Did you know that serious and organized crime cost Australians up to A$60.1 billion in 2020-21?
Illicit financing is at the heart of most of these criminal activities lies. Pubs and clubs have become more vulnerable to risks of illicit financing. With the rise of electronic gaming machines, these areas may offer more than just entertainment.
As the electronic gaming industry expands, so does the risk of money laundering and terrorist financing. To address these concerns, AUSTRAC has stringent compliance requirements for these entertainment areas.
Below is an AUSTRAC compliance guide that explores requirements for pubs and clubs.
What is AUSTRAC?
AUSTRAC stands for the Australian Transaction Reports and Analysis Centre. It is Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regulator.
The body ensures that pubs and clubs comply with their AML/CTF obligations. This can help prevent cases of money laundering and financial terrorism. AUSTRAC does this by:
- Regulating pubs and clubs to ensure theyve put AML/CTF policies and procedures in place
- Collecting and analysing financial data from pubs and clubs to identify suspicious activity
- Disseminating suspicious activity reports to law enforcement agencies for investigation
The financial intelligence and reports AUSTRAC generates are vital for law enforcement.
Who Does AUSTRAC Regulate?
AUSTRAC regulates pubs and clubs that run electronic gaming machines (EGMs). To stop illicit financing, pubs and clubs with licenses to operate 16 or more gaming machines must submit specific reports to AUSTRAC. These reports include:
- Suspicious Matter Reports (SMRs): mandatory for all businesses
- Threshold Transaction Reports (TTRs): required for businesses with 16+ gaming machines
- Compliance Reports: required for businesses that operate 16+ gaming machines
Compliance with AUSTRACs reports is vital for pubs and clubs to contribute to preventing financial crimes.
How Can Criminals Take Advantage of Pubs And Clubs With EGMs?
Pubs and clubs with EGMS provide a favourable environment for illicit financing. It can happen through credit washing, smurfing, exploiting CRTs, and colluding. Learn more below:
Credit washing relies on anonymity and ease of access within pubs and clubs. Criminals take advantage of this cash-intensive environment to approach legitimate players. Then, they offer to buy their accumulated credits or win tickets with cash.
Once the transaction is complete, the criminal can claim the acquired credits or winnings as their own. This technique allows them to convert their illicit funds into legitimate gambling winnings.
Criminals can insert large amounts of cash into EGMs without engaging in significant gameplay. It allows them to launder small amounts of money several times, making it hard to trace the origin of the funds.
For example, a criminal may insert A$100 into an EGM and then immediately cash out. They may then repeat this process at several different EGMs in the same pub or club.
Smurfing activities usually takes advantage of the volume of transactions and the flow of cash in pubs and clubs. When they insert large amounts of cash into EGMs, criminals can introduce their illicit funds into the gambling ecosystem.
Exploiting Multiple Cashiers and Cash Redemption Terminals (CRTs)
Pubs and clubs often use many cashiers to handle the high volume of transactions. Criminals exploit this structure to distribute their cash transactions among different cashiers. This reduces the chances of detection.
Additionally, criminals may use Cash Redemption Terminals (CRTs). It allows them to evade observation and monitoring by staff members.
Collusion and Trust Exploitation
Criminals can befriend or bribe staff to gain insider knowledge to carry out their illicit activities. As a result, your staff may overlook or fail to report suspicious transactions. They may also help them collect winnings without proper identification.
AUSTRAC Compliance Requirements for Pubs and Clubs
If you operate a pub or club with EGMs, be aware of the aforementioned AML/CTF risks. Below is a regulatory guide with AUSTRAC AML/CTF rules to help you mitigate these issues.
Enrol with AUSTRAC
If your pub or club has EGMs, enrol it with AUSTRAC. You’ll be assigned an AUSTRAC registration number.
Conduct Customer Due Diligence (CDD)
AUSTRAC requires you to collect information on all customers who use your EGMs. This will help identify and mitigate the risks of money laundering and terrorism financing. The information you collect will vary based on your customer’s risk profile.
For low-risk customers, you may only need to collect their name and address. However, enhanced due diligence may be necessary for high-risk customers. You may need to get additional information, such as their date of birth, occupation, and source of funds.
