AUSTRAC’s civil penalty proceedings against poker machine giant Mounties Group mark a critical moment for fraud analysts, especially those working in or advising industries like gaming, hospitality, and clubs. The regulator alleges that Mounties, one of Australia’s largest club operators with 10 clubs and over 1,400 poker machines across NSW, failed to implement basic, risk based anti-money laundering controls. Mounties generated around $216 million in revenue last year, playing a significant role in NSW's gaming sector, AUSTRAC says such volume heightened its AML vulnerabilities.
Mounties failed to implement an effective money laundering and terrorism financing (ML/TF) risk assessment, particularly in relation to the use of gaming machines and high volume cash transactions. The club did not apply enhanced customer due diligence (ECDD) measures for high risk patrons, even when clear indicators of suspicious behaviour were present.
Additionally, its transaction monitoring processes were inadequate, and staff did not receive appropriate training to identify or respond to ML/TF risks. The AML/CTF program had not undergone an independent review that met regulatory requirements.
Mounties also failed to adequately monitor customer activity to identify, assess, and manage the money laundering risks it was exposed to.
Cash Based Businesses Remain High Risk
Despite the shift toward digital payments, cash intensive sectors such as clubs and pubs continue to be prime targets for money laundering, particularly during the placement and layering stages. It is essential to closely examine:
Weaknesses or gaps in cash monitoring systems
Transaction behaviour that deviates from expected income or customer profiles
Frequent, structured cash deposits designed to stay below reporting thresholds
Third Party Compliance = Third Party Risk
Mounties outsourced its AML/CTF compliance but failed to validate the effectiveness of that arrangement. Outsourced risk functions, especially when not audited or reviewed, can become blind spots that criminals exploit.
"Frequent Flyer" Gamblers Deserve Extra Scrutiny
AUSTRAC highlighted that some patrons returned regularly to gamble large sums, without triggering ECDD. High frequency, high spend customers often mask identity or source of funds through proxies or mule accounts.
Fraud red flags:
Patrons linked via shared devices, addresses, or IDs
Sudden spikes in gambling frequency or value
Pseudonym use or unusual customer aliases
Risk Assessment Gaps = Criminal Opportunity
A risk assessment that doesn’t reflect operational reality is an invitation to criminals. In Mounties’ case, failure to assess and mitigate gaming specific ML risks allowed financial crime to potentially flourish.
Mounties is the latest in a growing list of AUSTRAC AML/CTF enforcement actions targeting the gambling sector. In 2023 Crown Resorts was subject to a $450M penalty for systemic AML failings, including allowing VIP clients to gamble millions via third parties. Entain, who operates online gambling sites Ladbrokes and Neds is subject to civil proceedings for accepting over $150M in bets from high risk clients with pseudonyms and insufficient ID verification. This trend reflects AUSTRAC’s increasing willingness to target non bank financial sectors and cash intensive venues.
AUSTRAC has released its regulatory priorities for the 2025-26 financial year, outlining a transformative agenda to crack down on financial crime, ahead of sweeping legislative reforms set to take effect from 2026.
AUSTRAC CEO Brendan Thomas described the year ahead as critical, with the agency intensifying its focus on high risk areas preparing to regulate a wide range of professions under the Tranche 2 reforms.
“We’re about to embark on the most ambitious overhaul of Australia’s anti-money laundering laws in a generation and we’re determined to get it right,” Mr Thomas said.
From 1 July 2026, lawyers, real estate agents, accountants, conveyancers, dealers in precious metals and stones, trust and company service providers, and other designated non financial businesses will be brought under AUSTRAC’s anti money laundering and counter terrorism financing (AML/CTF) regime, with an estimated 80,000 new businesses expected to be captured under the law.
For these new reporting entities, AUSTRAC expects that by the time reforms commence; businesses will be enrolled as reporting entities, they will have implemented an AML/CTF program and appointed a compliance officer, have trained their staff, and be prepared to report suspicious matters. After the July 2026 deadline, AUSTRAC will prioritise enforcement against those who fail to enrol or deliberately ignore their obligations.
Digital currencies and exchanges remain a top regulatory concern. A July 2024 national risk assessment highlighted growing vulnerabilities in this space, with AUSTRAC noting that many exchanges have underdeveloped risk management practices, leaving them open to criminal exploitation. By 30 June 2026, only digital currency exchanges that can demonstrate robust AML/CTF controls will be registered. AUSTRAC will take action against businesses that are careless, negligent, or complicit in criminal misuse.
