As delays for Tranche 2 reform continue on, banks are straining under the weight of increasing compliance costs and complications.
Tranche 2 is happening. But what does that mean for Australia and, more specifically, businesses who will now have to report to AUSTRAC?
Australia can learn a lot from other jurisdictions where similar regulations are already in place. Martin Dilly, AML/CTF specialist and director of MDAML, joined us to discuss anticipated changes to Australia’s compliance regulations, recent findings from the NZ Mutual Evaluation, and what that means for you as an affected business.
Changes to Australian regulations
Tranche 2 reforms have been teetering at the edge of Australian compliance regulation for years now. The drawn out delays add more strain on those companies already regulated by AUSTRAC – namely, banks and fintechs.
Creating a regulatory framework that demands enough of larger institutions, not too much of small businesses, doesn’t increase the cost of compliance, but still satisfies the AML/CTF requirements of AUSTRAC is no easy feat. It is, in part, the reason for extended delays on Tranche 2 reforms.
New Zealand, on the other hand, went through this process already with their Mutual Evaluation. Perhaps we have a thing or two to learn from our neighbours across the ditch?
What NZ Mutual Evaluation got right
The Mutual Evaluation reports on the effectiveness of New Zealand’s AML/CTF system and legislative framework. The latest investigation was carried out in early 2020—with the findings published in April 2021—and includes a thorough analysis of the system’s:
- assessment of risk, coordination, and policy-setting
- financial intelligence, ML investigations, prosecutions and confiscations
- terrorist financing
- preventative measures, supervision, and
- transparency and beneficial ownership.
The investigation uncovered a number of strengths including the implementation of ‘Phase 2’ (known in Australia as Tranche 2), the confiscation of criminal proceeds, and the robustness of the framework itself.
“I think it was overall positive”, Dilly said of the NZ Mutual Evaluation. “New Zealand has always had a pretty good framework”.
Gaps and risks in the NZ Mutual Evaluation
Although New Zealand created a “pretty solid” framework for AML/CTF legislation, Dilly noted some gaps that could pose potential risks, including licensing of money remitters, supervisory challenges, and beneficial ownership.
What does this mean for Australia?
Tranche 2 reform will impact a wider number of businesses, including ‘gatekeeper professions’ such as lawyers, accountants, and real estate agents. The number of businesses affected could increase as much as 100,000+.
But what does this actually mean for businesses set to be regulated under new Tranche 2 reforms?
Perhaps of all the insight Dilly shared, one word of advice stands out amongst the rest:
“Prepare” says Dilly.
If your customer database isn’t up to date how can you expect to remain compliant and have the information you need to report on, when the changes come?
“My key advice is to start thinking ahead (and) don’t leave it too late.”
Learn more about how Identitii is helping AUSTRAC-regulated businesses to minimise non-compliance risk through automated reporting.
