S2/E5: Meet the CEO - In Conversation with Brendan Thomas

Intro Welcome to the Financial Integrity Hubs podcast. At the Financial Integrity Hub, we pioneer research and explore how law and governance strategies can be designed, implemented and enforced to support anti money laundering and counterterrorism financing. This podcast is proudly sponsored by CFCE, providers of online modules to enhance capabilities across AML and CTF global and domestic ratio. These modules are carefully designed for professionals in diverse sectors, including public service, corporate environments and law enforcement agencies. By participating, individuals can gain a competitive edge in their careers and contribute more effectively to their organisations and communities. Find out more at courses.cfce.com dot AU. Speaker 2 Welcome to the Financial Integrity Hub podcast, the show with hot questions and even hotter insights at the intersection of law and financial crime. I'm your host. Speaker 3 Doctor Hannah Harris. Speaker 2 And today we are joined by none other than Brendan Thomas, the current CEO of AUSTRAC. AUSTRAC is Australia's first line of defence in the fight against financial crime. Acting is both anti money laundering and counterterrorism financing regulator and financial intelligence agency. AUSTRAC is also responsible for implementing the recently amended AML CT effect. The amended Act expands Austrac's regulatory oversight to entities in high risk sectors like real estate dealers and precious stones, metals and other products, and providers of professional services, including lawyers and accountants. Under the leadership of Mr. Thomas, AUSTRAC has strengthened its focus on intelligence LED regulation and expanded public private collaboration through initiatives like the Fintel Alliance, strengthening Austrac's capacity to respond to new and emerging financial crime threats. Brendan brings a wealth of experience to his role as Austrac's CEO. Prior to leading AUSTRAC, he served as CEO of Legal Aid NSW and has held senior physicians within the NSW Department of Justice. His career spans over 2 decades in public service, underpinned by a deep commitment to social justice, regulatory innovation and building resilient institutions, all important objectives for the agency. Spearheading Australia's collaborative efforts to combat financial crime and stop criminal enterprises in their tracks, Brendan delivered the keynote address at the Financial Integrity Hubs Annual Financial Crime Summit, where he spoke to a full House of academic, government and industry leaders keen to better understand the most pressing issues in AML, CTF and financial crime prevention. 2 key themes at the Summit were the critical role of cross sector collaboration to combat financial crime and the need to innovate and harness new technologies to tackle emerging financial crime risks. Today we delve deeper into these topics, exploring Austrac's evolving strategic priorities, the transformative impact of technology and data analytics on financial intelligence, and we get some sage advice for the next generation of financial crime fighters stepping into this fast evolving and critically important field of financial crime prevention. I thoroughly enjoyed speaking with Mr. Thomas today and came away with a deeper understanding of the important role that AUSTRAC continues to play in guiding national efforts to combat financial crime and support industry stakeholders in their mission to protect Australia's financial integrity. If you haven't already, remember to like and subscribe to the Financial Integrity Hub podcast on Spotify and YouTube, and follow the Financial Integrity Hub on LinkedIn to stay up to date with the latest insights and events. Speaker 3 Welcome everyone to today's episode of the Financial Integrity Hub podcast. I am here with Brendan Thomas of AUS Track and I'm really excited for this discussion. But before we begin, I'd like to welcome everyone and acknowledge the Traditional Custodians of Macquarie University. Speaker 2 Land where we're currently recording from today. Speaker 3 The Wallamata Gold people of the Dark Nation, whose cultures and customs have nurtured this land since the Dreamtime and continue to nurture this land today. We pay our respects to Elders past, present and emerging and extend that respect to all Aboriginal into Australia Island peoples. And now a very warm welcome to our special guest, Mr. Brendan Thomas, the current CEO of AUTRAC and a leading figure in Australia's fight to combat financial crime. Welcome. Speaker 4 Brendan, thanks for the welcome, Hannah. Speaker 3 The format of today's episode is a little bit different for our listeners. We don't usually have a live audience for our episodes, but today we're joined by an enthusiastic cohort of Macquarie Law School students. They have a keen interest in combating financial crime and I know they're all extremely excited for this opportunity as well. And I also have with me Associate Professor Daron Goldbat, who happens to be the director of the Financial Integrity Hub as well. Speaker 5 So. Speaker 3 I'm aiming to reserve some time at the end of our session for an open floor Q&A. Speaker 2 But before that. Speaker 3 I'm going to be asking Brendan some questions that students have provided earlier in the week and that I think will provide a really great insight for everyone that we. Speaker 5 Otherwise wouldn't be able to have. Speaker 3 So I think that's fantastic and jumping right in. Speaker 2 Brendan, could you maybe tell us a little bit about your? Brendan’s background Journey getting here What led you to this role as CEO of AUSTRAC? Speaker 2 And how your? Speaker 3 Background might have shaped your perspective on financial cruise. Speaker 4 Yeah, I've been at the CEO of AUSTRAC for probably 15 months now, I think. So I started in the on the last day of January last year. My career for the last 25 years has been in crime and criminal justice in one form or another. I'm an Aboriginal man and most of you probably know how people are involved in the justice system too much and I've spent a lot of my career focused around trying to redesign the criminal justice system to get Aboriginal people out, sometimes successfully, often not so successfully. I've worked in the court system, I've run a whole run a bunch of of programs around preventing all sorts of crime, ways to run the crime prevention, a thing called the Prime Crime Prevention division in, in the NSW government where we did lots of big strategies around trying to reduce burglary, financial crime, violence, domestic violence. And I spent quite a few years doing that in the NSW Attorney General's department. I left there and I was the chief executive of the NSW Legal Aid Commission for about 5 years. Most of you know, legal aid provides free legal services to people around NSW. It is Australia's biggest legal practice, I think NSW Legal Aid Commission. So I was there for five years. I went back and did some work again in the justice system for a couple of years and then moved into AUSTRAC at the start of last year. But I've had a lot to do with organized crime. Spent