Similarly, AUSTRAC is intensifying scrutiny of cash based operations. Despite a national decline in cash usage, over $100 billion is still in circulation, and cash remains a favoured tool for money laundering due to its anonymity and accessibility. AUSTRAC will be conducting in depth discovery work to identify businesses that fail to adequately manage cash related risks.
AUSTRAC will focus less on individual compliance and more on sector wide behaviours and systemic vulnerabilities. This new approach includes enhancing intelligence capabilities to detect gaps and enforce reform through data driven insights. Current reporting entities are expected to, Maintain and strengthen existing controls, implement transitional plans aligned with the reformed AML/CTF Act, and demonstrate measurable progress by 30 June 2026.
December 2025: AUSTRAC will release AML/CTF starter programs and further guidance.
31 March 2026: Enrolment opens for new reporting entities and the first of the reforms takes effect for already regulated entities.
30 June 2026: AUSTRAC will assess readiness across sectors, including digital currency exchanges and cash-intensive businesses.
1 July 2026: Tranche 2 reforms commence for newly regulated industries.
AUSTRAC also committed to supporting businesses through tailored guidance, educational materials, and starter programs, with a focus on building capacity and long term resilience.
With the most significant AML reforms in decades on the horizon, AUSTRAC’s 2025-26 priorities aim to create a safer financial system by reducing vulnerabilities, targeting high risk sectors, and bringing thousands of new businesses under regulation.
For more information, visit https://www.austrac.gov.au
Crypto ATMs, which now number more than 1,800 across Australia, offer a fast and convenient way to convert cash into cryptocurrency, but that convenience makes them highly vulnerable to misuse. Scammers often pressure victims to use these machines to transfer money in the form of crypto, which is extremely difficult to recover once sent.
Analysts from AUSTRAC’s Cryptocurrency Taskforce examined the highest value crypto ATM users in each state uncovering dozens of suspicious profiles, many believed to be linked to scams or fraud. Police contacted 90 individuals identified through the operation and found that the majority were not offenders, but victims. “Almost all of the transactions we referred involved victims rather than criminals,” AUSTRAC CEO Brendan Thomas said. “Our analysts discovered that many of the top transactions in each state involved illegal activity.”
Among the most tragic cases was a woman in her 70s who deposited more than $430,000 into crypto ATMs after falling victim to a romance and investment scam. In another case, a woman lost over $200,000 after responding to a convincing advertisement from what she believed was a legitimate trading firm.
The operation follows AUSTRAC’s recent announcement of minimum compliance standards for crypto ATM operators. These include a $5,000 cap on cash deposits and withdrawals, mandatory scam warnings, enhanced customer due diligence, and improved transaction monitoring. The agency also refused to renew the registration of crypto ATM operator Harro’s Empires, citing ongoing risks that its machines could be exploited by criminals.
Between 1 January 2024 and 1 January 2025, Australia’s cybercrime reporting platform, ReportCyber, received 150 reports of scams involving crypto ATMs, one report every 2.5 days, with average losses exceeding $20,000. Total losses for the year amounted to over $3.1 million. AUSTRAC’s data from nine crypto ATM providers shows that older Australians are most at risk, with people over 50 accounting for nearly 72% of the total value of transactions. Those aged between 60 and 70 alone represented 29% of all transactions by value.
“If anyone is asked to use one of these machines to send money to someone, I urge them to stop and think twice,” Mr Thomas warned. “Once your money is gone, it is almost impossible for authorities to retrieve it.” To help prevent further harm, the AFP led Joint Policing Cybercrime Coordination Centre (JPC3) are working to develop educational materials placed near crypto ATMs, warning users about scams, how they operate, and how to report suspicious activity or seek help.
Western Union Financial Services Australia, one of the most recognised names in global money transfers, is under scrutiny from financial intelligence regulator AUSTRAC following concerns about its compliance with anti-money laundering and counter-terrorism financing (AML/CTF) laws.
AUSTRAC has ordered the appointment of an external auditor to examine Western Union’s AML/CTF program. This move comes after the company self-reported ongoing compliance issues but failed to convince the regulator that sufficient improvements had been made.
