agency was interviewed. These interviews were conducted anonymously and no individuals or businesses were named or made identifiable. The aim of the interviews was to ascertain more detailed information on some issues that the questionnaire was unable to canvass in detail. Interviews with such a small number of individuals cannot be considered to be representative of the entire regulated sector but nonetheless, the qualitative data that were obtained provided some important, albeit subjective, insights into the operation of the regime in Australia.

The anti-money laundering/counter-terrorism financing regime

The primary aims of those who commit economic crimes are to secure a financial advantage and to be able to make use of the stolen funds without being detected by police and regulatory agencies. Many offenders, but by no means all, seek to disguise the origins of their criminally derived funds by engaging in the process of money laundering. Others, however, simply disburse money with little attempt at concealment, which often leads to detection by police, followed by prosecution and punishment.

There are three stages to laundering the proceeds of crime. In the initial or placement stage, the money launderer introduces illegal profits into the financial system. In some cases, illegally obtained funds may already be in the financial system, such as where funds have been misappropriated electronically from business accounts. Placement can also entail splitting large amounts of cash into less conspicuous smaller sums that are then deposited directly into a bank account, or by purchasing a series of financial instruments, such as cheques or money orders, that are then collected and deposited into accounts at other locations.

After the funds have entered the financial system, the launderer may engage in a series of transactions to distance the funds from their source. In this layering stage, the funds might be channelled through the purchase of investment instruments, or by transferring money electronically through a series of accounts at various banks. The launderer might also seek to disguise the transfers as payments for goods or services, thereby giving them a legitimate appearance. Another device used at the layering stage is to use corporate and trust vehicles to disguise the true beneficial ownership of the tainted property.

Having successfully processed criminal proceeds through the first two phases, the money launderer then moves to the third or integration stage in which the funds re-enter the legitimate economy. The launderer might choose to invest the funds in real estate, luxury assets, or business ventures. It is at this stage that offenders seek to enjoy the benefits of their crimes, without risk of detection.

In response to mounting international concern about money laundering, the Financial Action Task Force (FATF) was established in 1989. FATF is an inter-governmental body that sets international standards and develops and promotes policies to combat ML/TF. In 1990, FATF issued a set of 40 Recommendations to combat money laundering. The 40 Recommendations sets out the framework for anti-money laundering efforts and provides a set of countermeasures covering the criminal justice system and law enforcement, the financial system and its regulation, and measures to enhance international cooperation.

The FATF AML/CTF standards typically recommend provisions that criminalise ML/TF, enable freezing and recovery of assets linked to proceeds of crime and terrorist activities, and create a preventive regulatory system that aims to make ML/TF more difficult to commit and more likely to result in the detection and punishment of offenders. AML/CTF preventive measures are not uniform between countries but each regime broadly encompasses aspects of:

  • customer identification;
  • transaction monitoring;
  • transaction reporting;
  • record keeping;
  • staff training; and
  • compliance reporting.

AML/CTF preventive measures, unlike the criminal sanctions and asset recovery systems, are aimed at and implemented through private sector businesses rather than by law enforcement and prosecutorial agencies. The FATF’s Recommendations suggest that countries implement preventive AML/CTF requirements for financial institutions and selected non-financial businesses and professions that FATF believes are at risk of becoming involved in money laundering, the financing of terrorism or financing the stockpiling of weapons of mass destruction (FATF 2012).

Following the attacks on the United States on 11 September 2001, FATF expanded its mandate to address the financing of terrorism and created an additional eight (and subsequently 1 further) recommendations aimed at combating the funding of terrorist acts and terrorist organisations (Jensen 2005). The structure of the 9 Special Recommendations reflects the different aims of the two crimes and the different typologies used to commit each offence. The 9 Special Recommendations were intended to work in concert with the earlier 40 Recommendations targeted at money laundering and not as an independent separate system to address the financing of terrorism.

