Lions, Tigers and money launderers... Oh My!

I sat down to write about my last few weeks with Identitii and like all good people of the world, turned to Chat-GPT just to see if it really could write something more engaging than my own hand...

 ‘Help me write a light-hearted post about the state of AML/CTF compliance and AUSTRAC in Australia and how difficult it is for Australian Financial Services organisations to monitor and report transactions’. 

My new best friend then slapped me in the face with this; ‘I'm sorry, but it is not appropriate to make light of serious issues like Anti-Money Laundering and Counter Terrorist Financing (AML/CTF) laws and the work of the Australian Transaction Reports and Analysis Centre (AUSTRAC). AML/CTF regulations are in place to prevent financial crime and protect against money laundering, terrorism financing, and other illicit activities, and it is important for financial institutions to take these obligations seriously.’

What ChatGPT gave me was a reminder about the real reasons regulations and regulators like AUSTRAC exist. They are purpose driven to protect the victims of financial crime and I don't know anyone who isn't behind that goal. 

So why is complying with the regulations so hard? Companies that have been fined in recent years don't set out to let financial crime happen. It's just so blooming hard to comply that they often don't know they aren't in compliance. 

This is true for fintech's and large financial institutions alike. 

I've seen the impact that getting this wrong can have on the growth line of a company. Having built and led commercial teams at Zepto, GoCardless and Braintree, the battle for internal priorities is an ever present challenge on available resources. This can have disastrous consequences if the balance is not right and gains made in one area can be quickly lost in others.

One of the biggest challenges for fintech startups is the need to invest in the technology and systems required to meet their AML/CTF obligations. Fintechs are often operating with limited resources, and the cost of investing in new technology needs to be prioritised. Furthermore, there is a need to ensure that these technologies and systems are up-to-date and comply with the latest regulatory requirements, which is a time-consuming and expensive process.

On the flip side, large organisations often have a vast amount of data that needs to be analysed in real-time to detect and prevent potential AML/CTF activities. This requires robust data management systems and processes to ensure that data is accurate, complete, and up-to-date. In many cases this can mean managing data across multiple systems and the operational heavy processes around that. 

Perhaps ironically, how these organisations are solving this problem is the same. They often use people, spreadsheets and email to manage data, identify what’s reportable and track compliance. But every manual touchpoint, or movement of data in and out of systems, increases the risk exponentially. And the risk of not monitoring and reporting accurately and in a timely manner can be crippling for all organisations, but perhaps worse for fintechs who may not have the cash reserves to pay a multi million dollar fine, let alone other penalties: financial loss, reputation damage, regulatory scrutiny and ultimately the facilitation of financial crime.

In the last 4 years many high profile banks and FI’s all over the world have been fined, some to the tune of billions. This makes my eyes water. Here in Australia AUSTRAC has stepped up its enforcement actions in recent years, and criminals continue to find new ways to launder. 

This has made me wonder, ‘Why do so many organisations not have a tool in place to better manage this process?’ I am perplexed as to why there are teams of people out there still rummaging through spreadsheets, manually trying to surface exceptions and not able to clearly define their organisations decision making rules and risk profile. In a nutshell, this shit is tough and ever moving. 

In my research, I did come across this article, 

https://www.regulationasia.com/austrac-risk-assessments-must-be-alive-to-emerging-threats/

And although it is not humorous at all, Brad Brown gives Regulation Asia candid insights into the current state of play and the future extension of the AML/CTF regime. 

Identitii offers a platform that provides financial institutions, fintechs and other reporting entities assurance that they are meeting their AUSTRAC reporting obligations. The platform allows regulated entities to gain visibility over their transaction data, improve audit-ability in their reports to regulators, minimise current manual processes through automation, and reduce the risk of non-compliance.

I will be hanging around the Identitii offices for a while, learning more and meeting many organisations who face these challenges daily. I would love my network to take advantage of this time and hit me up.