Exchanges Might Not Meet All AML & KYC Requirements But Neither Do Banks

An investigation led by Australian Transaction Reports and Analysis Centre (AUSTRAC) to one of Australia’s major banks, Commonwealth Bank of Australia (CBA), has revealed the deficiencies of the country’s banks regarding compliance with the know-your-customer (KYC) and anti-money laundering (AML) requirements of the law.

According to consultancy ComplianceAsia chief executive officer (CEO), Philippa Allen, banks in the country have failed to get all levels of staff to take compliance seriously despite the aggressive efforts by regulators and the banks, themselves, in the past few years.

This could be due to the culture in the industry and the non-imposition of hefty fines against violators:

"That is not as widespread yet in Australia. Australian banks have not had the big fines imposed on them like their global peers have."

Global focus on KYC and AML implementation

According to corporate governance recruitment company Barclay Simpson, international banks are already spending between $900 mln and $1.3 bln annually on financial crime compliance following the hefty fines imposed on several violators in the past.

In 2012, Standard Chartered (STAN.L) and the HSBC Group (HSBA.L) were meted heavy fines due to KYC and AML violations.

Due to this, HSBC has increased its spending on regulatory and compliance programs.

The company has spent $1.6 bln in the first half of 2017 alone, up by 12 percent from the first half of 2016.

Lagging KYC and AML compliance in Australia

In Australia, the Australian Bankers’ Association claimed that the country’s banks are lagging behind their global counterparts in terms of investments in regulatory compliance.

The group said that the country’s four major banks, namely, CBA, Australia and New Zealand Banking Group (ANZ.AX), Westpac Banking Group (WBC.AX) and National Australia Bank (NAB), as well as other regional lenders have together spent a total of just AUD$1.73 bln on regulatory compliance programs.

A senior banker from one of the Big Four lenders said that the main issue in Australia’s banking industry is non-compliance to the KYC/AML regulations:

"There is an issue and the issue is the KYC/AML standards in Australia has lagged the global benchmarks for several years.”

Call not to single out cryptocurrency exchanges

Recent efforts from the Australian government to regulate cryptocurrency led them to focus on its weakest link - exchanges - where user information and activities are provided as part of the AML and KYC efforts.

However, recent information reveals that traditional banking systems do not necessarily have all the compliance efforts required by the government.


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