Money Laundering & Terrorism Financing
The banking industry is committed to supporting the global response to reduce the risks posed by money laundering and terrorism financing.
Banks take their legal obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act seriously and seek to put in appropriate controls to make it harder for the Australian financial system to be used to launder money.
In addition to complying with the regime, ABA members work closely with relevant government agencies, including AUSTRAC and the Department of Home Affairs, to help ensure that the Australian regime meets international best practice.
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Anti-money laundering rules explained
Banks are central to detecting and reporting suspected financial crime, and are subject to Australia’s anti-money laundering and counter-terrorism financing regime.
This fact sheet sets out what the law now requires of banks, and what it means for customers.
What the law requires of banks
Know who their customers are
Banks identify and verify customers, and keep customer information current over the life of an account.
Watch for unusual activity
Banks monitor customer activity and payments for patterns or activity that may indicate money laundering, terrorism financing or other financial crime.
Report to AUSTRAC
Banks report suspicious matters, cash transactions of $10,000 or more, and international transfers to AUSTRAC as required by law.
What customers may notice
More frequent questions. Banks are required to keep customer information current over the life of an account. Some customers may be asked to re-confirm identity or contact details at times unrelated to a transaction.
More questions about the purpose and source of payments. Particularly for large, unusual or overseas transactions. Some customers may be asked about their source of wealth or source of funds, and asked to provide information or documents showing the source is legitimate.
Cash transactions and the $10,000 rule
Banks must report cash transactions of $10,000 or more to AUSTRAC, within 10 business days.
The obligation applies to physical cash only, not electronic transfers or card payments. It covers withdrawals as well as deposits. The report is filed after the fact. It does not hold up the transaction at the counter.
Tellers may ask for additional details if they suspect a customer is the victim of a scam.
Splitting a transaction for the dominant purpose of avoiding the report is a criminal offence.
When a bank asks about a payment
Banks check payments and account activity that look different from a customer’s usual pattern. Being asked questions does not mean a customer has done anything wrong.
Providing the information the bank asks for is the fastest way through.
Bank branch and call centre staff asking these questions are often meeting a legal obligation, not making a judgement about you. Please treat them with patience and respect.
Does my bank have to give me a reason for closing my account?
There can be valid reasons for a bank not to explain its decision.
If a payment is held or an account is restricted
- Respond to the bank’s questions promptly. Delays can prolong a hold or restriction.
- Provide relevant documents where you have them: a payslip, an invoice, a contract of sale. Records can help the bank complete its checks.
- Contact the bank through its published channels if a hold is not resolved within the timeframe the bank has indicated.
- If the matter remains unresolved, make a complaint to the bank. Every bank has a formal complaints process and must respond within set timeframes.
- If the complaint is not resolved, escalate to the Australian Financial Complaints Authority (AFCA). AFCA’s service is free for consumers and small businesses.
Know Your Customer (KYC) rules explained
Know Your Customer obligations require banks to confirm that the person using an account is who they say they are – not only when an account is opened, but on an ongoing basis. KYC also allows banks to identify money laundering and terrorism financing risks.
Recent changes have added and modernised these obligations. Customers may be asked to verify information at times unconnected to any transaction, and may encounter the same questions outside their bank.
What Know Your Customer actually does
It verifies that it is you
KYC confirms the person using an account is who they say they are. It stops criminals opening accounts with stolen details, or taking over an existing one.
It disrupts money mules
Verifying who sits behind every account is a critical tool banks have against mule accounts and the crime syndicates that recruit them.
It protects identity
Verification makes it harder for someone to open or use an account in your name.
Identity checks
Confirming who you are and keeping your details up to date.
Politically exposed persons and sanctions screening
Extra scrutiny for people in prominent political positions, their family members and close associates, and people or businesses subject to targeted financial sanctions.
Transaction monitoring
Monitoring for activity outside a customer’s regular behaviour.
