Laundering costs loom over industry
The financial services industry is bracing itself against the potentially crippling cost of having to identify more than nine million investors ahead of the Federal Government issuing a draft paper on its anti-money laundering reforms next week.
The reforms pertain to the provisions of the Financial Transaction Reports Act 1988 (FTRA) and follow the Government calling for submissions from the financial services sector in an issues paper on the matter released earlier this year.
The Investment and Financial Services Association (IFSA) has been lobbying the Government on the issue and says any expansion of the financial services industry’s regulatory obligations is untenable.
However, IFSA chief executive Richard Gilbert is confident the reforms, which are being steered by the Minister for Justice and Customs, Senator Christopher Ellison, will deliver a reasonable outcome to the industry.
“We remain sanguine that the Government will deliver us a risk-based system that is not cost crippling to organisations, but at the same time achieves the objectives of identifying genuine money laundering and terrorist financing, and we will work over the coming months to achieve that,” Gilbert says.
The issues paper defines the purpose of the FTRA as “to discourage financially motivated criminals and to provide financial intelligence to revenue and law enforcement agencies”, but Gilbert says the costs of identifying every client within the investment industry may outweigh the benefits to the Government.
The Government says risk-based strategies are intended to map a financial institution’s internal control environment in order to isolate areas and activities that may be vulnerable to money laundering and terrorist financing.
The FTRA has penalties in place for non-compliance with its reporting requirements or for provision of false or incomplete information.
These penalties pertain to those involved in investing, administering or managing funds or money on behalf of other persons, as well as businesses involved in underwriting and placement of life insurance and other investment related insurance.
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