Bank IT shops cop costly cleanup in money laundering scams

Australian banks will be forced to invest heavily in information technology and other financial services systems in coming years because the nation is a target for international money launderers, organised criminals and terrorist financing groups, according to global consultancy KPMG.

Despite the long list of compliance projects already under way including Basel II, the Sarbanes-Oxley Act and the hefty sums already spent by financial services firms on technology to detect fraudulent transactions, KPMG Australia forensic partner David Van Homrigh said the industry will be stretched even further.

Van Homrigh said "huge amounts" of money are going undetected in Australia which is a target simply because it has a 'First World' banking system.

While KPMG said it was not possible to estimate how much money went undetected, the consultancy said it could be up to $8 billion based on estimates for fraud-related activities of around $3 billion to $5 billion per annum.

Last year the Australian government endorsed new global, anti money-laundering standards issued by the Financial Action Taskforce on Money Laundering (FATF), a 33-member international body of which Australia is a member.

This included an overhaul of local legislation and Van Homrigh said it is inevitable that Australia will have to comply with new standards.

"The processes to have standards formalised, the impact on IT and other financial service systems will result in huge costs to companies," he said.

While the government has not yet set the legislation or defined who will be the money laundering watchdog, Van Homrigh said the regulator is likely to be a separate watchdog to ASIC as it will need broad investigative powers and functions of its own.

Currently compiling a submission on the proposed legislation, Australian Bankers' Association chief executive David Bell said the Act will set new compliance standards over and above the current laws requiring banks to file reports with the Australian Transaction Reports and Analysis Centre (AusTrac) for any transaction over $10,000.

Since the September 11 World Trade Centre attacks, Bell said banks have intensified their money laundering detection efforts, but the best line of defence is employee training principally ensuring front-line staff can identify suspicious transactions.

– with Siobhan McBride and AAP

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