Western Union, with over 170 years of global history and operations in more than 200 countries and territories, plays a significant role in Australia’s remittance market. Through a network of agent locations and digital platforms, it enables fast cross border transactions. But it is this very global reach and high transaction volume that makes the company, and the broader remittance sector, a prime target for criminal misuse.
AUSTRAC CEO Brendan Thomas stressed the importance of vigilance in the industry. "The remittance sector is particularly vulnerable to criminal exploitation," Mr Thomas said. "Businesses providing international funds transfers pose a high risk for money laundering."
The concerns about Western Union are not limited to isolated lapses. AUSTRAC has flagged deeper, systemic issues, including poor customer due diligence, delayed or missing reports of suspicious transactions, and noncompliance with international funds transfer instruction (IFTI) reporting requirements.
The remittance sector faces well known challenges that contribute to its vulnerability. High volumes of low value transactions make it difficult to detect unusual patterns, while the global nature of services means transfers often occur between jurisdictions with varying AML standards, creating opportunities for regulatory gaps. Many providers rely heavily on cash based operations, which are inherently harder to trace and monitor. The rapid processing of transactions can also outpace legacy or manual monitoring systems.
These combined factors create significant opportunities for criminal groups to move illicit funds across borders, obscure their origins, and integrate the proceeds into the legitimate financial system. These problems highlight the ongoing challenge for remittance providers to stay ahead of evolving criminal techniques.
The independent auditor will be tasked with delivering a comprehensive report to AUSTRAC. The findings will guide whether further remedial action is required by Western Union and whether additional regulatory intervention is warranted.
Mr Thomas said he hopes AUSTRAC’s action serves as a wake up call for the entire remittance sector. As the financial crime landscape becomes increasingly complex, pressure is mounting on high risk industries like remittance services to modernise their compliance frameworks and adopt more sophisticated monitoring and reporting systems.
When Open Banking officially launched in Australia in July 2020, it was hailed as a revolutionary move to give consumers greater control over their financial data. Promoted as a way to boost competition, drive innovation, and deliver better deals for everyday Australians, it was part of the government’s broader Consumer Data Right (CDR) agenda. So, if this was such a revolutionary idea, why don’t we hear about Open Banking five years on?
Under the CDR, Open Banking was meant to allow consumers to share their banking data securely with accredited providers. The system was designed to increase transparency, foster competition, and encourage innovation. The idea was simple: put power back in the hands of the consumer and break the monopoly of the Big Four banks.
Despite years of development and substantial investment in infrastructure, the benefits failed to materialise, with many Australians either unaware of Open Banking or unclear about how it benefits them (Australian Banking Association, 2024). At the same time other innovations in banking, such as mobile wallets and PayID, provided much higher customer use.
ABA CEO Anna Bligh noted in a 2024 review “Despite the best efforts of Government, regulators and industry, this review makes it clear that CDR has not realised its potential” (Australian Banking Association, 2024).
One of the key challenges stalling the success of Open Banking in Australia is the strict regulatory framework around accreditation. While these rules were introduced to protect consumers and ensure data security, the burden of compliance has made it difficult for fintech startups and mid-tier banks to participate, stifling competition and innovation in the sector. Ironically, these are the very innovators the CDR was meant to empower.
This cost of compliance has proven to be a major obstacle. Since 2018, the banking industry has invested around $1.5 billion in building and maintaining CDR systems (Australian Banking Association, 2024). According to a review conducted by Accenture, an estimated 97% of this expenditure has gone toward meeting compliance requirements, rather than innovation (Buncsi, 2024). This has left limited resources available for customer focused products or enhancements that might demonstrate the benefits of Open Banking.
Participation in the CDR is mandatory for banks, and noncompliance has led to regulatory penalties. Faced with high costs and minimal consumer engagement, ABA CEO Anna Bligh has called for a “new pathway forward” before banks are expected to commit further resources. Without meaningful reform, the current trajectory threatens to undermine the original goals of Open Banking entirely.
The continued dominance of Australia’s Big Four banks presents a significant challenge to the progress of Open Banking. While these institutions are legally required to participate, they have shown minimal enthusiasm in promoting or leveraging the system for innovation. With little competitive pressure, the major banks lack motivation to drive change that could threaten their existing customer base and revenue streams.