a couple of years on the board of the NSW Crime Commission. Did a lot of work in NSW government on legislative reform to give police extra powers to deal with organized crime. I'm a crime guy. My background is crime in all all its various facets. Speaker 5 I mean, that's relatable as well. Get transnational crime isn't my thing. I guess that makes me a crime gal, but you always have to be careful about how you frame those kind of things it. Speaker 4 Means that it depends on what side of the food you're sitting. Speaker 5 Exactly. I think it's great too. AUSTRAC’s Strategic Priorities To see the kind of. Speaker 5 Unique background and also the the justice focus that you've had in your past career and how that ties into an area of crime that I think is often viewed. Speaker 3 Separate to or distinct from other forms of crime. So I'm curious kind of how that relates to your perspective and your approach at AUSTRAC and also maybe how you are expecting that or how it already has shaped Austrac's current strategic priorities. Maybe if you could talk a little bit about those priorities as well. Speaker 4 Yeah. My focus in AUSTRAC is about reducing heart. It's not about kind of ticking regulatory boxes or fat F compliance training, that kind of stuff. I mean, that's kind of important, but at the end of the day, if we're not reducing crime and making the country safer, we've kind of missed the point of why we exist. And I think that focus on on crime and harm sometimes. Yeah, as as you guys probably know, in AUSTRAC, we do two things with an AML regulator for Australia and they're also the financial intelligence on the regulation side. It's really easy for regulators to lose sight of the reason why they're there and I think sometimes regulators can get caught up in compliance for the sake of compliance without really thinking hard about what that compliance is trying to achieve and whether it's working. That's a big question we have in financial crime and anti money laundering areas is what works, what's effective, what actually works to reduce financial crime and money laundering. And so I really tried to bring that very strong focus to us track around making sure we're focused on how we reduce harm from the first point of view and how we take all of our regulatory powers and tools and focus it on reducing harm. And we've shifted the way we do that a little bit in the last 18 months. We've just done some work on digital currency and digital currency exchanges, which is a kind of a new way for us to do some work. But we've also done some really interesting work in our public private partnership, our Fin Tail Alliance, again, looking at how we can get better insights on crime and what do we do to tell you if it's around crime. So I've tried to bring a really strong focus to the organization about how we focus all of our efforts on on tackling crime and reducing harm. Speaker 3 I mean it. Speaker 5 Makes so much sense. It's one of those great ideas, right That sounds obvious when you say it, but as you mentioned isn't always the way, but we quite at your bride. I guess tying into that and I'd love to talk about the Fintel Alliance a little more shortly, but when you're talking about. How technology and data analytics are helping to assess the effectiveness of a regulatory strategy Harm and effectiveness of a regulatory strategy, I think a huge part of that is measurement as well, right? Could you maybe share how technology, data analytics, some of these things in that other element of what AUS track does are feeding into that assessment in that strategy? Speaker 4 Yeah, it's a really complex thing to measure effectiveness in in crime reduction. I've spent 25 years trying to measure that in all the different things I do. Sometimes it's pretty obvious. Sometimes it's really hard to to judge effectiveness, but sometimes it's also really obvious. If I give you, if I can give you one example of where it's really obvious we took some action. We've been taking a bunch of action around online, sorry, on casinos and gambling houses in Australia. So you probably would have seen that we took action against Crown Casino and got a a significant fight against him. We're in court this week with the Star. She following that. That's finally hopefully going to resolve itself taking some action against casinos in the last couple of weeks in northern in northern Queensland and the NT. But if you take Crown, for example, Crown was full of dirty money. You know, I don't know, they might be saying that, but it's true. They were full of casino junkets. Those junkets were connected to serious and significant organized crime figures from Southeast Asia. And now we're bringing billions of dollars of dirty money into Australia and running it through Australian casinos, literally running it through Australian casinos. We took action against Crown and, and as I mentioned, we got a $450 million fine against them. But if you look at that company now, it's fundamentally different. Like the way it operates, the way it uses risks, the way it manages its gaming flaws. It's fundamentally different. But the big challenge for that company is we've cut its profit by a significant amount. So that business has had to restructure itself completely, restructure itself around the legitimate gaming to take The Dirty money out, which means its financial profile is quite different. And it's caused them to think differently about how they run their business. You know, can you actually just run a casino in Australia and make profit with money laundering controls? Maybe, maybe not. Their view is you can't and that you need to have hotels and restaurants and other things as part of that business. But it's a good example of where you can see a significant effect on a on a business model. And I think more broadly across the casino industry on getting The Dirty money out and then having to reprofile the business model. There's a couple of the other casinos we've taken actually against as well, where you can track the risks that we talk against the the risks that were behind the legal action that we talk. And then look at the data that's flowing through those casinos in terms of the cash transactions, the international funds transactions, the kinds of things they're reporting to us in suspicious matter reports. And you can notice a change in the behavior both in the way they're managing their business, but also in the people that are going in there and the types of business that they're doing. But it's a challenging thing, measuring effect. And so we're trying to use big data and analytics much more to get a sense of what's actually happening in the overall environment. Where is the risk in that environment and what does it tell us about where money laundering is actually happening? And if we're taking action, can we see a difference being in the flow of payments or the flow of transactions or the change of the risk that those businesses are exposed to? And so we're starting to get some bigger, much bigger data sets. Last year in in Australia, we created a new division just dedicated to data and data analytics. We're starting to