Leveraging External Information for MLTF Risk Assessment Framework for Tranche 2 Entities

External Information for MLTF Risk Assessment Framework for Tranche 2 Entities

To build a comprehensive and effective framework for addressing risks related to money laundering (ML), terrorist financing (TF), and proliferation financing (PF), it is important to incorporate insights from credible external sources. Referring to such external information helps Tranche 2 entities to understand the evolving threats and regulatory measures, thereby enhancing their ability to identify, assess, and manage Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) risks effectively.

This infographic outlines some key external references that should be considered during the ML/TF Risk Assessment process to ensure a well-informed risk evaluation.

National Risk Assessment for ML/TF/PF

A National Risk Assessment (NRA) is a government-led initiative to evaluate the country’s exposure to ML, TF or PF risks. In Australia, the Australian Transaction Reports and Analysis Centre (AUSTRAC) has published three separate NRAs:

• Money laundering in Australia National Risk Assessment 2024
• Terrorism financing in Australia National Risk Assessment 2024
• Proliferation financing in Australia National Risk Assessment 2022.

It provides valuable strategic information and guidance on the types, scope, and seriousness of criminal threats, along with identifying key vulnerabilities within Australia’s financial system.

While developing the ML/TF Risk Assessment framework, Tranche 2 entities should actively consider the findings, recommendations, and specific observations from the NRA to align their internal policies with the broader national risk mitigation framework.

Sector-Based Risk Assessments

Sector-specific ML/TF Risk Assessments provide the unique money laundering and terrorism financing threats faced by individual industries. These assessments are typically conducted by relevant AML/CTF regulatory bodies.

In Australia, AUSTRAC provides its Sectoral Report on ML and TF Risk Assessments, identifying the ML, TF, and PF risk exposures of various sectors. The tranche 2 reporting entities should look out for sector-specific guidance that will be finalised by AUSTRAC in December 2025

Tranche 2 entities must ensure that they incorporate these tailored assessments to customise ML/TF Risk Assessment processes according to the unique ML, TF, and PF risk exposure of their specific industry.

Financial Crime Guides and Threat Alerts

Financial crime guides and threat alerts are crucial tools that provide detailed guidance and insights into specific criminal activities, which help with the identification of suspicious behaviour. AUSTRAC regularly issues such guidance to assist businesses in enhancing their transaction monitoring systems and customer profiling.

ML/TF risk assessment framework should incorporate the findings contained in these guides into its transaction monitoring and customer due diligence (CDD) systems to detect and respond to the emerging financial crime threats.

Typology and Case Study Reports

Typology reports and realistic case studies provide detailed examples of how criminals carry out money laundering and terrorism financing activities. These reports inform the tactics and techniques used by the criminals to disguise the illicit funds.

Integrating AUSTRAC’s Feedback and Guidance on ML/TF Risks

While framing and revising the AML/CTF program, reporting entities are required to consider AUSTRAC’s Guidance Materials published and Direct Feedback issued to the Reporting Entities or the Sector, on identification, mitigation, and management of ML/TF risks emanating from rendering Designated Services.

This ensures that reporting entities’ measures to identify, assess, and manage money laundering and terrorism financing risks are not only robust but also aligned with current regulatory expectations and emerging threat patterns highlighted by AUSTRAC.

FATF Mutual Evaluations of Australia’s AML/CTF Framework

Mutual Evaluation Reports assess how well a country aligns with the Financial Action Task Force’s (FATF) 40 Recommendations and evaluate the overall effectiveness of its AML/CTF framework. In the case of Australia, these reports provide a detailed analysis of strengths and gaps in its current system and issue targeted recommendations for improvement.

It is important that reporting entities should align with global AML/CTF standards in their ML/TF Risk Assessment framework for better protection against financial crime.

Guidance Issued by International Organisations

Tranche 2 reporting entities should also take note of the findings and guidance issued by various international organisations, such as:

• Asia/Pacific Group (APG) on Money Laundering
• Bank for International Settlement (BIS)
• Egmont Group of Financial Intelligence Units
• Organisation for Economic Cooperation and Development (OECD)
• Transparency International
• Association of Certified Anti-Money Laundering Specialists (ACAMS)
• Pacific Financial Intelligence Community (PFIC)
• The Financial Intelligence Consultative Group (FICG)
• Association of Certified Financial Crime Specialists (CFCS)
• Anti-Money Laundering and Financial Crime (AMLFC) Institute
• Sharing Electronic Resources and Laws On Crime (SHERLOC)
• Stolen Asset Recovery Initiative (StAR)
• International Consortium of Investigative Journalists (ICIJ)
• Association of Certified Fraud Examiners (ACFE)

These international organisations provide a thorough understanding of financial crimes and help the reporting entities to make a robust policy structure to combat the problem of ML/TF.

To know more about the guidance provided by the international organisations to fight financial crimes, check out our article here.

Any Other Authoritative and Reliable Sources

Apart from official regulatory materials, reporting entities are also required to refer to other credible resources such as peer-reviewed academic publications, expert commentaries, and books focused on AML/CTF practices.

Reference Guides , Annual Reports , Corporate Plans , etc, available on the AUSTRAC website should also be referred to as supplementary sources to get practical clarity and support for the development of a more informed, refined, and compliant AML/CTF framework.

Conclusion

By embedding insights from these external sources, reporting entities can ensure that their ML/TF Risk Assessment framework is both comprehensive and responsive to the ML/TF/PF risks. It is a core obligation on the part of the reporting entities to assess the risk of their organisation; failing to do so may lead to a civil penalty or a criminal penalty of imprisonment up to 6 months or a fine.

Incorporating these sources not only supports regulatory compliance but also reinforces the organisation’s ability to actively combat financial crimes.