In June 2003, FATF completed a major review of its recommendations and on 15 February 2012, issued revised standards on combating ML/TF and stockpiling weapons of mass destruction. The revised FATF Standards strengthen global safeguards and further protect the integrity of the financial system by providing governments with stronger mechanisms to take action against financial crime, while also addressing new priority areas such as corruption and tax crimes. The revised Recommendations have been strengthened to deal with areas of increased risk and to deal with new threats such as the financing of proliferation of weapons of mass destruction. They are also emphasise transparency and are tougher on corruption. In addition, there is more flexibility for compliance in low risk areas, which allows financial institutions and other designated sectors to apply their resources to higher risk areas. FATF (2012) calls upon all countries to effectively implement these measures in their national systems. The AIC has published a separate study in which the response to the FATFs recommendations in a number of selected countries was reviewed (Walters, Budd, Smith, Choo, McCusker & Rees 2012).

The AML/CTF regime broadly refers to three core components adopted universally (to varying degrees) by developed nations and by the majority of developing countries to address both crimes (Chaikin & Sharman 2009). The FATF Recommendations form the basis for AML/CTF systems internationally (Sharman 2008).

Australian anti-money laundering legislation was implemented as a direct response to two Royal Commissions in the 1980s exposing the links between money laundering, major tax evasion, fraud and organised crime. The Costigan and Stewart Royal Commissions identified the need for legislative strategies to address these issues. While initially focusing largely on suspicious transactions and large cash transactions, Australia’s anti-money laundering legislation was later extended to include the reporting and monitoring of certain international transactions. Australia’s primary anti-money laundering legislation, the Financial Transaction Reports Act 1988 (Cth) (FTR Act), was enacted to create barriers in Australia’s financial and gambling sectors to discourage financially motivated offenders and to provide financial intelligence to revenue and law enforcement agencies. It applied to a wide range of businesses within the financial services industry, including banks, building societies, credit unions, the insurance industry, the travel industry and the gambling industry.

The FTR Act required cash dealers to report suspicious transactions to AUSTRAC and to report certain domestic currency transactions and currency transfers to and from Australia, of $10,000 or more. The Act also required cash dealers to report international funds transfer instructions and verify the identities of account holders or signatories, as well as block withdrawals by unverified signatories to accounts exceeding certain credit balance or deposit limits. The Act also created an offence of opening or operating a bank account or similar account with a cash dealer in a false name. The FTR Act specified penalties for non-compliance with its reporting requirements or for provision of false or incomplete information. The reporting and identification requirements, backed by penalties for offences, provided a strong deterrent to money launderers and facilitators of money laundering.

The FTR Act was originally developed for a financial system in which most transactions were face-to-face and took place over the counter at branches of financial institutions. However, cashless, non face-to-face electronic transactions are increasingly replacing traditional cash-based transactions and the range of financial services available to consumers outside the traditional banking sector has expanded greatly. Money laundering methodologies have continued to evolve, as these commercial and technological developments have created opportunities for criminals to exploit.

In 2005, FATF conducted its third review of Australia’s AML/CTF regime and found that Australia did not comply with all of the FATFs Recommendations that were current at the time (FATF 2005). Partly as a consequence of this, Australia introduced the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act 2006 (Cth)) to address the concerns raised by FATF. The primary concerns related to customer due diligence and the resourcing of AUSTRAC. To some extent, it may be said that Australia’s regulatory regime was criticised for not addressing a number of areas that had never been incorporated into its aims, such as the monitoring of PEPs (persons linked to senior positions in judicial, political, management or military arenas). In this regard, FATF’s concerns about Australia’s regulatory arrangements mirror FATFs expanded concerns beyond money laundering (and its initial emphasis to its links with the narcotics trade) to terrorism and terrorism financing. There was also a perception that the previous legislative regime had been too prescriptive and cumbersome, resulting in ‘defensive reporting’, a practice that threatened to overload regulators with information of dubious relevance and accuracy, and an inflexible response to new developments in money laundering techniques (Ross & Hannan 2007: 139).

In keeping with most comparable regulatory regimes (such as those in the United States and United Kingdom), the AML/CTF regime in Australia is risk based. The regime requires businesses that supply designated services to comply with the legislation, but there is discretion in how they meet some of these obligations. The focus of the legislation is on the nature of the service rather than on the entity that supplies it. The reporting entity is largely given responsibility—with general guidance and education from AUSTRAC—for both determining the level of risk represented by any customer and any transaction, and the appropriate response. Responsibilities such as customer due diligence show a change in emphasis from a regulatory ‘tick and flick’ based regime to one that emphasises the responsibility of reporting entities to maintain ongoing knowledge of their customers. The presumption is that a risk-based regime allows financial bodies (which presumably have more practical experience in dealing with actual clients) to be given more latitude in determining what level of risk any particular client or transaction represents and how best to manage that risk (Ross & Hannan 2007).

