AML/CTF legislation a huge cost burden

A senior executive of a data warehousing organisation estimates that it will cost major financial institutions up to $100 million to implement systems and procedures to ensure they comply with the proposed Anti-Money Laundering and Counter Terrorism Financing (AML/CTF) legislation.

Teradata senior consultant Asia Pacific Mark Taylor said: “The banks here are going to be spending at least anything from $30, $50, right up to $100 million or more. The organisations need to do an awful lot in terms of building enterprise-wide programs from top to bottom. There needs to be significant training put in place so that everybody is aware of what it means and how they can play their part.”

He said Australian financial institutions were currently lagging behind other organisations around the world regarding its AML/CTF structures.

“Last October, the Financial Action Task Force (FATF), which is responsible for building all of the anti-money laundering recommendations around the world, did an audit in Australia and we failed pretty dismally in terms of what we had to combat this sort of thing. We were found in many of those recommendations to be 25 to 50 per cent compliant,” Taylor said.

In recognising how much work needed to be done in this country to comply with the impending AML/CTF legislation, executive vice president with Mantas, a company supplying AML software systems, Darren Innes, supported calls from bodies such as the Financial Planning Association for a minimum three-year transition period.

“What’s going to happen in Australia is that four phases are going to have to be implemented at the same time. Financial institutions are going to have to look at their ‘know your customer’ activity, they are going to have to have a look at their transaction monitoring, and then they’re going to have to look at their processes and cultural change and everything that goes on around that,” Innes said.

“This has taken some countries five, six, and seven years to implement the whole project, and Australia is likely to have to do all of it in 18 months,” Innes added.

However, his advice for financial institutions was not to focus on the cost alone, as being implicated in a money laundering exercise is likely to cause greater cost to the company’s reputation than the initial procedural implementation expenses.