Source: The Conversation (Au and NZ)
The start of the new financial year on July 1 was a special date for Australian laws against money laundering and terrorist financing.
For years, anti-money laundering (AML) and counter-terrorism financing (CTF) rules have applied to banks, casinos and gold bullion dealers. Now, for the first time, they also apply to accountants, lawyers and real estate agents.
These reforms mark a sea change in the relationship between regulated businesses and their customers.
But although such laws are now ubiquitous around the world, their effectiveness remains bitterly contested.
Keeping tabs on criminals
If you open a bank account, your bank is already obliged to know who you are and how you make money. This is referred to as customer due diligence. If your activities give rise to a suspicion you might be handling proceeds of crime, the bank must report you to the government by filing a report to the regulator, AUSTRAC.
These rules help the government enlist the human, financial and analytical resources of the private sector to detect proceeds of crime. Put less charitably, they require regulated businesses to snoop on their customers and dob them in.
This regulation might sound like a dull affair, but the stakes are very high.
Getting it right can help put major organised crime figures behind bars, as demonstrated by the Australian Federal Police’s Taskforce Avarus, which targeted professional money launderers. One criminal gang in Sydney was laundering A$1 million every hour on some days, the federal police said.
Failing to comply with the law can cost dearly. In 2018, AUSTRAC fined Commonwealth Bank $700 million for failing to monitor deposit machines that could be used to launder the proceeds of crime. That was followed by Westpac’s fine of $1.3 billion in 2020 for breaching the law, the highest civil penalty at the time.
AUSTRAC then shifted its focus to casinos: Crown had to pay $450 million in 2023.
From July, many more businesses will find themselves learning about anti-money laundering laws. In fact, we are witnessing one of the largest regulatory expansions in the country’s history: from roughly 19,000 AML/CTF-regulated businesses to almost 100,000.
So why exactly is it happening, and what good will it do?
Slow to comply
Australia used to be one of the global laggards when it came to anti-money laundering and counter-terrorism financing laws.
In the early 1990s, Australia joined the Financial Action Task Force (FATF), an intergovernmental organisation set up to tackle the finances of the drug trade. But when the task force recommended in 2003 that these laws be extended to accountants, lawyers and real estate agents, Australia dithered.
It took until 2021 for the Australian parliament to legislate these rules, known as “Tranche 2” of anti-money laundering regulations.
While the expanded rules are new for Australia, we have seen how they play out in comparable jurisdictions, including the United Kingdom and New Zealand.
This is where there is a paradox.
There is consensus in the expert community that anti-money laundering regulation is costly and resource-intensive. A 2023 report found the global cost faced by financial institutions to comply was US$206 billion.
There is less consensus about what this compliance achieves, or whether the regulations offer good value for money. For example, the UK has had them in place for decades, but its National Crime Agency consistently estimates “hundreds of billions” of pounds are laundered in the UK annually.
Does the system actually work?
In a recent book, Doing Business with Criminals, I trace this paradox. Why does the regulatory regime keep expanding, when so many professionals are profoundly sceptical about its efficacy and efficiency?
Part of the answer is that anti-money laundering and counter-terrorism financing rules have multiple objectives, and none are easily measurable.
These laws are meant to generate valuable intelligence for law enforcement agencies; but also to ensure that legitimate businesses do not facilitate criminal activity.
Those are difficult objectives to quantify, let alone express in financial terms.
But there are also genuine flaws at the heart of the regime. Governments rightly expect regulated businesses to turn away criminal customers and report suspicious activity. But they have created no incentives for them to do so in a smart way.
A risk-averse business may well refuse to service someone who, say, holds the passport of a higher-risk country, resulting in financial exclusion.
And if a business is worried about being penalised for failing to report suspicious activity, it may over-report instead – flooding law enforcement agencies with worthless information and eroding customers’ privacy.
These practices, often described as examples of “tick-the-box” compliance, foster cynicism about the laws.
Making the laws more effective
The good news is there are ways to address this misalignment between the objectives of the laws and their implementation:
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public-private partnerships, such as Australia’s Fintel Alliance, bring government agencies and regulated businesses together to jointly tackle organised crime
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more innovative forms of reporting, such as “geographic targeting orders” used in the US to identify criminal activities in specific high-risk geographic areas or business sectors
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instead of solely relying on the fear of punishment, it is time to consider rewarding businesses for genuinely high-quality contributions to the disruption of criminal schemes.
AUSTRAC is a world-leading regulator, and is well placed to succeed in this. It will, however, need to be bold and innovative for the promise of the latest reforms to be realised.
Anton Moiseienko is a Senior Advisor to Transparency International Australia, a global anti-corruption civil society organisation, and an Associate Fellow at the Centre for Finance and Security at the Royal United Services Institute (RUSI), a financial crime research centre in the UK. His work is funded by the Australian Research Council.
Original source: https://analysis1.mil-osi.com/2026/07/15/australia-has-brought-in-sweeping-new-laws-to-combat-money-laundering-but-will-they-work/