Under the FTR Act, AUSTRAC’s responsibilities were related to specific industries and less than 4,000 cash dealers. Under the AML/CTF Act 2006 (Cth), a larger number of entities are regulated. At 30 June 2011, AUSTRAC reported that a total of 18,484 entities were enrolled with AUSTRAC Online (AUSTRAC 2011); a much broader family of regulated entities than under the FTR Act). Although AUSTRAC is the AML/CTF regulator in Australia, it does not have any law enforcement or prosecutorial powers. Therefore, it is an administrative-style Financial Intelligence Unit (FIU) that supplies information to a wide variety of government bodies. The financial intelligence it provides is used by these partner agencies to investigate cases of alleged financial crime, which may then be referred for investigation by police and prosecution.

The Australian legislative framework

Australia’s legislative framework proscribes ML/TF and includes asset recovery mechanisms, as well as various preventive regulatory measures.

Money laundering offences

Division 400 of the Criminal Code Act 1995 (Cth) (the Criminal Code) outlines the federal money laundering offences for Australia. The Criminal Code defines money laundering broadly and the only limit it places on predicate crimes is to restrict these to indictable offences—that is, money laundering involves dealing in the proceeds of indictable offences, as opposed to summary offences dealt with in lower courts. Division 400 of the Criminal Code specifies 18 separate money laundering offences of dealing with the proceeds and instruments of crime and an additional offence of possessing the proceeds of crime. Offences for dealing with the proceeds and instruments of crime are distinguished by the value of the money or property involved and the mental element of the offence. The decision in R v RK [2008] NSWCCA 338 indicated that each of the 18 ‘dealing’ offences created two separate offences. The first is an offence of dealing with the proceeds of crime; the second is an offence for dealing with the instruments of crime as Chief Justice Spigelman noted (at para 6):

s 400.3(2)(c) creates an offence where a person is reckless as to a relevant fact. Furthermore, it creates two distinct offences where either:

(A) the money or property is proceeds of crime and the person is reckless as to the fact that the money is proceeds of crime (s 400.3(2)(b)(i) and (c)).

(B) there is a risk that the money or property will become an instrument of crime and the person is reckless as to the fact that there is a risk that it will become an instrument of crime (s 400.3(2)(b)(ii) and (c)).

All Australian states and territories, with the exception of the Northern Territory, have other money laundering offences. Offences relating to financing of terrorism, however, are solely at the federal level.

Financing of terrorism offences

Offences relating to the financing of terrorism are contained in two pieces of federal legislation, each of which has a separate definition of terrorist organisation that is applicable.

The Criminal Code contains general offences that proscribe the financing of terrorism. The Suppression of the Financing of Terrorism Act 2002 (Cth) amended the Criminal Code by including a range of offences relating to the financing of terrorism. The Anti-Terrorism Act (No. 2) 2005 (Cth) further amended the Criminal Code’s financing of terrorism offences in 2005. The Criminal Code’s offences currently encompass getting funds to, from, or for a terrorist organisation intentionally or recklessly, collecting funds to finance terrorism and collecting funds to finance a terrorist. Division 102 also criminalises the provision of resources or support to a terrorist organisation.

Terrorist organisations are defined by the Criminal Code as organisations:

  • directly or indirectly engaged in, preparing, planning, assisting in, or fostering a terrorist activity, irrespective of whether one occurs; or
  • that have been proscribed as terrorist organisations by the Attorney-General.

In addition, the Charter of the United Nations Act 1945 (Cth) (CoTUNA) contains offences tied to asset freezing sanctions imposed on individuals and entities proscribed by the United Nations Security Council’s 1267 list and certain other lists of proscribed persons. The individuals and organisations tied to offences under CoTUNA are identified in the Department of Foreign Affairs and Trade’s Consolidated List. Section 20 creates an offence of holding a freezable asset and using or dealing with that asset, allowing another to use or deal with the freezable asset, or facilitating the use or dealing with an asset, unless the use or dealing has been authorised. Section 21 creates an offence for directly or indirectly making a freezable asset available to a proscribed entity, unless the dealing is an authorised dealing.