What has changed, and what it means for customers
Additional and modernised AML/CTF obligations took effect for existing reporting entities. These updates strengthen banks’ existing customer due diligence requirements, including keeping customer information current. Obligations also expanded to cover more virtual asset service providers.
What it means for customers
Customers may be asked to re-confirm identity or contact details at times unrelated to any transaction. Banks may also request additional information about a customer’s source of wealth or source of funds. Access can be restricted if requests for information go unanswered.
AML/CTF obligations now apply to a new group of sectors, including real estate professionals, lawyers, conveyancers, accountants, trust and company service providers, and dealers in precious metals, stones and products. AUSTRAC expects the regulated population to grow from around 19,000 to close to 100,000.
What it means for customers
Customers may encounter the same questions from an agent, conveyancer or accountant, including questions about identity and source of funds.
What banks may ask customers
- Where the money for a large transaction came from, with documents or other information to verify it.
- Why the money is being sent, and what the intended outcome is.
- For a business or trust, who actually owns or controls that entity.
- Whether a change in circumstances explains unusual account activity.
These questions are routine. Being asked does not mean the bank suspects anything is wrong.
Answering promptly and honestly is the fastest way through. Delays can lead to held transactions or temporary restrictions on an account.
If a request feels like a scam, call the bank
A genuine request may look like a fake one.
A bank will never ask for passwords, one-time codes or PINs by phone, text or email. A bank will also never ask you to move money to a “safe account”.
If a request feels wrong, hang up. Call the bank on the number published on its website or the back of the card, use the app, or visit a branch.
Points for constituents
- KYC represents a legal obligation on the bank, not a judgement about the customer.
- Reach out to your bank if you suspect a request is a scam.
- Unresolved holds can be escalated to the bank, then AFCA.
Modern Slavery
Understanding who may be involved in modern slavery allows Australian banks to explore the different characteristics of its customers, suppliers, and business relationships.
Working Paper: Typologies and Indicators of Modern Slavery
What is modern slavery and how is it related to the banking industry?
Monitoring and managing the industry’s connections to modern slavery is key to fulfilling these roles and requires bank-wide awareness of modern slavery and how it presents, as well as internal and external information sharing and industry-wide collaboration.
Typologies and Indicators of Modern Slavery Edition 1 March 2022
Download the ReportUnderstanding how modern slavery works
There are four key factors which elevate the risk of modern slavery:
- vulnerable populations;
- high-risk business models;
- high-risk categories; and
- high-risk geographies.
Typologies and Indicators of Modern Slavery Edition 1 March 2022
Download the ReportThe role of banks in addressing modern slavery
Given the banking industry’s potential for connections to modern slavery through its products and services, corporate operations, and supply chain, addressing modern slavery requires a multi-functional approach.
No one team or business unit can address modern slavery alone, and human rights due diligence should be embedded across banks’ value chains and decision-making.
Typologies and Indicators of Modern Slavery Edition 1 March 2022
Download the ReportGeneral characteristics of common victims, perpetrators and intermediaries
The agriculture sector is widely known to face high risks of modern slavery, both in Australia and globally. Migrants on visas with working restrictions are most at risk of modern slavery in the agriculture sector.
In the construction sector, an Australian bank conducted an investigation into serious organised crime groups utilising ATMs in the south-west Sydney locality to conduct large scale money laundering and exploit foreign nationals.
Typologies and Indicators of Modern Slavery Edition 1 March 2022
Download the Report
Sanctions: ABA Guidelines for the Financial Services Sector
These guidelines (updated December 2021) are intended for Australian Banking Association (ABA) member banks. The guidelines are not legally binding. They aim to set out good industry practice for ABA members and their staff in relation to sanctions requirements.
Organisations that are not members of the ABA may have regard to these guidelines as industry good practice, particularly where their industry body has not issued specific guidelines to them on sanctions.
These guidelines will have impact on operational areas, but it is expected that more detailed internal policies and guidance will be developed, specifically tailored to suit the needs of member banks, using these guidelines as a guide to good practice