Additionally, you should verify your customer’s identity. Ensure you check their identification documents, such as a passport or driver’s license. If the customer can’t offer IDs, use their recent bank statement for verification.
Monitor EGM Transactions for Suspicious Activity
Ensure you monitor your EGM transactions for suspicious activity. This includes looking for patterns of activity that may show money laundering. Some examples of suspicious activity include:
- A customer depositing or withdrawing large sums of cash in a short period of time
- A customer using multiple EGMs in a short period of time
- A customer winning or losing large sums of money in a short period of time
- A customer behaving in a suspicious manner, such as refusing to provide identification
If you notice any suspicious activity, report it to AUSTRAC immediately.
Train Your Staff on AUSTRAC AML/CTF Rules
An essential aspect of AUSTRAC compliance is providing regular training to staff members. Training programs should focus on increasing awareness about AML/CTF compliance requirements. It will also help them identify suspicious transactions or behaviours.
Each staff member should understand the role they play to prevent money illicit financing activities. Well-informed and vigilant staff members are crucial in maintaining compliance. Your staff should also know how to report suspicious activity to AUSTRAC.
Submit Annual Compliance Reports
Pubs and clubs must prepare and submit annual compliance reports to AUSTRAC. These reports outline the measures taken to comply with AML/CTF laws and regulations.
These records should always be made available to AUSTRAC upon request. Adequate record-keeping ensures transparency and enables effective compliance monitoring and reporting.
Submit Threshold Transaction Reports
Pubs and clubs must submit threshold transaction reports to AUSTRAC if they receive or make a transaction of AUD10,000 or more. The transactions may be in cash, by cheque, by electronic transfer, or more.
Review and Update Your AML/CTF Program Regularly
Conduct regular reviews and audits of the AML/CTF. It helps assess its effectiveness in mitigating the risks of money laundering and terrorism financing. Independent reviews can help identify gaps and areas of improvement.
Appoint a Compliance Officer
To ensure effective implementation of AML/CTF measures, your pub and club need to hire a designated Compliance Officer. They will be responsible for overseeing and managing compliance activities. They should also ensure adherence to relevant laws and regulations.
Whats more, they can act as a point of contact for AUSTRAC and internal stakeholders. Your compliance officer should possess a good understanding of AML/CTF requirements. Also, they should have the expertise to address any compliance-related issues.
Conduct and Maintain an ML/TF Risk Assessment:
Pubs and clubs must conduct a comprehensive Money Laundering/Terrorism Financing risk assessment. It involves evaluating the potential risks associated with their specific operations and clientele.
This strategy will help you develop tailored risk mitigation strategies.
What Happens If The AUSTRAC Compliance Requirements Are Not Met?
AUSTRAC compliance requirements ensure compliance with anti-money laundering and counter-terrorism financing regulations. Failure to meet these obligations can result in various enforcement actions by AUSTRAC. These include:
If your pub or club fails to comply with specific parts of the AML/CTF Act, AUSTRAC may issue a remedial direction. This direction requires the establishment to take specific actions to rectify the non-compliance. It serves as a means to guide the pub or club towards compliance.
When you break the requirements, AUSTRAC has the authority to issue infringement notices. These notices impose financial penalties on the pub or club. They also act as a warning and encourage establishments to fulfil their compliance requirements.
AUSTRAC may issue written notices to pubs and clubs. The notes may need you to take specific actions to address compliance issues. For instance, if you have inadequate record-keeping, AUSTRAC may instruct you on measures to correct the issue.
AUSTRAC may accept an enforceable undertaking from the pub or club in certain situations. The undertaking shows that your pub or club agrees to take certain steps to follow its AML/CTF rules.
Civil Penalty Order
If the breaches of AML/CTF obligations are significant, AUSTRAC can apply for a civil penalty order from the Federal Court of Australia. These penalties can range up to a maximum of 20,000 penalty units or up to 100,000 penalty units for a body corporate.
Follow AUSTRAC Compliance Requirements for Pubs and Clubs
Compliance with AUSTRAC’s AML/CTF rules is important for pubs and clubs to contribute to the integrity of the financial system. Meeting the aforementioned obligations can contribute to the fight against illicit financing. It will also protect your business from legal risks.
At RCA Group Pty Ltd, we offer AML/CTF staff training programs to help identify and stop financial crimes. Contact us today to start training.