Asset recovery mechanisms

All Australian states and territories, in addition to the Commonwealth, have asset recovery mechanisms that enable the proceeds of crime to be recovered from entities. The bulk of the Commonwealth’s asset recovery powers are held within the Proceeds of Crime Act 2002 (Cth) (POCA 2002), which repealed the previous Proceeds of Crime Act 1987 (Cth) (POCA 1987). The key change in the asset recovery regime in Australia that was introduced by POCA 2002 was the inclusion of a civil recovery mechanism. In addition, in 2010, the Crimes Legislation Amendment (Serious and Organised Crime) Act 2010 (Cth) amended POCA 2002 to include unexplained wealth provisions. The asset recovery mechanisms in some Australian states and territories, such as the Northern Territory and Western Australia, also extend the powers to recover the suspected proceeds of crime beyond civil confiscation and encompass unexplained wealth provisions.

Key preventive legislation

Australia’s key AML/CTF preventive measures are contained in the AML/CTF Act 2006 (Cth) which, together with supplementary regulations and instruments, establishes Australia’s compliance framework (see Appendix for definitions). The FTR Act, the previous core AML/CTF legislation, contains additional requirements and defines cash dealers (with reporting obligations) in Australia.

The AML/CTF Act 2006 (Cth) outlines much of the regulatory regime, as well as defining those businesses with AML/CTF regulatory obligations. The Act takes a service provision approach to describing the businesses with obligations (referred to as reporting entities). The AML/CTF regime currently applies to providers of designated services as defined in s 6. The general categories of regulated businesses are:

  • financial services—banks, credit unions, building societies, lending, leasing and hire purchase companies, stored value card issuers, asset management companies, financial planners (who arrange for the issue of financial products), life insurers, superannuation funds, custodial services companies and security dealers;
  • money service businesses—remittance dealers, issuers of traveller’s cheques, foreign exchange dealers and cash couriers;
  • the gambling sector—casinos, bookmakers, TAB’s, clubs and pubs, internet and electronic gaming service providers; and
  • bullion dealers.

The requirements of the AML/CTF Act 2006 (Cth) do not, as yet, extend to various non-financial service providers (known as Designated Non-Financial Businesses and Professions or DNFBPs)—such as legal practitioners and accountants engaging in financial or real estate transactions, trust and company service providers, dealers of precious metals and stones (outside of bullion dealers), and businesses in the real estate industry (although the government is considering the extension of the regime to these sectors; AGD 2009).

Australia requires all reporting entities to meet the same AML/CTF obligations, with few exceptions. Broadly, these obligations include:

  • filing transaction reports, including threshold reports, to the FIU;
  • performing risk-based customer identification procedures and monitoring customer transactions;
  • establishing and maintaining an AML/CTF program;
  • maintaining customer and transaction records;
  • reporting on the level of compliance with the regime; and
  • nominating a compliance officer.

The Australian regime is a risk-based system where reporting entities who provide designated services have the discretion to assess the risks associated with specific customers and transactions and to an extent, determine how to mitigate that risk by meeting the obligations under the Act. Reporting entities adjust the level of due diligence associated with each customer and transaction, according to their risk level, as well as to consider the level of risk posed by their different operations.

Financial intelligence unit

In Australia, AUSTRAC is both the FIU and AML/CTF regulator for all business sectors with AML/CTF obligations. AUSTRAC is not a law enforcement-style FIU and as such, does not have any investigative or prosecutorial powers. AUSTRAC’s regulatory powers extend to monitoring compliance, issuing remedial directions, accepting enforceable undertakings and applying for civil penalty orders.

Reporting obligations

The AML/CTF regime currently requires reporting entities to provide the following reports about transactions to AUSTRAC:

  • SMRs—reporting entities are required to submit SMRs on forming a suspicion that a transaction may be connected to a breach of taxation legislation or to the proceeds of crime. SMRs are discretionary reports that may be triggered for transactions of any value.
  • Threshold transaction reports (TTRs; significant cash transaction reports for some entities)—reporting entities must report any transactions in physical currency beyond the threshold amount, which is currently $10,000 or more or the foreign currency equivalent. TTRs are mandatory, rather than discretionary, reports.
  • Reports of international electronic transactions—reporting entities are required to report all electronic funds transfer instructions (international funds transfer instructions), regardless of value, to AUSTRAC. These are also mandatory reports.