For smaller banks, the story is even more challenging. The CDR has had the unintended consequence of exacerbating inequality in the sector. Mid-tier and regional banks face disproportionately higher compliance costs, which strain their limited budgets. According to the ABA (2024), mid-tier banks are spending nearly three times as much on compliance relative to their operating costs, 1.1% compared to 0.4% for major banks.
These financial pressures often force smaller institutions to delay or cancel important investments in areas like digital banking enhancements, fraud prevention, and customer service improvements (Australian Banking Association, 2024). This disparity puts smaller players at a serious disadvantage, reinforcing the market dominance of the Big Four and limiting the competitive edge Open Banking was designed to foster.
Despite the years of development, Open Banking remains largely unfamiliar to many Australians. Even those who are aware of Open Banking often find the signup process too complex or inconsistent across institutions, discouraging them from exploring potential benefits. The limited availability of practical applications leveraging Open Banking data has further dampened consumer interest. Some key account and transaction information was either excluded or made available much later, which diminished functionality for early adopters. As a result, consumers have found little incentive to switch from existing services.
Adding to this hesitancy are ongoing concerns about data privacy and digital security. Many consumers remain unclear about how their data is collected, stored, or shared under the Open Banking framework. With data breaches making frequent headlines, these fears are not unfounded. But with the current state of the Open Banking system, many users have instead relied on less secure methods like screen scraping (Braue, 2024), which involves sharing online banking credentials with third party providers, a practice Open Banking was supposed to eliminate.
Despite all this, public interest in the idea behind Open Banking remains. A 2024 survey found that while 55% of Australians had not heard of Open Banking, there was still significant appetite for the features it promises (FinTech Australia, 2024). Consumer appetite for Open Banking is clear, especially among younger Australians. Research shows that 44% of consumers want access tools that provide a comprehensive view of their finances across multiple institutions, something Open Banking can enable (FinTech Australia, 2024).
In response to these challenges, the government has introduced amendments aimed at simplifying the CDR process. The updates include bundling consent steps to reduce friction for consumers, and easing data sharing requirements for banks seeking to access customer information (Duncan, 2024). These changes are designed to enhance the consumer experience and increase uptake.
While regulators have expressed concerns, fintech companies maintain a more hopeful outlook. They see the CDR as a foundational tool that enables access to bank held customer data, opening the door to more personalised and innovative financial services (Lefebvrain, 2024). Despite slow adoption so far, fintechs believe that once key barriers are removed, the potential for innovation and competition will be unlocked.
Lending could prove to be a key growth area for Open Banking. Industry leaders argue that it offers a compelling business case, with clear returns through faster processing times and better lending decisions driven by richer data. (FinTech Australia, 2024).
The future of Open Banking in Australia remains uncertain. It could either become a transformative force in the financial sector or end up as a missed opportunity weighed down by complex regulations. Assistant Treasurer Stephen Jones recently acknowledged the heavy compliance costs associated with the CDR, stating that these burdens have discouraged businesses from using it for practical applications like comparing mortgages and savings accounts. He stressed the need for the government to do more to justify the significant investments made in the CDR framework (Braue, 2024).
As 2025 unfolds, Australia finds itself navigating a shifting economic landscape shaped by slowing global growth, domestic inflation pressures, and a highly scrutinised housing market. For investors, this environment presents a complex mix of risks and opportunities. Understanding these economic dynamics is essential for making informed financial decisions.
After a turbulent few years, the inflation rate has dropped within the Reserve Bank of Australia (RBA) target range of 2 to 3% and is expected to stay within this range. Despite the good news the RBA remains cautious due to global uncertainties.
Recent missile strikes in Israel and Iran bring geopolitical risks back to the forefront. With threats to global inflation and economic growth due to a predicted surge in oil prices reminiscent of the 1970s and early 1980s. Ultimately the fear is of a surge in oil prices feeding back into consumer prices and lifting global inflation.
In addition, President Trump’s tariff policy continues to be a roller coaster causing political and economic uncertainty worldwide. Although a temporary 90 day reduction in tariffs on Chinese goods, from 41% to 30%, offered brief repose, the threat of renewed hikes if no long term agreement is reached by August 12 keeps markets on edge. These tariff swings affect global supply chains and input costs, potentially contributing to higher prices in both producer and consumer markets.
