Technology and Tranche 2 key focus at ACAMS Australasia

Technology and Tranche 2 key focus at ACAMS Australasia

30 June 2023

30 June 2023

ACMAS Australsia Conference Sydney
ACMAS Australsia Conference Sydney

At the ACAMS conference in Sydney, the finest minds in financial crime compliance came together to delve into the rapid growth of financial crime and address the most critical challenges faced by the industry in 2023. 

Throughout the event, compliance and financial crime experts shared invaluable insights on how to confront these threats head-on. The discussions revolved around a range of hot topics, including the influence of technology and cryptocurrencies in the surge of fraud, the significance of Tranche 2 entities in combating financial crime, the key factors in determining risk appetite, and the imperative role of technology and automation in compliance solutions.

Amidst these engaging discussions, there prevailed a collective determination to safeguard the integrity of financial systems and make it considerably tougher for perpetrators. 

Here are our top takeaways from the conference last week:

The impact of tech and digitisation on fraud growth

According to the Australian Institute of Criminology, Australia incurred costs of up to AUD$60.1 billion in 2022 alone due to financial crime.

Alex Engel, Assistant Secretary at the Transnational Crime Branch of the Commonwealth Attorney-General’s Department, shed light on this issue, saying, “not only is it (financial crime) costly, it threatens the safety, prosperity and security of Australians, and distorts the integrity of our institutions and economy.”  

Criminals have rapidly exploited our adoption of new digital technology as well as the rapid nature of crypto-currencies and as such “the threats that we’re facing are also continuing to evolve”. Crypto Is often the go-to for certain crime types, such as ransomware, and of course an enabler of illicit financing which something that the government is looking to address with stricter legislation.

Tranche 2 entities critical to fight against fincrime

According to Anthony Quinn’s review of the sessions “the lucky country may have gotten even luckier with 10+ years between FATF visits”. And, as Dr Gordon Hook, from the APG (FATF in APAC), pointed out “Australia may have dodged a bullet” by missing the 5-year mid point follow up on the 2015 MER citing Financial Action Task Force (FATF)

But, it’s highly likely that reforms to encompass the gatekeeper professions will be passed in 2024 and we could see the current 17,000 regulated entities increase to potentially well over 100,000. 

We can expect to see a huge amount of education and guidance when this happens.

Risk appetite should be a top priority

The importance of governance and oversight at a board level was reiterated, particularly with the need to determine and document the company’s risk appetite. 

Sonja Marsdic, Risk Advisory partner at Norton Rose, highlighted that although specific guidelines were not provided in the act and rules, it is still essential to develop an approach that identifies, mitigates, and removes risk to the business.

Furthermore she stated that “defining risk appetite works as both a shield and a sword” as reporting entities can shield their businesses from regulatory enforcement actions. It also serves as a sword by enabling the board to set expectations and demonstrate their understanding of risks, as well as their clear preferences regarding risk acceptance or avoidance. Having risk appetite documented also avoids it being left blank for the regulator to set. 

The absence of clearly defined risk appetites is predicted to be a recurring factor in enforcement actions. With the responsibility falling firmly on the board to identify and mitigate risks. 

Technology is a key part of the compliance mix

The consensus among experts is that while technology is a crucial component of a compliance strategy, it cannot single-handedly solve all compliance-related issues.

Whether it’s Al, machine learning or simple automation “no amount of technology can help if the data isn’t fixed” according to Yogesh Kulkarni, General Manager, Financial Crime, Regulatory Compliance, Privacy & Fraud Risk Audit at Commonwealth Bank “you need to look under the hood and see where your data problems are”. 

Tom McNally, Head of Anti Money Laundering & KYC Solutions, Asia-Pacific at Quantexa, also reiterated that “Technology is often seen as a one stop shop to solve all the problems. And it’s not”.

It was widely acknowledged that regtech’s are essential for optimal performance of a compliance function, with automation and AI being instrumental in reducing manual processing and expediting transactions. However, a recurring theme emphasised the need to utilise technology strategically to address specific pain points, enhance compliance processes, and provide support, rather than relying on it as a universal solution or silver bullet.

It’s easy to say “let’s get a regtech solution and then set and forget” according to Tony Hope, Executive (GM) AML / CTF / Fraud and FCR Innovation, NAB but it should never be a set and forget. Continuous review and monitoring are essential. 

Sean Cook, Director Of Compliance, China Construction Bank Corporation, warned against building in-house sharing that in his experience “he’d never seen an inhouse build turn out the way it was expected”. There was also the recognition that an in-house build requires on-going maintenance and staff who can code or work with the language of the solution. 

Again it was raised that “Risk appetite should be the number one guiding principle that boards and executives focus on.” and this should guide regtech decisions. As Luke Raven, industry commentator, shared, “with regulators, law enforcement, financial institutions, regtechs, social groups, big tech, media… working tirelessly and working together to help combat some of the worst crimes imaginable, never before has the epic challenge before us seemed so surmountable.”

ACAMS Australasia provided an invaluable platform for participants to come together to discuss the challenges and changes in AML and CTF compliance. The experts present at the event highlighted the critical role of technology and automation in mitigating financial crime, as well as the need for robust risk appetite and governance at the board level. 

The event was a great success and provided attendees with the opportunity to explore the opportunities and potential of technology to fight financial crime. Ultimately, the conference demonstrated that with the right strategies and solutions, we can protect the integrity of our financial systems and make it harder for criminals to succeed.

Learn more about how Identitii can help you improve your AUSTRAC reporting here.