use AI to, to look at our suspicious matter reports and big large language models to, to dive into our data to see what it can tell us about about patents. And it's really interesting. It's quite powerful. And some of the work we're doing with the Fintail Alliance is really groundbreaking in terms of kind of the scale of the data that we're looking at and the tyes of things that it's showing us. Speaker 5 I think that's a really fascinating point. So I feel like you've touched on a lot there. One of the things that I loved from my perspective and this measurement of effectiveness of regulation that is caught at what I'm trying to do as well, whether it be in foreign bribery or in some of the more social and environmental harm assessment areas. How to measure the effectiveness of regulation It's like you have regulatory change that's trying to achieve harm reduction, but how do you actually tell if it's done it? And I loved your example with litigation and how the result of specific cases, which is not the type of big data that we normally talk about, but how that can really show you like a cultural change in an organization that also has procedural change attached to it. And then you get very different outcomes, ones with huge market impact in your example as well, which I guess there's a secondary challenge. They're trying to keep these same entities on the side and working with you. And I feel like the Fintel Alliance is worth kind of talking a little bit more about in that as well as in the way that it feeds into your data analytics and your access to data to do that enforcement effectiveness side of things as well. Speaker 4 Yeah. So the Finta Alliance is a really strong part of what we're doing and becoming much stronger. Just for people who might not know, it was started in about 2017 where we brought some of the bodies that we regulate together to start to talk about money laundering and to look at what we could do to focus on money laundering. And we took a bit of a different approach to what some people were doing overseas in that we took some staff from those financial institutions and make them staff of AUSTRAC and gave them access to our data and our tools. And so there's dedicated rooms in in Sydney and Melbourne where FINTRAC staff come in and sit with those, track staff and work specifically on projects. And you've done some really interesting work over the years. I'll give you a couple of examples of the types of things that we do and why it's really important. One of the things I did maybe 4 and 15 months ago was looking at student money mule accounts. Student Money Mule Accounts So, you know, in Australia we've got many foreign students that come to Australia to to study in universities, maybe not as many as we used to. He gets not so great. You're being the ones with St. universities, I think types of that. But there was a challenge in that particular area where students coming to Australia are opening a bank account, going about their business and being approached by organized crime as they're leaving Australia to still their bank accounts and that bank account then becoming a money meal account. Lots of daily money flowing through those. You probably still see some of the ads on social media for that. There's there's still people out there chatting for those accounts. Big problem. We noticed that some of the banks noticed it, put it to the Fintel Alliance, and those analysts from the banks and AUSTRAC coming together are able to look at big data and look at trends. And from those trends, looking at those accounts that we could identify as being new accounts, they could pick the transaction patterns. That was from when that account went from a regular student account to a meal account. And so banks were able to brew in those patterns into their transaction monitoring algorithms. And now you've got a process where they're picking up those meal accounts pretty quickly and slowsing them down. So I'll ask you, I closed down throughout those things. So that's the kind of work that the Fintel Alliance has been doing, getting together and looking at problems and seeing what does the data tell us about these problems and what can we do about it to try and shut that out. But we've wanted to kind of expand that for the last of a while, but I haven't haven't really been able to do it that well. But we started last year where we said we want to kind of ramp this up more. And so last year we tested a new approach where we went to the big four banks in Australia, so ANZ, Westpac, NAB and Commonwealth Bank to give us all of your cash deposit data under $10,000 for a six month period. And so we wanted to see could we assume that data could be legally take it and then would it tell us in? And So what we did is we did that and we took all of that data into Austrax and about 56,000,000 data points that we took in. And over a focused week, we had our analysts and the analysts from those four banks and some guys from the the federal police look at that data and ask us some really basic questions. Really, really basic questions like accounts across those banks with common phone numbers, links with people and a whole bunch of other things. And we uncovered money laundering networks that just weren't visible to any one of those banks on your own that have resolved in a whole bunch of law enforcement activity. And it taught us some really important things. One is we could take on big data and we could do it legally and we can do it technically. But secondly, all those eyes focused on that data together in a really intense way. By that I mean they're all sitting in the same room for a week and focusing on that at analysis shadows trend so quickly that in at the end of the week we're making referrals off to the AFP and they're starting a whole bunch of new investigations. And so from that we've developed what we call a collaborative analytics hub and we've made that a permanent way of working now. So we've doubled the size of the staff that are in there. The banks have increased the number of staff that's in the near. We've got a Co director from ANZ, he's based now at AUSTRAC and we're about to start our second big data exercise, just getting even bigger than that, 50 minutes, 56,000,000 data points. But the whole idea of that is, you know, our money laundering regime requires banks, for example, to give us a certain number of reports, threshold transaction reports and suspicious matter reports. And they're, they're really important. But we're kind of going further now by saying, well, let's just go to the source data and have a look and tell us see what that tells us. And it tells us where the risk is geographically. It tells us where the risk is demographically. It tells us about the types and techniques of money laundering and how that's changing. It tells us what's about money laundering networks. And it tells us heaps about the weaknesses in financial systems that we can start to to patch up. I talk about those money laundering networks we picked in those four banks. There was one bank where they weren't present. They were present in the other three, but this one bank