Matters triggering TTRs and reports of international funds transfers may also be the subject of an SMR.

Anti-money laundering/counter-terrorism financing compliance programs

The AML/CTF Act requires all reporting entities to assess their own levels of ML/TF risks and to develop their own AML/CTF programs. Each program has two components. Part A of the program includes identifying, managing and reducing the risk of money laundering and terrorism financing faced by the reporting entity. Part B of the program centres on customer identification measures and includes the minimum KYC information requirements.

All reporting entities must report their compliance with the AML/CTF Act 2006 (Cth) annually to AUSTRAC.

Methodology

The way the current survey was undertaken, including detailed information concerning the design of the questionnaire, selection of participants, data collection, response analysis and data preparation is presented in a companion report published by the AIC (Challice & Eliseo 2012). The following is a brief summary of the key features of the methodology of the study.

The study was undertaken in two parts. The first comprised a survey administered to all businesses in Australia in July 2009 that had AML/CTF regulatory obligations. Respondents were able to complete a questionnaire online, by telephone or on paper, with responses forwarded to a consultant research organisation engaged by the AIC to administer the survey. The survey instrument also called for volunteers to participate in follow-up face-to-face interviews, which were conducted in October 2009 with 10 individuals from a range of sectors including one Australian Government department, pubs and clubs, a credit union, a cash delivery business, a mortgage lender, a private equity firm and a currency exchange service. Eight of the 10 interview participants came from the small business sector, which was the business sector in which most survey participants were employed. Interviews with such a small number of individuals cannot be considered to be representative of the entire regulated sector but nonetheless, the qualitative data that were obtained provided some important, albeit subjective, insights into the operation of the regime in Australia.

Ethical considerations

The study was approved by the AICs Human Research Ethics Committee, as well as the Statistical Clearing House of the Australian Bureau of Statistics, who monitor large surveys undertaken of Australian businesses by government agencies. Detailed protocols were also followed in connection with the provision of the sampling frame from AUSTRAC to ensure that data were held securely and that confidential information could not be compromised or released publicly. All results were reported in aggregate form in order to preserve participants’ anonymity.

Survey instrument and interviews

The questionnaire asked respondents to report:

  • views on, and procedures for, conducting customer identification and due diligence;
  • views on, and procedures for, conducting transaction monitoring and reporting;
  • views on under-reporting and over-reporting suspicious transactions;
  • the extent of AML/CTF compliance costs, expectations of cost movements in the future, areas of greatest expense and means for reducing the expense;
  • views on the effectiveness of the AML/CTF regime, the responsibilities assigned to businesses by the regime and means for improving how it operates;
  • perceptions of money laundering risks to their business, including high-risk customers and changes to those risks; and
  • perceptions of terrorism financing risks to their business, including high-risk customers and changes to those risks.

The follow-up interviews addressed the same themes, with a specific focus on the perceptions of money laundering and terrorism financing risks to business, the risk management practices used to mitigate those risks, the costs of complying with the AML/CTF requirements and the extent and utility of contact with AUSTRAC.

Respondents, sector and profile

AUSTRAC provided an initial sampling frame of 10,670 businesses believed to provide designated services under the AML/CTF Act 2006 (Cth) in 2009. The final sampling frame consisted of 8,690 businesses, of which 4,346 (50%) responded.

The confidential release of the mailing list was undertaken with the authority in writing of AUSTRAC’s Chief Executive Officer at the time and was subject to strict conditions as to usage and confidentiality. A number of security measures were implemented by the Social Research Centre to ensure necessary privacy protocols were maintained and these are described by Challice and Eliseo (2012).

The difference between the number of businesses in the initial sampling frame provided by AUSTRAC and the final sampling frame used was explained because of duplicate entries in the initial list, which were present because many businesses were members of a Designated Business Group (DBG) who only needed to be contacted once. A DBG comprises two or more businesses or persons that join together to adopt and maintain joint AML/CTF program obligations under the legislation. Finally, over 1,000 of the records had incomplete or incorrect contact information.

