Australian Money-Laundering Alliance a Stretch for U.S.
May 15, 2017
By Richard Hill
An anti-money laundering partnership between Australia’s big four banks and the continent’s government designed to share more information in real time is getting good reviews but probably isn’t exportable to the U.S., several lawyers and consultants said.
The Fintel Alliance launched in March “offers an unprecedented opportunity for government and banks to share insights to combat the long-standing issue of serious financial crime,” Aidan O’ Shaughnessy, policy director for the Australian Bankers’ Association, told Bloomberg BNA.
Real-time information sharing could even help halt money-laundering transactions as they happen, said Peter Reeves, special counsel at Gilbert and Tobin, Sydney, who specializes in financial services law and AML regulation.
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Nevertheless, privacy concerns, the much-larger size of the U.S. banking industry and different AML requirements would all make it difficult to replicate the partnership in the U.S. The U.S. also already has a quasi public-private partnership, AML experts said.
All in a Day
The Australia partnership brings together the continent’s largest banks, the Australian Transaction Reports and Analysis Centre (AUSTRAC) and other government and academic institutions to share information about money laundering in near real-time in a bid to combat the financing of terrorism, smuggling and other crimes.
The partnership is designed to allow a regulator to flag suspicious activity to bank officials and then work with them to connect disparate information and summon law enforcement–all in the course of a day, according to a video posted by AUSTRAC.
The alliance reflects a shift in thinking by the government “from a regulator that seeks compliance to a regulator that seeks cooperation,” Reeves said. Indeed, one of the reasons banks agreed to join the alliance was to reduce their compliance burdens, Reeves said.
The initiative was conceived to transform the “siloed relationship” that existed between banks and the government to “a partnership where solutions are co-designed in response to mutual problems,” an AUSTRAC spokesman told Bloomberg BNA.
There are several reasons the program may not be easily exported to the U.S., starting with privacy concerns, according to Miami attorney Andrew Ittleman and others.
“You’ve got a lot of businesses with access to private information that they otherwise wouldn’t have, [and] you don’t necessarily have the benefit of the federal government coordinating the information-sharing between the private companies,” Ittleman, a white-collar criminal defense attorney at Fuerst Ittleman David & Joseph, said. “It looks like a free-for-all.”
Another factor is that in most cases, financial institutions in Australia must file suspicious activity reports within 72 hours. In the U.S., institutions have up to 30 days and can file for extensions, making real-time information-sharing less imperative.
It’s a major difference, said Don Andrews, who heads the compliance and risk-management unit at Venable LLP, New York. “One thing I think would get significant pushback, and maybe rightly so, would be getting reporting down to a matter of days” in the U.S., he said. “That’s a pretty big burden to place on a financial institution.”
The Fintel alliance is a good way for banks to learn about law enforcement priorities, Robert Rowe, vice president and associate chief counsel for the American Bankers Association, said. Such information currently is lacking in the U.S., he and others said. Banks are “trying to get a better understanding about where to focus their energies,” Rowe said. “The banks are saying, `if you tell us what the problem is, we know where to look and what to look for.’”
Andrews agreed, saying, “a little more direction from the government would be helpful. Firms are spending billions of dollars to comply with [AML] requirements, so it’s very important that the government be incredibly clear about what it’s looking for.”
Dennis Lormel, a former FBI agent who specialized in AML enforcement, cited costs and regulatory concerns as reasons banks might not be keen on forming an alliance with the government. “When the general counsel for some of the major banks get involved in this, they look at it like, `we’re just asking for trouble if we open ourselves up to something like this,’” Lormel said.
Banks also are “very concerned and and overly conservative as a result of regulatory expectations,” Lormel, who now runs DML Associates LLC, a consulting firm that helps financial institutions with compliance, said. “If they go above and beyond what they’re expected to do, then the expectation is they’re gong to do it on a regular basis.”
Several AML observers also said that U.S. banks and the government already have a functioning AML partnership appropriate to the size of the financial services industry, making a formal alliance like Australia’s—with its much smaller banking industry—less necessary.
“The reality is, we have a pretty good public-private partnership between banks and law enforcement,” said David Stewart, director of the financial crimes and compliance unit of Cary, N.C., analytics software firm SAS Institute Inc. Stewart cited the USA PATRIOT Act as one conduit for information-sharing, as well as a “close network of relationships” between financial institutions and the Department of Justice. “The question is whether the current system could be improved with technology to share data in real-time between the public and private sectors,” he said.
Rowe agreed that there’s a dialogue, but said the banking industry has sought a more formal alliance over the years. “Believe it or not, law enforcement says, we don’t have the time,” Rowe said.
However, according to Sharon Cohen Levin, a former top U.S. AML official, the Australian program of “out-and-out collaboration” between the government and financial institutions “would be welcome in the U.S.” Levin, former chief of the money laundering and asset forfeiture unit in the U.S. Attorney’s Office for the Southern District of New York, said that while a U.S. alliance would have to be consistent with U.S. AML rules, “in the end, I think it would lead to better law enforcement outcomes.”
The collaboration gives financial institutions “a better understanding of the criminal conduct and the patterns of suspicious activity, which produces more complete suspicious activity reporting,” Levin, now a partner at Wilmer Cutler Pickering Hale and Dorr LLP, New York, said.
U.S. AML efforts are spearheaded in the government by the Financial Crimes Enforcement Network. FinCEN spokesman Stephen Hudak pointed to remarks by Deputy Director Jamal El-Hindi in November that financial intelligence “is most effective when information flows in both directions between the public and private sectors.”
Like Stewart, El-Hindi said the USA PATRIOT Act allows the government and financial institutions to share information. “It’s a successful program,” he said.