had a control over its cash deposits that those organized criminal networks clearly knew about and they just completely avoided that bank altogether. It was a really good lesson of how much, how much the money laundering organisations are actually looking at our money laundering controls and adjusting what they're doing to try and get around those kinds of controls. But it's it's a different approach for us and it's working really in partnership with some of the big parts of the financial industry where we're really sharing insight, data, expertise. They're bringing expertise to the table around the operations of financial systems that we just simply don't have. We're bringing Fintel intelligence in that they just don't have. And it's incredible, incredibly powerful way for us to make our financial system stronger into Boston bogies. Speaker 5 Yeah. I mean, I just want to pause on that relationship between what are effectively regulated entities and you as a regulator. But coming at it and I guess you are unique in this case because you have that intelligence dimension to the organization as well. But that level of collaboration is I think in some ways the dream for many other agencies. And I hear also when you're talking about the effectiveness of your enforcement actions, for example, against Crown and other casinos, that you're really doing something different because quite often you have a rhetoric around enforcement agencies, penalties and then the status quo just continues, right? But here we've seen really good examples of things are actually shifting as in response both to that collaboration and to that enforcement, active enforcement. I wonder if you could speak a little bit to what you think is the secret source there, I guess. The secret source of the Commonwealth Bank’s financial crime operations Yeah. So I mean, around that table we've got a number of big banks. So if you take the Commonwealth Bank for instance, they're very heavily involved in the Fintile Alliance. Their financial crime area is their biggest operational branch. I think you're 4000 people, something like that in financial crime. And they've invested hundreds of millions of dollars in my laundering measures. They wouldn't have done that if we didn't find them 100 million bucks, they would. That just wouldn't be there. And if we didn't have the threat of continued fines and legal action, I'm not sure, call me slightly cynical, I'm not sure the board would continue to invest that level of money in those kinds of controls. And so the unique thing in Australia is we've got the financial intelligence unit and the regulator in the same organization. So we can use the stick of the carrot at the same time to try and get the best level of compliance and cooperation from those organizations. And now they're being absolutely plagued by kind of pig butchering and other kind of scams and and other scams that are hammering the banks. They can see the valuing strengthening themselves against financial crime because it's costing them a lot of money in the scam to kind of just the epidemic of scams that we've got in Australia. But getting that significant shift in the board oversight of financial crime is really important for us and I think has been really significant. And then from that, from that shift, getting that engagement in in a partnered way with a regulated entity is really important, but it does come with a lot of risk for us. So there's a thing meaning the regulatory area we call regulatory capture, when the regulator kind of gets captured by the people, it's regulating. And so we need to be really conscious of when we're working in partnership inside the Commonwealth Bank, we're still a regulator of that institution. If we need to take action, we need to take action. And so we're pretty clear in our engagement with them that that's still possibly the case. And I'm the statutory authority in AUSTRAC, so I don't sit on the Fintail board or get involved in the Fintail rights management because I might need to take regulatory action against one of its members. So we try and keep a little bit of a separation there so that we're trying to avoid that regulatory capture question. But from from our point of view, we're having a really good look at how we engage with all the people that we regulate. So at the moment, we regulate almost 18,000 businesses and on the 1:00 here in the Commonwealth Bank. And on the other hand, you've got organized criminals and you've got everything else in between in that 88,000 businesses. They're not all the same. The risk isn't the same, the maturity isn't the same. And so we're starting to introduce a maturity model into how we regulate to say, if you're really mature, we're going to take a very different approach to you, which is much more of a partnership kind of approach. And let's work together to to reduce financial crime so that on the other hand, when we know we've got organized criminals running certain businesses, we can actually spend more effort chasing those guys down. But you know, it's a constant discussion about how does the regulator working partnership with the regulator group. Speaker 5 Yeah. I mean, I love seeing this played out in in real life and in our jurisdiction as well, because it's certainly an area of academic research that is quite hotly debated. And one of the biggest challenges often is trying to kind of ensure that you get some real data on this. And often there's not because often regulators do fall into the ineffective or captured to kind of dichotomy. And it's nice to see that not happening here and some kind of innovation around that. What role, if any, do you think academic research and the kind of work that the Financial Integrity Hub is doing might play in promoting anti money laundering, risk mitigation, compliance, policy development, all of these aspects that feed into the work that you're doing? The role of academic research in promoting anti-money laundering, risk mitigation, compliance, policy development, and more Yeah, huge. It's huge. I mean the area of mind wandering and in the broad area of the work that we do, it changes all the time. And we, there's still lots of questions that we have about effectiveness, about realtor strategy for which we really don't have a lot of events. And there's some policy questions that we really still need to debate through and more of them are going to arise as kind of crime becomes more sophisticated and particularly in the financial system as the financial system changes and the dash, I'm going to talk about some of the innovation that's happening here that's causing some challenges. But there's a strong role, I think for for academics to kind of prod the system. So our money laundering system, as most of you probably know, is kind of based on Financial Action Task Force 40 recommendations in that global standard. There's a question about how relevant some of that stuff is and whether it's effective or not. And you know, that needs, I think some academic challenges and some pushes and some prods. Whether it's keeping pace with changes in the financial system, whether it's keeping pace