Lenders beware: Big player hit with infringement
So, you lend money. Are you registered with AUSTRAC and do you comply with Anti-Money Laundering Laws? No, now that’s a costly mistake.
AUSTRAC v State Street
State Street Corporation is an American bank with operations worldwide (including an Australian arm), and is the second-oldest continually operating U.S. bank. For a company of its size and pedigree, one would think it has Anti-Money Laundering compliance ‘ship-shape.’
However, AUSTRAC recently issued a $1.24 million infringement notice on State Street relating to 99 breaches of the Anti-Money Laundering and Counter Terrorism Financing legislation (“AML”) for failing to declare international transfers that potentially left it exposed to organised crime, terrorism, slavery, drug trafficking and tax evasion being committed via its facilities.
State Street had done the correct approach and upon becoming aware of the breaches it self-reported to AUSTRAC.
AUSTRAC has acknowledged that State Street has cooperated in relation to investigating such breaches and remedial action to prevent breaches going forward.
State Street released a statement conveying that “There is no suggestion that the transactions in question were suspicious nor that there were deficiencies in State Street’s customer due diligence.”
Pre-2017, AUSTRAC and ASIC took a largely cooperative approach with lenders under the AML and were focused more on assisting lenders comply with the legislation and learn from their failings. However, the Royal Commission was deeply critical of ASIC and AUSTRAC in its lack of prosecutions against lenders.
We have since seen some very high-profile players being pursued by AUSTRAC – CBA’s settlement cost it $700 million for its 54,000 AML breaches and Westpac is still in settlement discussions with AUSTRAC regarding its alleged 23 million AML breaches and an estimated costing to Westpac of $900 million in fines.
Conclusion
The takeaway is that even the big and well-established players get it wrong and it is a costly error to make. If you lend money you must check whether you should register with AUSTRAC and you must make sure you have the systems, policies and procedures in place to be AML compliant. Otherwise, you will be forking out money, not for loans, but fines.
Queries
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Disclaimer
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.