The Jade ThirdEye team recently hosted a Senior Leaders Roundtable Lunch in Melbourne, with special guest Neil Jeans GAICD, Partner - Risk Consulting, Grant Thornton. The event brought together a full house of senior leaders from wealth management and superannuation firms, sparking dynamic and thought-provoking conversations.
The discussion covered a wide range of topics, with the key themes including:
Current situation
Whilst there are complexities in interpreting the existing requirements and there is uncertainty about the impending changes to the law and rules, most reporting entities understand what they need to do to be compliant. Generally, boards and senior managers recognise the importance of compliance and strive to ensure that their AML teams have the necessary resources to meet regulatory requirements.
Obtaining funding to operate a more effective program is a harder ask. The board needs to buy in to the need for an effective program before they will fund it. To support this shift in mindset, the board needs to be educated to prioritise the benefits of achieving good outcomes over focusing solely on the costs.
In summary, the current situation is that the balance is heavily weighted towards compliance, in favour of efficiency and effectiveness.
Growing importance of effectiveness
Effectiveness is becoming a much more important concept to address. The FATF mutual evaluation commencing in 2026 will assess the state of play of Australia’s AML regime in terms of compliance and effectiveness. This not only applies at the national level but feeds down to the reporting entity level. Additionally, the proposed changes to the legislation require reporting entities to be both compliant and effective and puts the onus for this on the senior management team.
Definition of effectiveness
In both the FATF and national cases, effectiveness is not defined. Rather it is a hindsight assessment. This puts the onus on the reporting entity to define what they mean by effectiveness. This flows on to enabling the measurement of success and being able to demonstrate that what you have set out is giving you the outcomes required.
Effectiveness overlaps somewhat with compliance, as it is hard to justify that a program is effective if it isn’t addressing the risks identified in the risk assessment and is able to flex with the dynamic risk environment.
An effective program can also be viewed as one which detects financial crimes and reports them to AUSTRAC, thereby helping to reduce the level of crime in Australia, which is the ultimate purpose of the law. From a customer’s viewpoint an effective program is one which protects their funds. This becomes increasingly important with the approach of retirement and the ability to access superannuation funds.
AUSTRAC reporting
Quality SMRs are key for AUSTRAC to create quality intelligence. The number and quality of SMR reports is one way that AUSTRAC will use to measure effectiveness. An ineffective program may produce many low-quality reports (aka defensive reporting). Alternatively, an ineffective program may result in submission of a much lower number of reports than AUSTRAC would expect by comparison with similar reporting entities. In both cases, this will attract AUSTRAC’s attention. Building a strong, positive relationship with AUSTRAC starts with submitting high-quality SMRs.
Reporting entities also need to submit an annual report to AUSTRAC. It is important to submit a quality report, as a poor report is often AUSTRAC’s first indication of a poor program that needs investigating.
Staffing
To be effective you need to have compliance, capacity, and capability. Capacity leads back to the need to ensure the board provides sufficient funding to the team. Capability relates to the skills of the team. A well-trained, knowledgeable and engaged team that is familiar with your business will enhance efficiency and effectiveness.
High staff turnover presents a problem within the AML team or frontline staff interacting with customers. This is likely to be exacerbated when Tranche 2 arrives, with the increased demand for knowledgeable people across a new range of sectors.
The Senior Leaders Roundtable highlighted the evolving challenges and opportunities in AML compliance and effectiveness. As the industry braces for upcoming regulatory changes and the FATF mutual evaluation in 2026, the focus on effectiveness alongside compliance has never been more critical. By fostering strong board engagement, investing in skilled teams, and prioritising high-quality reporting, organisations can not only meet regulatory expectations but also play a pivotal role in combating financial crime and protecting customers. These discussions underscore the importance of collaboration, innovation, and shared responsibility in shaping the future of AML in Australia.
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