with changes in international organized crime is really important. I think there's a really important role for evaluation and effectiveness assessments so that we get better evidence around what works and what actually is effective in preventing and reducing financial crime. Because at the moment all you've got is the words of regulators and financial institutions. You don't really have that independent kind of level of assessment that you do have in other areas of public policy. Where I've come from in the past, in the the kind of the broader criminal justice system, we have lots and lots of academic research around what works, what doesn't work, what the effects are certain laws on certain types of crime, on certain offenders. We don't have that same body of evidence, I don't think, in the world of financial crime. And so the more we can build that, the better for awesome. Speaker 5 Yeah, fantastic. And again, nice to hear regulatory authority open to that level of collaboration, not only in the business context, but also with academia and other stakeholders. It's really inspiring I think to to hear that. OK, so a next question leading a little bit more towards our students before I open the floor to get their direct input. Advice for early-career professionals But many of our listeners, not just the ones here today, but in our wider financial integrity, have audience professionals in early stages of their careers who have a real interest in financial crime prevention, but might not necessarily be actively working in that space yet. What advice would you give to those just starting out in this field? What do you think are really some of the important things to think about, both in terms of, I guess, getting in, but also in terms of when you're in these roles and working on this crime prevention issue, how you'd like people to think about it, go about it? Speaker 4 Yeah, there's lots of great information and and things around the world on financial crime, great podcasts, great publications, lots of great groups on LinkedIn and other places. I encourage people to throw themselves in those things as much as they possibly can and hear real world examples about crime and criminality. I think sometimes people can get a little bit caught up in kind of theoretical or regulatory kind of areas of, of financial crime without understanding the criminality that actually sits behind it. And that's really, really important to understand. The nature of organized crime that we're dealing with is it's multifaceted, it's international, it's transnational. And you know, from a money laundering point of view, there are organizations in Australia, international organizations that have branches in Australia who just launder money. That's all they do all day, all the time, constantly looking for how to improve it, constantly looking for how to do it more efficiently, constantly looking for holes in our financial systems networks. And so getting yourself tapped into real world examples from around the world as to what people are doing, what crimes they're seeing is really important to keep on the cusp of kind of keeping on financial crime. Don't get caught up with the regulatory side and kind of what compliance looks like. Think about the crime side and, and, and understand that very well. Also, we're about to expand our regime into what we call a tranche to group. So if you're using the job now, it's time to start looking because there's going to be a lot of financial crime jobs coming up in the next 6 or 8 months. So we're in an area where financial crime professionals are going to be in quite some demand, some from us. We're recruiting. We've recruited a fair bit in the last year, but also throughout all of those tranche turbinities. We're about to bring 100,000 businesses into our regime and lots of those are really small, but some of them are actually quite big and lots of them starting to recruit for financial crime teams now. So keep yourself touched into those if you're looking for some job opportunities because there was some coming up there. Speaker 5 You go hot tits. Yeah, but it was sitting in the back of my mind, especially when you were talking about data analytics and access to big data, potentially bringing technology in there. The future of data analytics And I'm thinking, well, and then when you have Trench 2 involved as well, suddenly you're going to have presumably a lot more data there too. So I'm sure you're looking forward to or maybe a bit trepidatious about what that's going to look like from from the data side as well? Speaker 4 Yeah. I mean, we're we're looking at we're really looking hard at third party data sources. So if you, if you take for example, one of the groups that are coming under the regime of real estate agents, and I can tell you being the head of Australia's FIUICDE Money now real estate agent, everybody got all the ties. So much people turning up and dropping bucket loads of money on really expensive houses in Sydney and Melbourne, like from outside of Australia, not only in Australia, but obviously there's like 10s of thousands of real estate transactions every year in Australia. Most of them are suspicious at all, most of them just regular people buying and selling houses. And so the challenge for us is to work out where the risk is, you know all that. And so for example, on the big data front, we're negotiating with Pics and now so enough people know, but all of the property transactions in Australia get recorded or almost all of them through a single source database. And so we're looking at getting just permanent access to that database so that we can take that data out, match it with our financial data and other law enforcement data and then really work out where the risk is in the real estate industry. So that we are focusing our effort where that risk actually is most effectively as opposed to focusing on 100,000 real estate transactions equally, we want to focus on those ones with risk out. So we're really exploring data options and big data sets for our transfer. Speaker 5 Fantastic. The Risk-Based Approach And you're describing such an integrated approach to the risk assessment dimension of this. And I feel like the risk based approach is being really well articulated when it comes to AM LCTF kind of the role of the financial action task force as well. But then tying that into what really speaks to me and my work as well. But this idea of the harm, why are we taking a risk based approach? Well, because that's where we can target the biggest harm or the biggest volume of harms in a particular scenario. I think that's really innovative approach to be taking, but it sounds like it's working for you at this stage. Speaker 4 It is and it's working increasingly effectively, I think. So the more we look at kind of data and matching data and risk, the more focused our efforts can be. If I can give you a quick example, we we've done some work recently on on cryptocurrency exchange. Yeah, cryptocurrency is a big money laundering risk internationally. Australia has a really unregulated crypto industry. The only regulation is money laundering