Survey respondents fell into nine broad industry sectors. Respondents self-identified as working in:

  • managed funds or superannuation—providing services as an investment company, managed fund, superannuation company, or unit trust manager;
  • banking—encompassing banks, building societies, credit unions, finance corporations, friendly societies, housing societies, merchant banks and SWIFT;
  • financial services—such as factorers, forfeiters, hire purchase companies, lease companies and pastoral houses;
  • securities/derivatives—including futures brokers, investment banks and securities dealers;
  • gambling—casinos, clubs, gambling houses, hotels and pubs, on course bookmakers, sports bookmakers and TABS;
  • foreign exchange—providing services as foreign exchange providers, payment service provider/postal and courier service providers, travel agents and issuers of travellers’ cheques;
  • cash delivery services—such as cash carriers, cash custodians and payroll service providers;
  • alternative remittance dealers—including both corporate remitters and remittance providers;
  • other—Australia Post outlets, news agents and other retailers, and bullion dealers.

Respondents were asked to identify the industry sector generating the largest proportion of income, or funds under management, in the year to 30 June 2009. The distribution of survey respondents across the nine industry sectors is shown in Table 1. Businesses generating the largest proportion of their income from gambling services (n=2,251) comprised more than 50 percent of respondents. The survey participants’ businesses ranged in size from zero employees (those with casual or contract staff only) to more than 200 employees. The distribution of businesses provided in Table 2 shows that 79.7 percent of respondent businesses employed fewer than 20 full-time equivalent employees at 30 June 2009. This reflects the concentration of small businesses (76%) that identified their main revenue stream as coming from gambling activities.

Table 1: Respondents, by industry sector
Industry sector n %
Managed funds and superannuation 356 8.8
Banking 313 7.7
Financial services 169 4.2
Securities and derivatives 115 2.8
Gambling 2,251 55.3
Foreign exchange 214 5.3
Cash delivery services 58 1.4
Alternative remittance businesses 195 4.8
Other businesses 397 9.8
Total 4,068  

Note: Percentages may not total 100 due to rounding

Source: AIC AML/CTF Australian businesses survey [computer file]

As shown in Table 2, more than 90 percent of the survey sample was represented by small or micro businesses. Due to the absence of publicly available information, at the time of writing, on the distribution of business size within the regulated sector, it was unable to be established whether the number of smaller businesses that responded to the survey were representative of the regulated sector as a whole. For this reason, care must be taken when interpreting the findings presented in this report.

Table 2: Full-time equivalent employees at 30 June 2009
FTE employees n %
0 405 11.1
1–4 1,422 38.9
5–19 1,087 29.7
20–49 419 11.5
50–99 160 4.4
100–199 90 2.5
200+ 75 2.1
Total 3,658  

Note: Percentages may not total 100 due to rounding

Source: AIC AML/CTF Australian businesses survey [computer file]

Table 3 shows that the annual turnover for 81 percent of respondents, outside the managed funds and superannuation industries, was less than $5m for the year to 30 June 2009. Managed funds and superannuation companies, shown in Table 4, were asked to estimate their funds under management at 30 June 2009 with two-thirds (66.2%) reporting that they held less than $1m.

Table 3: Annual turnover, 2008–09
Turnover 2008–09 n %
<$100,000 125 7.5
$100,001–$500,000 329 19.7
$500,001–$1,000,000 248 14.8
$1,000,001–$5,000,000 651 39.0
$5,000,001–$10,000,000 148 8.9
>$10,000,000 171 10.2
Total 1,672  

Note: Percentages may not total 100 due to rounding

Source: AIC AML/CTF Australian businesses survey [computer file]

Table 4: Funds under management at 30 June 2009
Funds under management n %
$0 253 36.2
$1–$100,000 93 13.3
$100,000–$500,000 82 11.7
$500,000–$1,000,000 35 5.0
$1,000,000–$5,000,000 59 8.4
$5,000,000–$10,000,000 14 2.0
$10,000,000–$50,000,000 49 7.0
>$50,000,000 114 16.3
Total 699  

Note: Percentages may not total 100 due to rounding

Source: AIC AML/CTF Australian businesses survey [computer file]

Respondents primarily occupied senior management roles within their companies. Approximately 65 percent (n=2,684) were owners, directors, or senior executives. A further 8.8 percent identified themselves as managers (n=364). Table 5 shows that few respondents were employed as risk or compliance officers (10.8%; n=448) or money laundering compliance officers (4.7%; n=194). The large number of managers, executives, or owners who participated in the survey is most likely due to the high proportion of small businesses that participated in the survey.

