On a recent trip to Australia, Financial Crime News caught up with ANZ’s Guy Boyd, now Chief Compliance Officer, in Melbourne, with responsibility also for Financial Crime Compliance. In this interview Guy answers questions on ANZ, the threats and risks facing Australia, New Zealand and the wider Region, challenges and opportunities and highlights the work of the Fintel Alliance, the public private partnership making great strides and an example to many. For more information from FCN on Country Threats on Australia see HERE, and on New Zealand see HERE:
1 FCN: What’s your current role and how did you get to this position?
GB: Since July this year I have been ANZ’s Chief Compliance Officer. Interestingly, I moved from private legal practice to ANZ in 2006 in its legal team and later into the Risk function to work on establishing a sanctions compliance response and capability. I then also took on the AML/CTF compliance responsibilities. I spent a few years leading our Australia Retail compliance team before returning to the Group Compliance function in 2013 as ANZ’s newly established Head of Financial Crime.
2 FCN: Tell us a bit more about ANZ?
GB: ANZ has existed for around 180 years. ANZ is among the top 4 banks in Australia, is the largest banking group in New Zealand and across the Pacific, and is among the top 50 banks in the world. ANZ has a presence in over 30 Countries including Australia, New Zealand, Asia, Pacific, Europe, America and the Middle East. ANZ provides Retail banking in Australia, NZ and Pacific, as well as consumer lending, and commercial lending from small to multi-national customers. ANZ has the largest international footprint of the Australian banks and has a long history of supporting international trade and commerce. ANZ’s purpose is to shape a world where people and communities thrive. That is why we strive to create a balanced, sustainable economy in which everyone can take part and build a better life.
3 FCN: Are Australia and New Zealand more or less exposed than other Countries in the Region and why?
GB: Australia and New Zealand are advanced economies, with stable political systems, and traditionally relatively open borders which have welcomed both trade and people from overseas, making both countries culturally diverse and successful, but at the same time the same conditions for success have also enabled criminal activities to exploit these attributes. This means opportunities in all aspects of financial crime from fraudsters, scammers, drug dealers, money launderers in general as well as for financiers of terrorism. In response, we have been trying to understand better, flows of funds, in particular to and from Asia to segregate those that are legitimate from those that are not. Much of the responsibility for detecting and managing this risk has fallen to financial institutions as the AML/CTF regime in Australia has not yet extended to capture real estate agents, lawyers, and other designated non financial service businesses. NZ has, however, recently broadened their laws to include those businesses so that is positive for the region.
4 FCN: What are the main ML/TF risks affecting Australia?
GB: The Australian Government produces ML & TF risk publications via separate Government agencies. AUSTRAC publishes ML Risk Assessments on specific sectors, recently issuing a Risk Assessment on the Mutual Banking sector, and currently is in the process of updating Risk Assessments on Major Domestic Banks, Foreign Banks and branches in Australia as well as Gambling/Casinos and Remitters. These are all due for publication in 2020 with the Private Sector consulted / interviewed as part of each of these. Whilst there is no official government estimates for the size of financial crime affecting Australia, Peter Soros, the Deputy CEO of AUSTRAC in a recent speech, provided some interesting figures when he stated that, “According to the Australian Institute of Criminology, serious and organized crime cost the country an estimated A$47.4 billion (US$33 billion) during the financial year 2016-17 — equal to about 3.8 percent of Australia’s A$1.25 trillion (US$860 billion) economy in 2017. One-third of this number, A$15.9 billion, (US$11 billion) is spent on prevention and response by law enforcement, the criminal justice system, various other government agencies, the private sector and individuals in the community.”
These numbers highlight the immense challenge Australia faces in attempting to stop various forms of financial crime, including money laundering, terrorism financing and tax evasion.” Some key areas of ML threat from offshore to Australia are (1) the outflow of funds to offshore locations from organised crime groups involved in the importation of drugs to Australia (Australia is an attractive option due to the high prices drugs can be sold for here), (2) the significant inflow of funds to invest in property in Australia from a range of developing Asian Countries (in particular China and Vietnam), and (3) the outflow of funds from the growing number of scams against residents of Australia (investment scams, romance scams etc). Australia in general still has relatively high levels of cash in use for genuine business purposes and criminals take advantage of this for co-mingling of criminal proceeds however from 2020 the Government is expected to introduce a limit of $10K cash that will apply to many business transactions as an attempt to stem some of the illegitimate cashflow.