regulation. Isn't that corporate regulation for crypto industry in Australia yet? Unfortunately. So we're becoming increasingly worried about it. And you saw the growth in Australia, these cryptocurrency automatic teller machines. Don't know if people have come across these things. There was I think 20 of them three years ago. There's like 2000 of them now. They're all over the place. Speaker 5 Exploding, right? Speaker 4 It's blowing nuts and we're getting really worried about the crime potential of these things. So last year, the end of last year, I established an internal task force just to look at what's what's going on here, what's the risk? Can we see what the risk is? And then what are we going to do that? There are nine companies, about 9 or 10 companies that are bringing these these things into Australia. And we used our powers to demand data out of these people. And so we got bucket loads of data on their transactions. And then we've asked them third party on train chasing company tracing companies as well as our own data and and data from the AFP to start to match the transactions each of these companies are doing to risky wallets. See the dark web wallets, wallets from risky jurisdictions, wallets that are attached to known organized crime groups. We can then start to establish a bit of a kind of a risk profile of each of those businesses based on that. And we can see the nature and types of the transactions that are flowing through these, these ATMs. And we see lots of scam proceeds coming through. You see like 60 year old guys going and dumping half $1,000,000 in cash through one of these machines. It's like people just being scammed out of their life savings through pig butchering scams from Southeast Asia about putting the money through these cryptocurrency machines. We see what we look like narcotics purchases going through through these machines as well as general local kind of run-of-the-mill money laundering. So looking all at all of that data within say, OK, what controls can we put in place to try and limit the criminal behavior that we think we're seeing in these, in these machines? But we last week we kind of put a whole bunch of those controls and, and mandated them on the the companies that are running these machines. But because we've got that baseline data, we can now track whether that those controls affect the change in the types of transactions that are going through these machines. And if they work, that's great. If they're not, we'll come back and put some different controls in and hopefully see the difference then. Speaker 5 It's a fantastic example of kind of one of the key things you've been talking about this whole time where you are looking at data, you're looking at change, and you're also targeting the criminality and have a really good awareness of what the different types of crime involved are so that you can see a particular set of data for what it is. A possible tale of laundering of drug proceeds or a possible tale of scam proceeds. Like I think that really demonstrates to our listeners kind of how those things come together. Last question from me would be, it seems like there's so much happening in all trick and you're moving really fast in a new direction and expanding your work in a really exciting way. Leadership Lessons What have been the biggest leadership lessons that you kind of come to maybe during your time at AUSTRAC or leadership lessons you brought with you from your career so far that are impacting you or benefiting your approach? Speaker 4 So we we're in implementing the transitory changes. Do they really big changes for AUSTRAC and really big changes for businesses that are coming into the money laundering regime. I've managed through the course of my career a lot of big government reform and I think the lesson I've learnt through all of that is the power of engaging the people that are being changed. So one of the first things I did last year was to create an industry engagement branch where their job is just to go out and engage with the industries that are forming part of our regulated entities. We don't in Australia, we don't have more firms or real estate agents or accountancy firms. We don't understand the dynamics of how those businesses run, but we need to refer you to make regulations that are effective for them. And so we spent a lot of time and effort in engaging the people that were regulating the other thing. My board is a, a good background in data and analytics and creating a data division in in AUSTRAC. One of the big lessons for me though is AUSTRAC has a strong international role. So there are if I use in 177 countries, I think and we work pretty closely together, but we take a really strong leadership role on AML issues in the Pacific and Southeast Asia. So we we lead an organization called the Pacific Financial Intelligence Community, where we bring all the fi us from the Pacific together. We share tradecraft, we train them all. We've installed software in all of their offices. So they've all got the same basis of, of software to do their work. And last year we started to bring analysts from different countries together into Australia and we're analyzing in that in those cases, we're doing outlaw motorcycle groups are trading narcotics throughout different countries in the Pacific and doing joint analysis on those groups and ending up with with some arrests from that. We're going to do some, some more in the next couple of months. And in Southeast Asia, we coach here with the Philippines a thing called the financial intelligence community and that's focused really heavily on scams on child sex exploitation and on cross-border cash movements. And that been a real eye opener for me, that kind of international work, being involved in kind of leading work with other countries and, and, and other regions. Speaker 5 Your insights are fantastic and I could talk for another hour or so, but I, I am going to conclude this part so that we allow some time for our students to talk as well. But thank you again so much for joining us today. It's been very insightful and really appreciate your time. Great to talk to you. OK, team. I would now like to open it up for more direct questions from students and I've got a little. Speaker 3 List here of. Speaker 5 Students who put their hands up quite early. Can OzTrac keep up with the fast pace of technology? To ask a question, maybe we'll start with Naomi. Speaker 6 Hi, Brendan. Thank you so much for your time. Obviously technology is accelerating. I know you said that there's a lot about data analytics that that and the resources that you have. But given the the sophistication with encrypted apps and you know, the increase of technology, is that something Oz track can keep up with that fast pace the sophistication also on a global level. I'm just curious about the technological side because often you hear about other agencies who have flat with the tech with keeping up with the technological case. Speaker 4 Magic, massive, massive change, massive challenge and it's not just us keeping up with it. I think the benefit of having strong relationships with our regulated