Headlines were made when AUSTRAC brought civil proceedings against Tabcorp for breaches of the AML Act. This was the first major civil proceedings litigation brought by AUSTRAC against any reporting entity in Australia. In the approximate two years that the action lasted there was much conjecture and debate over how the matter might play out. Ultimately, a settlement was reached for Tabcorp to admit to certain breaches of the AML Act and to accept a civil penalty of AUD $45M.
Justifiably, the largest civil penalty settlement, outside the ACCC jurisdiction, made the headlines. AUSTRAC were keen to talk up the settlement, whilst Tabcorp were at pains to confirm their newfound good corporate citizen role. But behind the headlines what was agreed before Mr Justice Perram? Attached is the full Order agreed by AUSTRAC and Tabcorp, and subsequently approved by Mr Justice Perram. It reads somewhat differently from the various press releases and press comments.
Download the Order in AUSTRAC v TABCORP
So what actually was the agreed? For sake of simplicity I will use the term Tabcorp to encompass all three entities which were subject to proceedings (TAB Ltd, Tabcorp Holdings Ltd, Tabcorp Wagering (VIC) Pty Ltd). Tabcorp admitted that it engaged in the following conduct which was in contravention of the AML Act:
- A failure to enrol as a reporting entity in breach of section 51 B (One) (A);
- Failure to report 84 suspicious matters between July 2010 and August 2014;
- 1 x failure to provide a SMR to AUSTRAC on time for an instance of suspected match fixing;
- 32 x failures to provide SMRs to AUSTRAC on time for instances of suspected credit betting;
- 51 x failures to provide SMRs to AUSTRAC on time in relation to instances of suspected credit card fraud;
- 20 x failures to provide SMRs to AUSTRAC on time for instances of suspected credit;
- 1 x failure to provide SMR to AUSTRAC on time for an instance of suspected credit card fraud;
- Providing a designated service to customer without having carried out the applicable customer identification procedure;
- Providing designated services in circumstances where the joint AML/CTF Program did not fully meet the requirements of the AML Act.
Therefore, Tabcorp agreed to a AUD $45 M fine for the following;
- 84 x failures to provide SMRs to AUSTRAC on time for suspected credit card fraud, match fixing, and credit betting;
- A failure to enrol on time;
- Providing a designated service to one customer without having carried out the customer identification procedure; and
- Having a program which did not fully meet the requirements of the Act.
In that light, it does appear a very large fine for not particularly serious breaches of the Act. Perhaps the size of the fine actually represented the totality of Tabcorp’s alleged breaches of the Act which it was not prepared to admit to given other factors outside AML compliance.
Several other points are of interest arise:
- Several of these potential suspicious matters were actually reported to other law enforcement agencies, just not to AUSTRAC. So reporting entities should be careful to report to all relevant law enforcement agencies even if that means multiple reporting;
- Suspected credit card fraud should now be reported by reporting entities, this clarifies Sect 41(1)(f) and shows how broad this section is.
- Tabcorp did actually enrol, albeit late;
- Section 81 – the obligation on a reporting entity to not to provide a designated service to a customer without having adopted or maintained an AML Program has, in could be argued, now changed to “not having a program that does not fully meet the requirements of the Act”. A dangerous interpretation? How did the AML Program “not fully meet the requirements of the Act”?
- There is no mention of the failure to have an adequate ML/TF risk assessment. Allegations which were pleaded; and
- There is no mention of the potential AML Program governance failures at Board level, and between senior management and the Board.
On the last point of AML Program governance it is disappointing that this was not dealt with, in my opinion, adequately. Yes, the $45M fine, plus the addition costs, gets the attention of Board members and Senior Management but a governance finding would do so even more, especially if followed up by ASIC action under the Corporations Act.