In Australia, the indirect impacts of these global tensions are already evident. Slower economic growth in China, Australia’s largest trading partner, is reducing demand for Australian exports. At the same time, uncertainty in global markets is dampening business investment and household confidence. These pressures may not immediately push inflation higher, but they create a fragile environment where any external shock could disrupt the current price stability.
Domestically, economic indicators paint a mixed picture. While inflation has eased and unemployment remains down, hovering at a historical low of 4.0%, with a slight increase to 4.2% expected. There are still signs of spending caution within the economy due to slow global growth and rising cost of living.
The Monetary Policy Board has announced a lower cash rate target of 3.85%, down from the prolonged rate of 4.35% due to lower inflation. Although the cash rate reduction is intended to stimulate economic activity, the RBA has expressed concern that global economic and political uncertainty could limit its effectiveness. Trade policy instability, weak external demand, and geopolitical risk all weigh on the outlook, making the sustainability of Australia’s economic recovery uncertain.
Additionally, economists reveal that a range of temporary factors may be distorting inflation figures, including cost of living support measures. The Commonwealth Energy Bill Relief Fund (EBRF) has been suppressing electricity costs, but with rebates winding down, prices are on the rebound, jumping 16.3% in the most recent quarter. This volatility highlights the challenges the RBA faces in accurately gauging inflation trends in the short term
Housing affordability remains a key concern with one of the most significant increases to CPI being due to the cost of housing rising by 2% over the past 12 months. Despite price rises of new housing continuing, the rate of increase is the lowest since 2021. New dwelling inflation has eased, partly due to increased construction activity encouraged by business incentives and government initiatives. While this suggests a gradual return of supply, it remains well below demand.
The slower growth in housing prices has invigorated home buyers, with NAB reporting that lending to first time home buyers is up by 16% since February. Despite this uplift the Guardian warns the long term outlook may not be so good. Predictions see housing price increases fuelled by increased borrowing capacity and lagging supply. Economists warn that without strong and long lasting reformist policy drastically increasing the housing supply the cost of housing will continue to increase, leaving first home buyers locked out of the market.
On the rental front, government support is playing a key role in moderating price increases. The expansion of the Commonwealth Rent Assistance (CRA) program has helped contain rental inflation to 5.5%, compared to 6.8% without the subsidy. Although this represents a deceleration from previous quarters, rent remains a significant pressure on household budgets.
While Australia has avoided recession, the strength and sustainability of its economic recovery remain in question. Belinda Allen, Senior Economist at the Commonwealth Bank of Australia, observes that “the consumer spending rebound is unfolding at a slower rate than we expected, which could be the result of scarring from a loss of real household income post-COVID, and the impact of global uncertainty caused by trade tensions.”
Australia’s economic recovery is delicately balanced and relies on several factors. One of the most crucial is the strength of domestic demand. For the economy to regain consistent momentum, household spending must continue to rise. However, this recovery is vulnerable to ongoing cost of living pressures, which can dampen consumer confidence and reduce discretionary spending. If inflation rises again or essential costs remain high, it may offset gains made through lower interest rates or modest wage growth.
Another important driver is the recovery of export demand. As a trade exposed economy, Australia depends heavily on the performance of its key trading partners, particularly China. Slower than expected economic growth in China has already reduced demand for Australian exports. Until global markets stabilise and international demand strengthens, the export sector will struggle to support national growth.
Finally, Australia’s policy settings, especially in housing, energy, and social welfare, must be carefully balanced. While targeted support programs can alleviate short term pressures, poorly designed or short lived policies may fuel inflation or worsen inequality. Sustainable economic recovery will require coherent, forward looking strategies that promote both economic growth and social resilience.
The financial services industry has historically faced significant challenges combating Money laundering (ML) and terrorist financing (TF). Rapid industry developments have introduced new threats, requiring financial institutions to adapt their compliance frameworks continually.
The shift to digital products has been a looming threat over the past decade, however with pressure from many executives to reduce the physical presence of financial institutions the complexities of AML/CTF activities have become more prominent.
While online account opening and transactions offer convenience, they also create significant vulnerabilities, including fraudulent account openings using stolen or synthetic identities (Francis & He 2023). The online movement has also necessitated the use of online KYC solutions which may have vulnerabilities that experts have not even discovered yet. The impact is not only at account opening, the shift to digital-first banking presents challenges in monitoring accounts and detecting suspicious activity in a fully online ecosystem.