bodies, particularly the banks is they've got way better tech than we're ever going to have in Australia, in Australia and can really, they're really turning that on to, to try and counter financial crime. But if I give you an example, I was two weeks ago, I was in a group called the Wolfsburg Group, which is a group of kind of global bankers that meet a couple of times a year. I was, I was with them in Europe and we were talking about the growth of generative AI and its use from organized crime groups. And if I give you one example, I won't name the company, but there's a, a British online finance company, all online transactions, all done digitally, really strong KYC, really strong customer due diligence processes, bringing on board all these customers. And I started to get a bit worried and they invested in their own AI, detective AI to try and put in the background on the accounts that they were dealing with. And the AI picked up to two kind of dots in the photos that were in a whole bunch of the identification information that was creating accounts. And these dots were exactly the same in like 1000 different accounts. And the AI picked up that all of this stuff had been climbed and created by other AI, but it was getting through all of their manual processes. And so they uncovered a massive money neural network that have been operating right under their nose. But the technology of the criminals was bringing all of the other technologies that that firm had. And you know, the, the challenge we've got isn't just the growth of AI from the crime fund, it's the rapid changes that are happening in the financial industry. So all of those American companies now are talking about agentic finance. So where? You have an AI agent that does your financial transactions on your behalf. So, you know, you have to move from KYC to, you know, it's one thing to know your customer. Now we're actually going to be asking the question of can you tell your customs agent? And that's going to start to trip some of us out. And also as as financial products move to faster platforms, we're seeing much faster transactions, instantaneous financial transactions, and they're taking a friction out of the process. And that friction is where the financial controls often the city. And that's causing a lot of challenges. Every time a country moves on to these faster platforms, we see scams going through a roof. And so it's causing some some businesses to think differently about how you do KYC. So at the moment, we do KYC in a very, you know, your customer, sorry, shouldn't use it. You know, your customer checks in very manual ways, you know, show us your passport, your driver's license and your bills and all that kind of stuff. So some people are now starting to talk about how do you do that digitally because all of those things are so easily faked now with General UVAI, what you can't fake is an online presence for 10 years. Like if you had a Facebook account for 10 years, pretty hard to fake that. But how can you start to look at people's online digital footprints that might help support that KYC process in a much faster way that might actually be slightly more reliable? I don't know the answer to that yet, but these are some of the questions that we're all starting to challenge ourselves with both as regulated as if I use in financial institutions. Speaker 5 Fantastic. That makes a lot of sense. And it's it's quite insightful, I think just to hear the kind of how quickly things are changing. Right. Will the new reporting entities be able to access PEXA data? I want to jump now to Ellen. Ellen Yang, are you here? Speaker 4 Yeah, thank you. Brendan Fungal. Yeah, basically my name is Ellen. I'm ajd student. Right now I'm studying AML, CTF law. So basically the question is, Brandon, you mentioned before with the new reporting entities coming in trenched to, there's almost 100,000 entities coming in and you mentioned that you will be trying to have permanent access to PEXA data to identify suspicious reports. So will this be the new AUSTRAC visions in terms of like public private relationships, partnerships and future AML strategies? Or can you shed more lights into what's AUSTRAC plans in the future? Public private relationships? Yeah, yes, it is much more of those kind of public relationships where they're relevant and where they're safe to do. I mentioned there are some businesses that we regulate that I would not in a million years ago into a partnership with because they either don't take this stuff very seriously. There might be too many criminals involved in it. So, so where that is effective, you have much, much more. So we're forming very strong partnerships with the industry associations for those groups. So they're really good. Like if you take accountants and kind of lawyers and others, they have very strong industry associations and we're forming very strong relationships with them. I just spent half a day today with the head of the War Council of Australia talking about AML rules. But what we're also trying to do is take a bit of a different approach from AUSTRAC. You know, we've had an interpretation around the risk based model of AML which basically says the business needs to understand its risk development program around that risk. We're taking a much more 4 leaning approach where we're going to say you need to do that, but we're also going to tell you where we think the risks are and what we think risk looks like. And so one of the biggest challenges we got for the trench to crown is of that 80,000 businesses or 100,000 businesses, lots and lots of them are tiny, like the sole practitioners, they're two or three people. Most link companies in Australia have two or three lawyers in them, like they're very small. And so for those small non complicated businesses, we're actually going to give them their AML program. We're calling it a starter kit, but we're basically going to say here's our risk assessment for our industry. This is what we think you really need to be looking for and these are the kinds of things that we think you need to do. If you've got a more complex business or you're operating in a more high risk area, then you'll need to do your own risk assessment. But for a lot of those businesses that are very straightforward and simple, we're going to help them as much as we possibly can to understand what they need to do and to try and help them to comply with the law. So my view is for businesses that want to comply with the law, we should make it as easy and as simple as possible for them to comply with it rather than putting a whole bunch of regulatory hurdles that make it really hard. And I talked about having those partnerships with the industry, and that's to try and understand how businesses work. So what we're trying to do is craft rules around how a business operates. So if you're running a legal firm and you've got a particular way of taking on clients, maybe it's not enough to meet our KYC requirements, but we don't want you to do the same thing twice. What we want you to do is just lift the game on what you're doing ready so that you meet the KYC requirement, so that