Tales from the anti-money laundering trenches

This article was current at the time of publication.

As Australian accountants prepare for one of the most significant regulatory changes in decades, those who have been through it warn the incoming AML/CTF compliance obligations will be a major cultural shift that can hurt you financially, if you are not prepared. 

Learning from Tranche 1

Lou Krstevski FCPA, CFO at BAC Consulting & Advisory says, accountants need to come to terms quickly with the new risk register and the more stringent monitoring.  

Krstevski, a former superfund CFO of a self-administered fund, helped in the adoption and ongoing compliance of the first tranche of AML/CTF from late 2006. The fund had a dedicated compliance officer with Krstevski and the management team all working closely to ensure the fund met its compliance obligations. 

He notes, “The new obligations are more process driven and need to be managed from the top down. It requires entity wide resource management, system upgrades and integration, and regular compliance training for staff. 

“You’ll also need to ensure the entire process works across all points of risk and is managed effectively by the dedicated compliance officer to ensure due diligence, reporting and record-keeping are accurate and timely.” 

He believes no-one will be exempt from the initial resourcing and capital needed to switch to the new regime. 

“Tranche 2 entities are required to set up a scalable risk management process as early as possible. Your compliance officer will need to manage internal resources as well as external expertise, board and senior-management-level support. 

“Scalable initial systems, processes and procedures must be in place. Without a well-managed entity wide process, your ability to comply will become cumbersome, costly and high risk,” Krstevski says.  

He adds that practices need to comprehend the time, resourcing and due diligence required for the Know Your Customer obligations (KYC).

Singapore’s experience

Accountants in Singapore are also dealing with significant customer due diligence. AML/CFT regulations and requirements for accountants have been in place since 2014. Singapore enhanced these in 2023 and formalised them last year for accountants. Corporate services come online this year. 

Lisa Liew FCPA, who helped lead the rollout of the AML/CTF regulations at Philip Liew & Co, says accountants were able to handle the enhanced framework better this round, having gone through a steep learning curve when the AML regime was first implemented about a decade ago. 

“Top of the list was the additional cost to comply. Additional resources were also required as we had to comb through our existing clients and carry out a formal customer due diligence exercise. 

“There was also resistance from clients not used to providing such information. Our team members were specifically trained to educate and explain the requirements. Some accountants did not know where to begin,” Liew says. 

Clients that engaged in cross-border transactions or complex structures required a lot of support.  

Liew notes that fostering a compliance culture in traditionally non-regulated professions was a cultural shift that calls for accountants to focus on communication, change management and tone at the top.  

“We had to understand the organisation chart and trace to the ultimate beneficial owner. Working through the layers and requesting the necessary information took time. We also needed to understand the legislative requirements and have lots of patience.” 

A mix of training, persistence and tech adoption helped meet their obligations. 

“Information is key to fostering a compliance culture,” Liew says. “Frequent communication via training helps ensure the key message is understood.” 

The firm also lent heavily on tools. 

“Although we can technically carry out a customer due diligence without paying for third party tools, it’s more efficient to do so and leverage on technology. 

“With the ongoing monitoring requirements, it makes sense to leave the constant updates of the sanctioned lists from the different agencies (United Nations, Financial Action Task Force, Office of Foreign Assets Control) to the service providers and to focus on our core business,” Liew says. 

Advice for smaller practices 

Krstevski encourages smaller practices and sole practitioners who have never had to conduct client vetting beyond identity confirmation to hit the ground running. 

“Do not be afraid to invest in and leverage technology and external expertise and do not underestimate the time, resourcing and skills required to ensure your initial set-up is not only effective, but scalable.” 

Liew says re-engineering systems and processes within the firm must be carefully considered from a risk perspective. 

Krstevski advises firms to: 

1. Start now 

Leverage external compliance expertise (subject to your due diligence) as soon as possible to avoid competing for this resource later.  

2. Begin internal training and resourcing processes immediately 

Ensure senior level management engagement and training as soon as possible and remember this is an entity wide compliance program. 

3. Invest capital early in scalable systems and processes 

The more you invest initially and early, the less resourcing is required later and the greater strategic advantage your firm will have. 

Liew advises firms to: 

1. Establish a risk-based approach 

Set up Internal Policies, Procedures and Controls and tailor them to the specific risks of your client’s profile.

2. Train and empower your team  

Regular AML training is a must for all employees, not just compliance staff. Make sure everyone understands red flags, reporting obligations and how to use internal systems. Empower them to speak up when they see suspicious activity. 

3. Remember, tone at the top 

Leadership must actively promote a culture of communication, visibly supporting AML initiatives, allocating sufficient resources and leading by example.