By Stephen Rae for AMLi
IT WAS a dramatic Monday ‘Down Under’ as Australia’s financial watchdog announced AML investigations into the country’s third biggest bank and three of its major casinos.
National Australia Bank (NAB) was the first to revealed it is being probed for suspected serious and ongoing breaches of anti-money laundering and counter-terrorism laws.
The news has raised the spectre of fines and higher compliance costs at the lender, while shares in Australia’s third-largest lender fell 2.6% in morning trading.
As well as targeting NAB, AUSTRAC also said it was investigating the major casino operators, SkyCity, Crown Resorts and Star Entertainment. The announcements come just one week after a Special Report on AML Intelligence warned that Australia was in danger of being placed on FATF’s “Grey List.”
One business journalist described the announcements as delivering “a rude awakening to corporate Australia in what felt like a pummeling from a mechanical ball throwing machine, as the anti-money laundering regulator carried out a concerted and rapid-fire blitz on Australia’s three major casinos and the National Australia Bank.”
AUSTRAC’s first hit on Monday was delivered at 7.31am when SkyCity Entertainment casinos disclosed notification from the regulator of potential serious non-compliance with the Anti-Money Laundering and Counter-Terrorism (AML/CTF) Act.
One hour later NAB issued ITS statement that AUSTRAC’s enforcement team had been given the brief to investigate serious concerns about the bank’s compliance with money laundering laws and regulations.
Soon after Crown Resorts announced that its Perth casino had also landed in the laps of AUSTRAC’s enforcement team – again thanks to the identification of potential serious non-compliance with the AML/CTF Act.
Crown was followed by rival Star Entertainment which said it was also in the frame for potential serious breaches of AML.
AUSTRAC said today there were “areas of serious concern” at NAB that required further investigation. These involved “potential serious and ongoing non-compliance” with customer identification procedures, customer due diligence and other compliance requirements.
“AUSTRAC’s concerns emanate from historical and contemporary compliance assessments,” the agency said in letter to the lender dated June 4.
“In particular, the seriousness of self-disclosed matters presented to AUSTRAC over a prolonged period combined with the accompanying closure rates is concerning.”
The investigation would now be handled by AUSTRAC’s enforcement team, while no decision had yet been made about whether further enforcement action would be taken and was not considering civil penalty proceedings at this stage.
This was “reflective of the work undertaken” by NAB to date, but the regulator’s position could change, the letter added.
Meanwhile the bank said it would continue to cooperate with the regulator.
“NAB has an important role in monitoring and reporting suspicious activity and keeping Australia’s financial system, our bank and our customers safe,” Chief Executive Officer Ross McEwan said in a statement.
“We are very aware that we need to further improve our performance in relation to these matters. We have been working to improve and clearly have more to do.”
AUSTRAC has levied A$2 billion ($1.5 billion) in penalties on NAB’s larger peers – Commonwealth Bank and Westpac Banking Corp – for breaches of anti-money laundering rules since 2018.
The announcement comes amid fresh revelations the lender’s AML department is struggling to cope with a blow-out in processing times for suspicious transactions and a year-long backlog for reviewing high-risk customers.
Multiple former employees from NAB’s anti-money laundering compliance department told The Age and Sydney Morning Herald newspapers of significant problems in the division, with high staff turnover and unrealistic performance targets sapping morale and outdated technology systems leaving the bank exposed to potential risks.
Former employees who spoke to The Age newspaper in Melbourne pointed to an internal policy overhaul introduced in 2018 designed to increase the thoroughness of NAB’s due diligence which they say ended up multiplying workloads to unsustainable levels.
“They can’t keep up with the flow … The risk is that things slip through the cracks. And if that happens, you can let potential terrorists go through,” one of the former employees told the paper.
NAB’s new AML policy was based on consultants’ advice that recommended changing the way each customers’ risk profile was calculated, from a series of “yes or no” questions in a check-list to a risk-based approach involving more detailed analysis.
This drastically increased the processing time for each alert, and meant NAB had to go on a hiring spree to keep up with the increased workload, the paper said. “Multiple sources claim NAB hired under-qualified people to fill the gaps, creating further problems, the Age reproted.
The former staff members claimed NAB’s cumbersome new processes contributed to a backlog of at least one year for ongoing monitoring required of customers working in industries most exposed to serious and organised crime, and that the company was using technology platforms that were up to two decades old.
“When it comes to high-risk customers, like casinos, guns, it’s mandatory to do a periodic maintenance review of them every year,” one source said. “It [the backlog] could be a year or two.”
AUSTRAC was apparently aware of this, and granted NAB a series of extensions to fix the problem.
In order to reduce the backlog, NAB introduced a new computer system that would track how long it took each staff member to complete certain tasks. A fourth former employee from NAB’s fraud team said they were made to process alerts within two or three minutes to meet the performance hurdles, where previously this took 15 minutes. “The KPIs weren’t actually reachable” the source said.
Staff that failed to meet the targets were placed on an “improvement plan” where they were banned from moving into new roles or receiving promotions, the sources told the newspaper.