For more information, AUSTRAC as both the FIU and Regulatory Supervisor in AU issues an Annual Report. The most recent (2018-19) sets out actions taken in oversight of 14,000+ reporting entities, and outreach to industry and regulatory action. It includes the use of the suspicious matter reports information, including that more than 4,500 Australian Taxation Office (ATO) cases used AUSTRAC’s financial intelligence capability. These cases contributed to the ATO’s raised revenue of more than A$210 million (US$145 million) for the financial year.
From a Terrorism Finance perspective, The Australian Government publishes a National Counter-Terrorism Plan as well as the Counter- Terrorism Strategy and other related publications. The current terrorism rating is “Probable” and the Government highlights that “The primary terrorist threat in Australia today comes from a small number of Australian-based individuals who are committed to a violent anti-Western, Sunni Islamist extremist ideology. These individuals present a direct threat as well as a secondary threat through their ability to influence others.” Areas of risk include onshore attack planning by those that have had their Australian passports cancelled — preventing them from travelling to join terrorist groups in conflict zones and from those that return from the conflicts, as well as radicalisation by extremists of vulnerable community members.
5 FCN: What are the risks and threats faced in New Zealand?
GB: New Zealand published their National Money Laundering and Terrorism Financing Risk Assessment in 2018. The FIU in NZ estimated that NZD 1.35 billion (USD870 million) is generated annually for laundering, primarily from drug, fraud and tax offending. That amounts to just 0.4% of NZ GDP for 2018. This figure excludes though transnational laundering of overseas proceeds and laundering the proceeds of domestic tax offending, as such the overall value of money laundering is likely to be significantly more than this figure. According to the NZ FIU, three key areas of known threat from offshore to NZ are from i) transnational organised crime groups linked to NZ, such as transnational drug distribution networks, ii) overseas criminal organisations not generally connected to NZ who may seek to move funds through NZ and/or utilise NZ’s legal structures, and iii) dedicated money laundering networks, which may also seek to move funds through NZ’s financial system or via NZ’s legal structures.
The highest priority observed vulnerabilities for New Zealand are: International wire transfers, Alternative payment methods, New technology, Gatekeeper professional services including formation of companies, trusts and charities, Cash, businesses & High value goods.
As far as Terrorism and Terrorism finance is concerned, the Risk Assessment focussed on NZ as traditionally a low risk environment, with groups such as Islamic State / Da’esh or Al-Qaeda named, though given the low level of domestic support for terrorist causes, it was considered more likely that this threat would manifest in NZ as isolated disaffected individuals or small groups. Of course this is what happened in Christchurch in March 2019, though this was a radicalised far right extremist from Australia that carried out NZ’s worse terrorist attack.
6 FCN: What opportunities do you see to improve the effectiveness of the fight against Financial Crime?
GB: There is certainly change in the air, and actually in Australia in particular, changes recently adopted are having an effect. For example legal changes now permit greater sharing of information between Reporting Entities and AUSTRAC (the FIU) enabling both FI’s and law enforcement to work better together, leading already to notable arrests of criminals, that have taken place much faster than would have been possible in the past as evidence can be gathered and assessed much more quickly. We want to see greater information sharing and to extend this principle also between Financial Institutions with safeguards protecting privacy, but as yet this is still not possible. As mentioned earlier broadening of the AML/ CTF regime to include more business types, is an important change needed to plug the gaps in the system.
Elsewhere there is a recognition that more is needed to be done (including investing in additional resources) to shore up the mandatory reporting of large cash transactions and international funds transfers, and a general uplift across the industry to improve technical compliance, at the same time as recognising that the priority should be fighting financial crime outcomes.
7 FCN: You mention the need for improvements, including investments in additional resources across the Industry, which is no doubt in response to the negative headlines in Australia – Is the turn around underway?
GB: There has definitely been a wake up call for many, and a tougher approach by AUSTRAC to enforcement with public actions against some Reporting Entities that were not meeting the standards expected. These actions will continue on a case by case basis as AUSTRAC drives the required uplift in technical compliance across the Industry and seeks to bring Australia up to standard in combatting money laundering and the financing of terrorism. This is not to say that FI’s are not working hard to fight financial crime, and can show significant contributions helping law enforcement in particular to be successful, but its also the case that there is now a much greater appreciation of what is now required than there has been, and the industry is determined and committed to meet these expectations fully.
8 FCN: How are these factors affecting the market for Talent in Australia?
GB: As the Industry focusses on upgrading the response, it has looked to other markets to attract FCC Talent into Australia and has largely been successful in doing so, with ex Pats, willing to return home from overseas and overseas talent willing to relocate to Australia. It’s not just the Industry that is expanding, as for example AUSTRAC has also had a significant funding increase and has increased resources too. In the short term this trend is likely to continue, with more hires to come. As hiring continues we are seeing a focus on key talent, with relevant specialist expertise sought as apposed to volume, and there is also a shift toward greater data analytics type skill sets being sought as a core attribute for the financial crime fighter of the future.
