Tabcorp pays record penalty for AML/CTF shortcomings

• Tab Ltd contravened s 51B(1)(a) of the AML/CTF Act by failing to apply for enrolment as a reporting entity within the required timeframe.
• The Tabcorp Group companies contravened s 41(2)(a) of the AML/CTF Act on 105 occasions by failing to provide suspicious matter reports to AUSTRAC in relation to instances of suspected credit betting, credit card fraud and match-fixing.
• Tab Ltd contravened s 32(1) of the AML/CTF Act on one occasion by commencing to provide a designated service to a non-account customer in a retail outlet having failed to carry out the required customer identification procedure.
• Tab Ltd and Tabcorp Wagering (Vic) Pty Ltd together contravened s 81 of the AML/CTF Act between September 2012 and December 2015 by commencing to provide designated services at a time when the joint AML/CTF Program under which they purported to operate did not fully meet the requirements of the AML/CTF Act.[4]

In return for the Tabcorp Group companies’ admissions of the above contraventions, AUSTRAC withdrew its remaining allegations of non-compliance.[5]

Since the order was made by consent rather than as the outcome of a hearing of the merits of the case, the public is denied the benefit of reasons for the findings of contravention or for the particular penalty imposed. However, the quantum of the penalty sought by AUSTRAC and agreed to by the Tabcorp Group companies provides a stark warning to other providers of designated services about the importance of compliance with AML/CTF obligations.

The nature of the contraventions in respect of which the penalty was imposed also draws attention to the breadth of the concept of ‘money laundering’. ‘Money laundering’ under the AML/CTF Act refers not only to the traditional case of concealing the origins of money or property derived from criminal activity, but rather also includes the use of money or property as an ‘instrument of crime’ – that is, where money is used in the commission of, or to facilitate, the commission of an indictable offence.[6] It is this latter element of money laundering that enabled credit betting, credit card fraud and match-fixing to be characterised as money laundering offences, suspicion of which enlivens the suspicious matter reporting obligation under s 41(2) of the AML/CTF Act. The s 41(2) obligation to report suspicious matters is a civil penalty provision,[7] in respect of which a body corporate may be liable to a pecuniary penalty of up to $18 million.[8]

The case also highlights the importance of having a robust AML/CTF Program, including procedures to perform adequate identification checks. The procedures must be meaningful, in the sense that if followed, they will enable the reporting entity to be reasonably satisfied of the matters prescribed by the AML/CTF Rules[9] with respect to each customer type – that the individual is who they say they are,[10] that a company exists and beneficial owner information is collected,[11] that a trust exists and the beneficiaries’ names (or a description of each class of beneficiary) is collected,[12] and so on. Simply restating the relevant provisions of the AML/CTF Rules in one’s AML/CTF Program would be inadequate to achieve this end, as the AML/CTF Rules do not prescribe sufficiently specific actions to take to collect and verify customer information.

It is not sufficient to have an AML/CTF Program; it is also necessary to comply with it. The finding of a contravention of s 32(1) is in respect of Tabcorp’s failure to identify a customer who collected $100,000 in winnings.[13] This suggests a failure in communication between management, who compiled and adopted Tabcorp’s AML/CTF Program, and the staff involved in giving effect to transactions – the frontline staff who receive the payout request and the accounting staff responsible for acting on that request. Part A of an AML/CTF Program must include a risk awareness training program which addresses, among other things, the obligations of the reporting entity under the AML/CTF Act and AML/CTF Rules and the consequences of non-compliance with the AML/CTF Act or AML/CTF Rules.[14] A reporting entity is required by the AML/CTF Act to comply with Part A of its AML/CTF Program,[15] meaning that a failure to provide employees with adequate AML/CTF training is a contravention of the AML/CTF Act.

In conclusion, the penalty imposed on Tabcorp provides a valuable warning to reporting entities about the importance of compliance with obligations under the AML/CTF Act. The quantum of the penalty reflects the seriousness with which breaches of the Act are treated and, as such, it should be a board-level issue in all reporting entities.