Innovations such as the New Payments Platform (NPP), mobile wallets, and NFC enabled terminals, along with increasing complexity of established systems, have increased transaction speed and convenience. However, as a result of a continually evolving landscape, financial institutions must be consistently evaluating their risk profile and developing controls for newly identified risks in order to mitigate growing losses (Australian Payments Network 2023).
For example, criminals can now exploit the NPP system to wash proceeds from illicit activities through fraudulently opened accounts to launder and integrate funds back into the community on a scale that was impossible with the traditional Bulk Electronic Clearing System (BECS) (Reserve Bank of Australia 2022).
Cryptocurrencies present unique risks due to their pseudonymity and decentralised nature. These assets can facilitate tax evasion through decreasing the visibility of income, enable money laundering due to the lack of robust legislation, and fund transfers to terrorists through the use of unscrupulous providers (Chainalysis 2024)
Since 2020, Australia's Open Banking system has enhanced customer experience by enabling data sharing between banks and third parties (Australian Banking Association n.d.). However, this increased data sharing between banks and third party providers can be exploited for fraud or money laundering if not securely managed. Additionally, the greater complexity in financial ecosystems can create gaps in AML/CTF compliance mechanisms.
With globalisation booming we are seeing more and more interdependence between international financial systems and the Australian banking system. Where before few customers would transact internationally, now many customers buy and sell online, donate to international causes, and invest globally. The convenience of global payments systems does not however come with the visibility to match the associated risks which results in opportunities for criminals to disguise the source or destination of funds (AUSTRAC 2024). The problem is exacerbated when dealing with jurisdictions which lack stringent AML/CTF regulations.
Technological advancement is not a resource limited to those acting within the law and oftentimes criminals have extensive resources to continually develop and improve technology to find, exploit, and even create weaknesses within the industry. Recent examples include AI-based voice replication used in scams and fraud (Federal Bureau of Investigation 2024) and AI-powered bots used to orchestrate large-scale, complex transaction laundering schemes (United Nations 2024). As criminals continue to develop new ways to exploit technology, so too do financial institutions need to innovate their use of technology to keep up with the changing landscape.
The banking sector faces an ever-evolving landscape of AML/CTF risks, exacerbated by advancements in technology and the increasing sophistication of criminal activities. The implementation of risk mitigation strategies is essential to safeguard the industry from financial crime, however these strategies pose their own faults which need to be carefully considered.
Enhanced KYC technologies, such as biometric authentication, AI-driven ID verification, and automatic database cross-referencing, significantly improve the accuracy and efficiency of identity verification (AUSTRAC 2024). These technologies reduce reliance on manual processes and minimise human error, making it harder for criminals to exploit stolen or synthetic identities.
Despite the benefits, systems can incorrectly flag legitimate customers or fail to detect sophisticated fraudulent identities where human checks would not have. The implementation of advanced KYC technologies is also costly, requiring significant initial investment and ongoing maintenance (sanctions.io 2022). Further, as more biometric data is collected, privacy concerns and regulatory challenges can arise.
While enhanced KYC technologies provide substantial value by improving fraud prevention and compliance, financial institutions must ensure that data security systems are robust in order to comply with data privacy regulations and ensure that models used are continuously refined to reduce inaccuracies.
Dynamic risk scoring can evaluate customer and transaction risks based on multiple variables, allowing institutions to prioritise monitoring efforts on high-risk entities. This adaptive approach improves efficiency by automating routine checks (Google n.d.). Despite its benefits, AI systems may inadvertently target specific demographics unfairly if trained on biased data sets. Additionally, decisions made by AI can lack transparency, complicating regulatory audits.
Overall, AI-driven risk scoring offers transformative potential by optimising resource allocation and enhancing risk detection. However, ongoing scrutiny of algorithmic fairness and data integrity is critical for long-term success.
MFA strengthens account security by requiring multiple forms of verification, such as passwords and biometric data. This makes it significantly harder for unauthorised users to access accounts, reducing fraud and identity theft (Cyber.gov n.d.). Despite its effectiveness, many customers lament the introduction of MFA as it can cause inconvenience and potentially deter users from particular products and services. Additionally, weaknesses arise if one authentication factor (e.g. SMS codes) is compromised.
Despite this, MFA has become a foundational security measure due to proven effectiveness in reducing fraud. However, financial institutions must carefully design MFA processes to balance security with customer convenience.