9 FCN: Australia has its own Public Private Partnership known as the Fintel Alliance, what does it do and where is it headed?
GB: The Fintel Alliance is a partnership between Public and the Private Sectors with the goal of bringing analysts and data together quickly to disrupt criminal behaviour. There are 25 government and private sector members including major banks, gaming, remittance and other industry partners. The Fintel Alliance is hosted at AUSTRAC’s offices and has been very successful in its first 2 years with ANZ playing a leading role in providing specific information into the Alliance and being involved in the Strategic Board that sets the direction for the Alliance and the working groups. Not only has the Fintel Alliance improved understanding and awareness of the risks and threats Australia faces, it has demonstrated operational success with targeted priorities worked by Alliance members. In addition the Alliance provides opportunities for members to contribute specific knowledge and expertise and for example, ANZ was able to share specific intelligence and detection algorithms with Alliance members which has strengthened the industry wide approach to important threats faced and now diminished. Whilst the Fintel Alliance is a prime example of partnerships and information sharing working, the next step I believe is to find ways to share more information beyond typologies between and across the Industry. The Alliance is the sole channel for parties to work together and whilst there are plans to do more in the Alliance this could be turbocharged if opportunities existed for example as they do in the US and increasingly elsewhere for increased private sector to private sector cooperation.
Additional background on Fintel Alliance from its recently published annual report: Since its inception in 2017, Fintel Alliance has introduced an innovative approach to combating serious financial crime, initiating 49 operations, with 15 ongoing in the 2019-20 financial year. Fintel Alliance has now expanded to 25 public and private sector partners, with three new private sector entities joining in 2018-19. The knowledge and expertise of Fintel Alliance has continued to expand, with 77 personnel now assigned from the private sector, government and law enforcement communities. Fintel Alliance was granted a modification under Section 248 of the Anti- Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). This modified section 123 (tipping off) of the AML/CTF Act to enable effective sharing of AUSTRAC information among partners. Successful tailored operations involving Australia’s Most Wanted and disrupting child sexual exploitation activities demonstrate the capabilities and effectiveness of Fintel Alliance. The Australian Government announced new funding of A$28.4 million over four years for the Fintel Alliance as part of its 2019-20 Budget (commencing in July 2019). This funding will allow AUSTRAC to continue to expand Fintel Alliance operations.
10 FCN: What kinds of collaboration is there across the Banks in Australia and New Zealand on fighting financial crime?
GB: On top of the Fintel Alliance, most Financial Institutions see value in working together to protect the communities we serve and there is significant engagement through industry groups. Additionally given the relationships between the NZ and AU banks (4 out of 5 of NZ major banks are owned by AU Banks) learnings are shared. Also, the Five Eyes Law Enforcement Group is an international coalition of law enforcement agencies from the United Kingdom, Canada, the United States, New Zealand and Australia (Five Eyes partners through international deployments and information sharing), which allows further ties between AU and NZ entities, and for us to benefit from knowledge and awareness from these sources.
11 FCN – Is Cyber Crime a concern also in Australia and New Zealand?
GB: Absolutely. In our now borderless digital world, and being fortunate to have reasonably wealthy populations in Australia and NZ we are exposed to the same cyber crime threats, as other prosperous nations are facing. As the National Risk Assessments make clear, Fraud is a significant risk, and increasingly Fraud is carried out via cyber channels. Most financial institutions have seen a significant increase of customers being caught up in scams and the Australian Cyber Security Centre has received more than 13,500 reports of cybercrime since July 2019. Each incident can have a real impact on the individuals or business caught with the average amount of loss per business incident around A$276K. Not surprisingly the evolving response to this threat is industry wide and across public and private sectors, in line with how the broader fight against financial crime is evolving.
Guy Boyd is ANZ’s Chief Compliance Officer. Guy moved from private legal practice to ANZ in 2006 in its legal team and later into the Risk function to work on establishing a sanctions compliance response and capability. Guy has held senior roles leading ANZ’s Australia Retail Compliance team before returning to the Group Compliance function in 2013 as ANZ’s newly established Head of Financial Crime. He became Chief Compliance Officer earlier this yer.
FCN thanks Guy Boyd and Warren Dickins and ANZ for their time and insights in bringing this interview to publication.