you're not doubling up on activity because that'll just send people crazy and send small businesses broke if we do that. So we're really trying to to form that kind of partnership with the industry to understand how things work so that for the good people who want to comply with the law, it's as straightforward as possible. So, and from my point of view, it makes the bad ones stand out much more obviously and it gives us a better indication that we all need to focus over. Speaker 5 Excellent. And I think if you're OK, Brennan, we'll take. Speaker 3 One more question. Speaker 4 Yeah, a couple. Speaker 5 OK. Speaker 3 Well, lucky you guys. Speaker 5 Leo. Speaker 3 Did you want to go next? Hi, Brandon, thank you for your time. So my question was sort of, so as AI systems and other regulatory technology becomes more common in AML, CTF compliance, what role does all track C for these technologies in both strengthening enforcement and protecting individual privacy rights as well? What role does the AML/CTF Tracker play in leveraging AI and other regulatory technology? Yeah. So we're starting to use AI in our analytics. We have suspicious matter reporting assessments. We're also testing AI in the regulatory side, particularly around how we're providing some basic advice to some of our regulated entities. But there's this huge scope for us to do a lot more, a lot more quickly with AI if we do it in a really controlled way. But along the side of AI being developed, there's pretty strong privacy enhancing technology that's being developed as well. And it's really important that we make sure that we really are focusing on people's privacy because we get, we, I think we get 2000 suspicious matter reports a day, some huge volume and we get a thing called the international funds transfer instructions. So all the data between funds transferring between Australia and our jurisdiction, we get close to half a million of those a day. And that's the personal information of people. And I'm incredibly conscious that we do everything we possibly can to protect the integrity of that information, because if that was ever at jeopardy, our entire organization fall apart. So it's something that we're really conscious of in AUSTRAC is to how do we manage the information and the data that we've got in a way that helps us reduce crime, but in a way that also protects the integrity of the information from humans that we have and that we're the custodians of. That really is something I worry about quite a lot. But you know, AI technology gives us a lot of of ability to get under the hood of criminal networks much faster than we otherwise could. It gives us the breadth of scope to analyse data much, much more incredibly than we could ever do in the past. And it gives us the ability to kind of build insight much more quickly than we could before and focus our efforts where like the human effort where it's needed in a better way. Fantastic. Speaker 5 Thanks, Brandon. Great question for. Speaker 2 You Adam, you can. Speaker 5 Go, Nick. Will AUSTRAC provide more service specific training? Hi Brandon. I had a question kind of leading off Alan's question before. I think you may have briefly already answered it. But with these new trench to reforms coming in, do you think that AUSTRAC will provide any more service specific training for say like tax professionals or something more specific to accounting? Speaker 4 Yeah. So what what we're doing is a couple of things here. We're doing what I call what we call those starter kits. Probably should get a better name for those. But yeah, the programs that we give people to help them understand what to do, we're also developing industry specific guidance materials. So we're at the moment finalizing our rules under the under the new legislation and at the same time we're working on guidance that kind of brings those work to life. And the guidance we're doing is very specific to industry. So they'll be guidance for lawyers and guidance for accountants and guidance for real estate professionals. And the whole idea is to try, and as I mentioned earlier, understand their business environment, talk to them in the language that most make sense to them and try and make sure that we're giving examples about what we expect them to do that's really relevant for the way that they do business. And we're, we're trying to craft what we're doing around the real world business. So for example, in a property transaction, we've got a whole bunch of different reporting unity. So you've got, you know, the real estate agent, you've got a lawyer, you might have a conveyancer, you've probably got a bank if there's financing involved. And what we're trying to do is to look at, well, how does a person fly through that transaction and how do we craft our regulation that matches that flow. So you don't have everybody doing the same damn thing in a whole bunch of different ways, but we're trying to get the relevant information from the place that can flow with the person through that transaction. And hopefully that will make it easier for business to meet their obligations if we're trying to design it in a way that actually matches what they're doing as part of their day job. So we're really trying to not only give people education, but think differently about how we regulate people so that it matches the real world experience of people running those business. Speaker 5 Fantastic. Thanks so much, Brendan and thanks everybody for joining today. I am going to call it. I've got a million more questions. I see a million more hands up. But we really appreciate the time that you've spent with us and I'd like you to be able to get back to your evening. Are there any last comments or thoughts you wanted to share with us, Brendan, before we let you go? Speaker 4 Oh, look, thank you for the opportunity to come and talk to you. Hopefully I'll be able to get an opportunity to come back and talk to you guys again. The Hubbard at Macquarie University does great work. We're great fans of it and happy to support the work that you guys do in any way we possibly can. I'm on LinkedIn, jump on and connect with me if you like. Post a bunch of stuff on there about what we're doing. Speaker 5 Great and amazing. I mean, we'll absolutely hit you up on making this a recurring episode for sure. I hope that to see you again very soon. Thanks so much for your time and have a lovely evening. Speaker 4 Thanks. Great to talk to you and great to meet everybody. Speaker 1 Financial Integrity Hubs Research is at the cutting edge of understanding and tackling illicit finance threats, providing the international community with the essential knowledge, tools and insights to make a real impact. If you want to stay ahead in the world of financial integrity, make sure to follow us on Spotify, YouTube X or LinkedIn. We're always sharing the latest updates, breaking news and ground breaking research. Join us and be part of the conversation. A huge thank you to Doctor Doran Goldbache for his academic insights. We also want to give a big shout out to Doctor Craig Cameron, Hyper Concepts, and CFCA for their support in bringing this podcast.