Table 5: Primary role of survey respondents within the regulated business
Respondents’ role n %
Owner/director/Chief Executive Officer/Managing Director 2,684 64.7
Risk/compliance officer 448 10.8
Manager 364 8.8
Accountant/auditor 259 6.3
Money laundering compliance officer 194 4.7
Administration 84 2.0
Other 80 1.9
Legal officer/lawyer 38 0.9
Total 4,151  

Note: Percentages may not total 100 due to rounding

Source: AIC AML/CTF Australian businesses survey [computer file]

Reference periods

All retrospective survey questions asked respondents to consider the 12 month period to 30 June 2009. The reported volumes of suspicious transactions, AML/CTF implementation costs and cost areas all related to this period. Respondents were also asked to consider the two year period between 1 July 2009 and 30 June 2011 when responding to the prospective questions about future trends. These questions addressed respondents’ views concerning expected changes to AML/CTF implementation costs and any changes to risks of money laundering or terrorism financing that they considered were likely to occur within their business during the specified two year period.

How this survey differs from other similar studies

The AML/CTF Australian businesses survey is the first large-scale study of Australian businesses regulated with respect to AML/CTF preventive measures. More than 4,000 Australian businesses responded to the survey from a population of around 17,700 businesses with AML/CTF regulatory obligations (AUSTRAC 2009b). This sample captured businesses from all regulated sectors and encompassed micro, small, medium and large businesses. The AML/CTF Australian businesses survey, as noted above, examined:

  • businesses’ perceptions of ML/TF risks;
  • application of core components of the AML/CTF regulatory requirements, including specific detail on their approach, confidence and use of software when conducting customer identification and transaction monitoring measures;
  • costs of implementing the measures;
  • views on the necessity and effectiveness of the regime; and
  • views on improving the regime.

The AML/CTF Australian businesses survey differed from AUSTRAC’s survey of compliance officers in relation to the topics covered and the sample used. AUSTRAC’s (2010a) survey examined the specific responsibilities of compliance officers and the AML/CTF reporting chain of command and focused predominantly on businesses offering financial services. In addition, more than half of the sample of AUSTRAC’s study came from businesses that employed more than 50 staff members, while in this study less than 10 percent of businesses had 50 or more employees.

The present survey also examined in greater detail aspects of AML/CTF compliance documented in previous surveys undertaken in overseas jurisdictions. Gill and Taylor (2004) surveyed financial institutions in the United Kingdom in 2001 concerning the utility of AML/CTF regulation and the importance of customer identification requirements. They analysed 466 responses from those businesses surveyed. More recently, PricewaterhouseCoopers (2007) examined the perceptions and implementation by businesses of the risk-based approach to AML/CTF by financial services entities in the United Kingdom and the associated costs of doing so. Their research involved 148 interviews with money laundering reporting officers (MLROs) and other compliance professionals with anti-money laundering responsibilities from across the financial services sector including retail banks, investment banks, insurers and investment managers, and covering a range of different sized organisations. KPMG India (2009) sent a survey to 100 financial institutions in India and considered the application of transaction monitoring, the costs associated with AML/CTF compliance, risk-based assessments and customer identification, by banks and non-bank financial services in India. As such, these previous surveys have involved quite small samples and have been focused on quite specific aspects of the AML/CTF regime. The present survey was far more extensive, involved a survey of regulated businesses in Australia and examined a wide range of issues to do with AML/CTF regulation and compliance in Australia.

In view of the differing samples and objectives of these and other surveys, it has not been possible to draw direct comparisons between the present findings and those previously reported. Where some limited comparisons are appropriate, however, these have been identified and reported in the discussion below. The broader question of how Australia’s legislative response compares with those in other countries has been addressed in a separate AIC publication (see Walters et al. (2012)).

Last updated
3 November 2017