AUSTRAC, which enforces the government’s anti-money laundering and counter terrorism financing (AML/CTF) laws, released its risk assessment report of the securities and derivatives sector yesterday, giving the sector a risk rating at the high end of ‘medium’.
The two-year sample period for the report saw 663 ‘suspicious matter’ reports covering issues ranging from money laundering, terrorism financing, fraud, insider trading, market manipulation and tax evasion.
The key vulnerabilities within the securities and derivatives sector related to trading accounts, trading activity, off market transfers and third-party payments, said AUSTRAC.
“The trend towards customers increasingly using online services to open accounts and trade creates additional delivery channel challenges for reporting entities, particularly in relation to cyber crime,” said the report.
One practice within the sector that the report labelled as particularly vulnerable was the practice of white-labelling trading platforms.
“Poorly developed agreements or contracts that do not clearly indicate which entities are responsible for AML/CTF obligations significantly undermine the AML/CTF framework,” said the report.
Front office staff can also represent a vulnerability in the sector if there is “complacency” around AML/CTF obligations, said AUSTRAC.