Real-time analysis of transactional patterns enables banks to detect anomalous behaviours indicative of fraud and money laundering rapidly. Behavioural baselines can quickly flag deviations, allowing proactive measures to block suspicious activity (AUSTRAC 2019).
Unfortunately, analysing large volumes of transactional data can strain resources and overwhelm systems, leading to inefficiencies. Criminals are also continuously modifying their behaviours to evade detection by these systems and frequent false positives can disrupt customer experiences and place strain on compliance teams.
As transactional pattern analysis has proven indispensable for detecting AML/CTF risks in real time it should be implemented in each financial institution, however, its efficacy depends on advanced algorithms and the integration of robust data management systems to minimise false alarms.
Limiting transaction amounts or frequencies in fast-payment systems mitigates misuse by criminals attempting to quickly launder illicit funds (AUSTRAC 2023). This strategy provides a basic control to slow down suspicious activity.
However, limits must be carefully considered and managed as unnecessarily low transaction limits can frustrate customers with genuine high-value or high-volume needs. Additionally, criminals may open multiple accounts or split transactions to circumvent limits. Overall transaction limits are a straightforward yet effective measure to deter illicit activity. However, banks should adopt flexible thresholds and combine limits with advanced monitoring for optimal results.
Verifying the legitimacy of cryptocurrency providers and wallets helps mitigate risks associated with anonymity and pseudonymity in transactions. Tools like blockchain analytics can be used to enhance visibility into cryptocurrency flows.
Limitations to this strategy arise similarly to issues faced with multinational transacting, not all jurisdictions enforce robust regulations on cryptocurrency providers, creating gaps in coverage. Further, integrating blockchain analysis tools requires specialised expertise and resources and therefore may be out of reach for smaller mutual banks and credit unions for now.
Verification of cryptocurrency providers can be a regular procedure for reducing the risks posed by digital assets. Collaboration with blockchain analytics firms and regulators can amplify its effectiveness (MasterCard n.d.)
Flagging transactions involving sanctioned entities or high-risk jurisdictions ensures compliance with international regulations, and automated screening tools improve accuracy and efficiency.
Difficulties arise with keeping up to date sanctions lists and this can take significant resources. Further, if systems are poorly configured customers may be flagged unnecessarily, creating additional workload and inconvenience for customers. None the less screening for sanctioned entities is a regulatory necessity with significant value (AUSTRAC 2013). To overcome limitations automation and integration with reliable data sources should be used.
Regular training equips employees with the knowledge to identify and mitigate risks effectively, ensuring that AML/CTF policies are applied consistently (AUSTRAC 2023). Training must be carefully considered as frequent or repeated training sessions can lead to disengagement. Further, high quality training programs require substantial investment. To circumvent these challenges financial institutions should use engaging, scenario based training modules and interactive assessment to maximise retention and effectiveness (Singh 2023)
Regular evaluation of third-party providers ensures their compliance with AML/CTF standards, reducing risks from outsourcing critical functions. Challenges arise as conducting thorough reviews of third-party providers can be time consuming and costly, and banks may face challenges in enforcing compliance among independent providers.
Evaluating third-party compliance is non-negotiable in mitigating risks (AUSTRAC 2019), therefore, institutions should prioritise high risk providers and leverage standardised assessment frameworks to streamline the process.
Collaborating with industry groups fosters information sharing on emerging threats and enhancing collective defences against financial crime. Platforms like AUSTRAC’s Fintel Alliance exemplify the value of partnerships (AUSTRAC 2024). Additionally, collaboration through shared reporting platforms can create fast paced detection of criminals leading to better risk mitigation. Despite the benefits, the sharing of sensitive information must be carefully considered and designed to comply with strict data protection laws. As industry collaboration is so critical to addressing systemic risks, financial institutions should actively participate in alliances and contribute to collective intelligence efforts using deidentified data wherever possible.
The financial services industry’s ability to mitigate AML/CTF risks hinges on a multifaceted approach that combines technology, robust governance, and collaborative efforts. Each strategy discussed has unique implications and limitations, but thoughtful implementation of risk mitigation strategies can form a strong defence system against financial crime. Financial institutions must tailor risk mitigation strategies to their operational contexts, continuously refining them to stay ahead of emerging threats.