October 2006 Top Story:
**MLI ARCHIVE***
Banks ‘Want years’ for AML transition
There are banks lobbying for as much as four years for the AML/CTF reforms to come into force. The government is unlikely to agree.
Some of Australia’s leading banks are lobbying hard to extend the transition period for anti-money laundering compliance to as long as three or four years, citing the difficulty in setting up the systems capable of meeting the government’s reforms.
A source close to the government told MLI that Justice and Customs
Minister Chris Ellison was unwilling to contemplate a three-year transition
period.
It initially wanted to give banks and financial services companies 12
months to have systems in order, but according to the source would probably
settle for two years.
The lobbying comes chiefly from the Australian Bankers’ Association and from the ANZ, both of which have warned the federal government not to underestimate the operational impact of the AML/CTF Bill which is expected to be passed in Parliament late this year.
In his submission to the minister, Sean Hughes, ANZ group general manager of compliance, said the proposed draft bill would “consume at least the same resources” as the Financial Services Reform Act and Basel II, the global accord on operational risk.
“FSR required compliance within two years,” Hughes’s statement
read.
“This target was only reached after a number of key obligations . . . had
been deferred by the Australian Securities and Investments Commission.
“In line with the Basel II accord, the Australian Prudential Regulation Authority allowed the industry a number of options for implementation and a three-year implementation period.”
Hughes said the obligations required by the bill “imposed severe sanctions” and forced reporting entities to embark upon extensive process changes with short timeframes.
“This could cause significant disruption to our customers and operations,” he said.
He said the bank supported “a staged implementation” over a period of three years.
Macquarie Bank’s submission, signed by the bank’s head of risk management and compliance, Kevin O’Neill, said the AML reforms were more complex than FSR and that a transition period “over a number of years” was not desirable but critical.
“The implementation of the AML Bill will require significantly more complex analysis given the broader range of designated services captured,” the submission said.
“Macquarie is sensitive to the risk of repeating the experience of transitioning to the FSR regime where there were industry-wide issues with how to interpret the impact of some core FSR obligations leading up to the deadline for compliance in March 2004.
“The unintended consequences are still being progressively managed today with ASIC and industry, evidenced in part by ASIC’s release of the eight FSR refinement projects announced in May 2005 to address industry concerns about the Act and its implementation.”
The Commonwealth Bank and Bendigo Bank have also weighed into the argument, requesting a three-year transition.
Chris Cass, Deloitte’s forensic partner, told MLI he had been telling the banks since 2003 that they had to get systems up and running. He said he probably had “the least sympathy of anybody” that the banks would need three years to set up their systems.
“I’m in no way underestimating the amount of change the banks need to undergo to get their systems right for a risk-based regime,” said Cass. “But they can’t use the excuse they didn’t know – they’ve known for years what’s coming in,” he said.
He said the supertanker theory did not count in this instance – that it would take a huge amount of time for the big banks to get their act together.
“If there has been a lack of attention to what’s happening, it’s because some of them may have made the mistake of concentrating on the letter of the law and not trying to understand the spirit of the risk management process involved here.”
PwC’s forensic chief Steve Ingram said getting industry to be fully compliant would be a long process “which had proven to be so in the northern hemisphere”.
“We will be developing this for many years to come – it’s an ongoing process and we will learn from overseas but we will still have to adapt this to the local market.
“Everyone is on the same page now. Three years is a reasonable timetable as long as people are prepared to make honest endeavours.”
DelMonte Publications Oct 2006
