The impact of Australia’s regulatory environment on fine technology innovation and growth

according to 2021 EY Fintech Australian Census, the sector’s speed to commercialization and the number of deals and initial offers through the COVID-19 pandemic have given investors greater confidence in returns. In light of this, FinTech was praised “the distinguished hero” of the Australian economy during the pandemic, as the sector generated the jobs and investment the country needed for a rapid economic recovery.

Support from public bodies, including investors and regulators, has been crucial to the sector’s growth trajectory. From the Banking Royal Commission open the door to innovation in 2019 to regulatory sandboxes and allowing license-free testing for up to two years, Australia’s pro-innovation and pro-competition outlook further increases legislative and regulatory support for the FinTech industry.

To ensure the integrity of these prospects, Australia’s Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) rules are currently under reform. The Australian Transaction Report and Analysis Centre (AUSTRAC), Australia’s AML/CTF regulator, supports the overhaul, citing the need to streamline the regime to support FinTech and wider innovation.

The reforms include ending the unjustified de-banking of FinTechs by legacy financial service providers on AML/CTF grounds and improving AUSTRAC’s online platform for reporting suspicious activity. However, daily challenges remain for FinTechs, especially when it comes to the growing threat of financial crime. AUSTRAC CEO Nicole Rose referred to this in a May 2022 speech warning of the potential for online finance to be misused by criminals, particularly digital assets.

The typologies of financial crime that FinTechs face, such as digital asset laundering, identity theft and account takeover, require firms to move away from the post-analysis of data and instead be proactive about AML. Having a compliance mindset from the outset is critical to ensuring the sustainability of new FinTechs in Australia.

While this guide to AML for Australian FinTechs confirms that there is no single ‘right answer’ to building an AML compliance program, FinTechs need to adopt a risk-based approach to take into account their risk appetite. This includes demonstrating to AUSTRAC their process for recognizing the existence of risks and implementing control strategies to mitigate and monitor the risks they identify.

In addition to providing suggestions on how to implement a risk-based approach, this guide will arm FinTechs with:

• An overview of the AML/CTF regime in Australia
• The core responsibility for compliance that follows
• A set of principles and actions that can help shape a flexible framework
  
  

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