Australia’s anti-money laundering regulator AUSTRAC has issued a statement warning banks against closing accounts. The context is, just because a business deals in bitcoin doesn’t mean it should automatically be debanked.
In the statement, released on October 29, AUSTRAC said Australian banks needed better systems to deal with assessing risk rather than simply debanking customers. “Businesses vulnerable to exploitation should not automatically have their accounts closed simply to avoid managing risk,” the financial watchdog stated.
Although the decision to close an account may remain a necessary risk control, AUSTRAC considers that with appropriate systems and processes in place, banks should be able to manage high-risk customers, including those operating remittance services, digital currency exchanges, not-for-profit organisations (NPOs) and financial technology (FinTech) businesses.The Australian Transaction Reports and Analysis Centre (AUSTRAC) statement
AUSTRAC expects banks to assess risk on a case-by-case basis, rather than just close accounts based on suspicion or caution. “AUSTRAC expects banks and all regulated businesses to adopt a case-by-case approach to managing AML/CTF (anti-money laundering/counter-terrorism financing) risks. This expectation extends to the importance of continuing to assess the particular risks relating to their business customers.”
In AUSTRAC’s view, the effect of debanking of legitimate and lawful financial services businesses can only increase the risks of money laundering and terrorism financing, and will negatively impact Australia’s economy as a result. Account closures have also created problems for regulators as they no longer have easy access to the debanked’s financial transactions.
In its statement, AUSTRAC addressed the issue of sector-wide debanking and aimed its message at discouraging the indiscriminate and widespread closure of accounts across entire financial services. This comes after many crypto businesses and individuals have been targeted and debanked without notice, under the guise that they posed a risk to the bank’s obligation to comply with AML and CTF laws. The large-scale account closures have damaged Australian-based Bitcoin exchanges and crypto traders’ businesses.
Australian Banks Highly Risk-Averse
Banks’ fear of being fined, coupled with the lack of transparency and clarity around these laws, has caused them to err on the side of caution, which has resulted in the wide-scale debanking of many businesses and individuals just because they deal in cryptocurrency and remittance services.
Yet banks have real reason to be cautious in Australia, because the consequences are harsh. If a bank is found not to be complying with AUSTRAC’s AML and CTF regulations, heavy fines apply, and they can cop a lot of bad press as well – as did Westpac in 2013, where the media were quick to print headlines relating to the bank’s involvement in one of the world’s biggest money-laundering schemes.
In recent years, the Commonwealth was fined A$700 million and Westpac fined A$1.3 billion for AML and CTF breaches. In June, National Australia Bank revealed it had been warned by AUSTRAC of “potential serious and ongoing non-compliance” with Know Your Customer (KYC) identification procedures, and last month the ANZ settled a debanking case brought by Canberra bitcoin trader Allan Flynn.
What is AUSTRAC and How Does It Work?
The Australian Transaction Reports and Analysis Centre (AUSTRAC) is the Australian government’s anti-money laundering regulator. It literally follows the money in order to protect Australians from criminal activity. How it does this is explained in the below video:
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