SYDNEY, Australia—The Australian Transaction Reports and Analysis Centre (AUSTRAC) has recommended lenders restrict the use of cash to repay loans and also limit the use of offsets and redraws as part of a money laundering risk mitigation strategy.
In a review of non-bank lenders and finance companies, AUSTRAC has assigned a “medium” money laundering and terrorism financing risk rating to the sector. It said the key threat to the sector is fraud.
According to AUSTRAC, Its assessment is based, in part, on 2,279 suspicious matter reports submitted by 83 reporting entities over the 12 months to January 2019. The great majority of the 600-plus reporting entities in the sector did not submit any SMRs over the period, Banking Day said.
AUSTRAC said loan application fraud is often associated with identity theft or the presentation of false or misleading information by the applicant.
“The non-bank lending and finance company sector is increasingly moving to online delivery channels. This shift exposes the sector to cyber-enabled fraud, including fraudulent online loan applications and attempts to obtain loans using stolen or fraudulent identities,” AUSTRAC said.
Converting Proceeds
According to AUSTRAC, the financial sector is exposed to money laundering in the form of unexpected early loan payouts using criminal proceeds, allowing criminals to convert the proceeds of crime into assets such as real estate and luxury vehicles.
“Loans are well established vehicles for money laundering, particularly when the loan is used to purchase high-value assets in which the proceeds of crime can be invested through loan repayments,” AUSTRAC said.