Financial crime's dynamic duo: AUSTRAC & industry

As the threat of money laundering and terrorism becomes clearer, regulators and industry are working more closely together to confront the threat in a united manner. But what role does the financial services industry need to play? 


"We have government officers sitting side-by-side with industry officers, sharing information real-time and collaborating."
Paul-Jevtovic, AUSTRAC CEO

At the recent ANZ Financial Crime Forum, bluenotes sat down with Paul Jevtovic, CEO of AUSTRAC, Australia’s Financial Intelligence Unit and Regulator of AML/CTF.

We started by asking him about the importance of the relationship between AUSTRAC and the private sector.

Guy Boyd: AUSTRAC is Australia's financial intelligence agency but also has regulatory responsibility for anti-money laundering and counter-terrorism financing. How do you see the relationship between AUSTRAC and the private sector?

Paul Jevtovic: I’m very much on the public record in saying I believe industry is a critical player, both as the first and often the last line of defence against the threats we face. Whether that be organised crime, terrorism, child exploitation, the list is endless. Industry has a critical role to play.

[The industry] represents a very strong contingent of intelligence officers and analysts and bank employees who are making a significant contribution to safe guarding this nation, which at the end of the day is what we’re all about.

I’m often quoted, and sometimes to the ire of some of my public service companions, that I never see how we differentiate, why we trust public servants more than people who work in banks in Australia.

It’s like you’re a better Australian if you work for government than you are in the private sector, I’ve never understood that.

Boyd: One of the most recent initiatives has been the establishment of the Fintel Alliance between industry and government. Can you explain the Fintel Alliance?

Jevtovic: The Fintel Alliance is the first of a kind in the world, where we have government officers sitting side-by-side with industry officers, sharing information real-time and collaborating on the kind of products and services we need to deliver to safe-guard our country, to protect the integrity of the financial sector.

In a way it’s sad it took so long. But the principles by which the Fintel Alliance has been formed are already paying dividends.

I’ll just share some of the initial priorities if you like of the Alliance. The exploitation of the Australian Cyber Online Reporting Network, ACORN, was one the priorities we’re working on together and already industry has been able to give some insights around ACORN data that was not obvious to government agencies in the first instance, so already we’re realising the value from this relationship. 

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Organised crime groups, the financial networks that sit behind the high risk organised crime groups, and in particular industry put forward a focus on this. That’s the beauty of the Fintel Alliance, it is not just the government agencies that will play the music and everyone else will dance.

This is about capability that respects and listens to the priorities industry puts forward and that is one of the most exciting things that I think, the Alliance has got going for it.

Child exploitation, there can be no more heinous crime that prevails in our community than child exploitation. Some of the work the Alliance is doing already is having some very good results.

We come from the child exploitation perspective obviously from the finances that sit behind those who would commit those serious crimes.

I think one of the things emerging more and more is the Fintel Alliance is helping law enforcement agencies and other government agencies understand there is hardly a crime, there is hardly behaviour, that does not have a nexus to finances in some form.

The Alliance therefore represents one of the richest veins of opportunity, to not only detect crime, but to prevent crime. And that’s something the Alliance has as one of its key objectives.

The Fintel Alliance represents a couple of pillars, the intelligence pillar is a critical one but it’s also about innovation. It’s about creating an environment where we can sit down as trusted partners and talk about regulation. Talk about what’s working and what’s not.

Boyd: How can you build that stronger relationship necessary for this to work well?

Jevtovic: Education is a key pillar of the Fintel Alliance. So we’ve established the first Financial Intelligence Analyst course, it’s been done in conjunction with two Australian universities; it will be tertiary accredited.

It is also a critical opportunity to have industry analysts attending the program with government analysts. Building networks, building alumni, building relationships that allow you to pick up a phone with fellow alumni and say ‘Hey listen, I’m just thinking about this issue, what do you think?’

That’s what actually underpins why we’ve developed this program.

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Source: AUSTRAC annual report 2015-16

Boyd: Obviously the threats we face are changing all the time – they seem to be changing rapidly. How do we best position ourselves for fighting financial crime in the future?

Jevtovic: Over the horizon, what are some of things really starting to challenge us from a financial intelligence perspective?

Well the war in Syria will end but ISIL’s war will not. So we’ll be confronted shortly with a lot of soldiers who have gone over and fought for what they believe in, they will need to go back somewhere. They will look for havens to continue their way of life and for them to practice their beliefs.

So all of a sudden the Southern Philippines becomes a potential key risk and threat for Australia – there is concern ISIL may well seek to declare a caliphate in the southern Philippines.

Its proximity and the fact it’s created an enclave that will allow radicals to do what they do. So what are we doing in anticipation of that? How are we thinking about that? What is the kind of financial intelligence we can collectively focus on? How can we work with our partners across South East Asia to ensure ISIL doesn’t re-emerge in this region?

Boyd: One of the growing threats of course is cybercrime. What is your perspective there?

Jevtovic: We have some serious challenges around cyber. The cyber threat is a real one, it’s a continuing one and I think it’ll be the hallmark of the landscape in which we need to operate into the future.

It’s frustrating when you think we still do so many things manually yet we’re up against an enemy like organised crime that can invest anything they want to be at the cutting edge. But at the core of a lot of our challenges is the issue of identity and that’s going to become worse.

You yourselves are contributing that. We’re looking at less contact between customer and financial institution. That’s a good thing because it means banking is going to be easier for the community.

How do we offset the fact most of the intelligence we used to receive was from a good bank officer making observations? How’s that going to happen in the digital and online network? It’s new intelligence we need to look for.

What’s the financial footprint in the digital environment and the online environment? We need to think differently about - I’m talking like this is coming, this has arrived and we’re catching up and we are really struggling to be quite frank.

Boyd: I don’t think any reasonable person would question the intention of what AUSTRAC and other regulators are seeking - we all want a safer and better financial system that is not corrupted. The challenge is the cost of safeguarding that system just keeps growing.

Jevtovic: We actually want ANZ to be spending less on regulation as it relates to AML/CTF because if you’re spending less on regulation I hope the board and the CEO employ more people; create more opportunities for Australians; reinvest in the economy of this country.

We get that and we’re committed to working with the industry in co-design strategies as to how we mitigate risk but at the same time bring down the cost of investment.

I want to make a point there, it’s one of the things from the moment I arrived here I hated hearing, was when people spoke about the regulatory burden. I just want to give you a perspective on that.

How can we call stopping terrorist, stopping paedophiles, how can we call that a burden? Because that’s what our regulation is actually all about.

It’s about stopping those people harming Australians, harming our children, how can that ever be a burden? So just a thought about a perspective I’ve taken and how I look at what I call investment.

Boyd: Of course as individuals and corporate citizens we do want to do the right thing. The other element though is it is good business to do the right thing.

It is a very much a deliberate strategy by the bank to invest in good financial crime risk management; it’s good for business, it’s good for the community, if you took away from Pauls’ presentation, there is a lot of commonality between the culture being created at AUSTRAC and the culture you are hearing being spoken about by the leadership at the bank.

There is no ‘magic’ behind that, it’s because it all makes sense. We are all in the same game about helping our communities thrive, and that necessitates fighting financial crime.

Guy Boyd is group head of financial crime at ANZ  

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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