Professional Documents
Culture Documents
Ostriches, Wilful Blindness, and AML/CFT
Ostriches, Wilful Blindness, and AML/CFT
com
PO Box W2108, Woods Centre, Friars Hill Road, St Johns, Antigua & Barbuda | +1-268-734-8063 | +1-702-508-4091 | +1-876-294-1650 | www.associates.ag
Governance Associates Ltd
No. 2015-00176
Governance Associates
Page 1 of 3
regional jurisdictions evaluating the AML/CFT compliance of other jurisdictions, known as mutual
evaluations. Australias compliance is subject to evaluation by a team of external experts.
Enhanced AML/CFT regulation has been a while in the coming
Success breeds complacency. Complacency breeds failure. Only the paranoid survive,
Andy Grover.
Nobody wants to read (or write) articles which at first glance appear to suggest non-compliance or
a downturn in revenue.
For a number of years I have been warning the gambling industry that a crack-down by AML/CFT
regulators is on the way. In October 2013 I wrote an article in the Asia Gambling Brief cautioning
that a crack-down was pending for Macaos casinos, only to be met by howls of derision from
barrackers and ostriches. In hind sight my projections came true and the crack down on dirty
money to Macao has led to substantial downturn in revenues there.
This is consistent with increasing AML/CFT fines on non-compliant gambling operators worldwide.
Just in the last few months the Tinian Dynasty Hotel and Casino has been fined US$ 75M and the
Trump Taj Mahal US$ 10M.
The Ostrich defences
Complacency is a state of mind that exists only in retrospective: it has to be shattered
before being ascertained, Vladimir Nabokov.
The ostrich defence #1, were registered with AUSTRAC can be dismissed as a prime
instance of complacency.
austrac_2-02-003.docx
Page 2 of 3
Governance Associates
2015-08-01
George Thomas Hotels, Canberra Southern Cross Club, and Tabcorp were all registered with
AUSTRAC. Yet AUSTRAC formed a view that these entities were not entirely compliant.
Classicbet was fined $A 10,200 for failing to enrol onto AUSTRACs Reporting Entities Roll.
The ostrich defence #2, we are in compliance of our duties
Most likely all of the above gambling operators believed or asserted they were in compliance of
their AML obligations. The absence of an AUSTRAC allegation of non-compliance does not
equate to compliance. More importantly, these operators fail to appreciate that under the
Australian risk-based approach to regulation, the onus is on them to continuously monitor,
assess and respond to changed risk profiles especially to changes to customer risk-profiles.
This is not a lazy tick-the-box assessment. It has to happen every working day, every week,
every month, every year. The biggest challenges? What is this persons source of funds? Is this
pattern of transactions suspicious?
The ostrich defence #3, not in the same league as Tabcorp
I shake my head - money-laundering can occur at pubs, clubs, small operators, casinos,
bookmakers, totalizators, and large integrated businesses. ML and TF activity will try to be
camouflaged by small scale activity at a local agency. Often smaller operators will be targeted
because their systems are not as sophisticated as larger entities.
Ostriches be warned.
When a great team loses through complacency, it will constantly search for new and more
intricate explanations to explain away defeat., Pat Riley.
Almost certainly, all of the gambling operators challenged by AUSTRAC have had AML/CTF
program in place, probably believing they were compliant in the absence of prior sanction.
Having an AML/CTF program and having not yet been cited by AUSTRAC does not equate to
compliance.
A regular independent review of Part A of the AML/CTF programme is mandatory. Without expert
analysis and review of AML/CFT programmes and a detailed examination of effectiveness, then
operators are being ostriches. They are exposed to fines and reputational damage to their
companies, their Boards, and executive.
Compliance is like the brakes on a Formula-1 car; if you are confident in your compliance, the
business can drive harder.
austrac_2-02-003.docx
Page 3 of 3
Governance Associates
2015-08-01