AUSTRAC Warns Banks Against Closing Accounts of Crypto Traders

  • Richard Marley
  • November 11, 2021
  • 3 minutes read
  • 2519

AUSTRAC shows full support for the Australian crypto industry and is issuing warnings to banks against closing accounts of virtual assets providers.

Australian Transaction Reports and Analysis Centre (AUSTRAC), the country’s AML regulatory body, has recently stood in favor of the country’s crypto industry by issuing a stern warning to local banks against large-scale de-banking of crypto dealers.

Crypto dealers in Australia have been raising concerns about de-banking from the banking systems because of having involvement in crypto businesses. De-banking, where the financial institutions stop providing services to customers, has become common practice targeting virtual assets providers in Australia.

AUSTRAC has made it clear that the Australian AML and CTF regulations do not mandate banks to evict customers from the country’s banking system just because they are associated with businesses dealing in cryptocurrencies.

“The effect of de-banking of legitimate and lawful financial services businesses can increase the risks of money laundering and terrorism financing and negatively impacts Australia’s economy,” AUSTRAC said in its statement.

AUSTRAC’s Chief Executive, Paul Jevtovic, highlighted that the regulatory bodies do not support the de-banking of crypto operators or terminating business relationships. This practice could soar the risk of money laundering and terrorist financing.

“Although the decision to close an account may remain a necessary risk control, Austrac considers with appropriate systems and processes in place, banks should be able to manage high-risk customers, including those operating remittance services, digital currency exchanges, not-for-profit organizations (NPO), and financial technology (FinTech) businesses,” the regulator said.

Australian banks have become conscious as aftermaths of money laundering or terrorist financing cases pours reputational damages that are unbearable. The Westpac Banking Group became part of headlines back in 2013 when $6 billion funds were laundered through their accounts. While the bank was not found guilty in this case, it portrayed that banks facilitating virtual assets providers can lead to reputational fallout. 

Westpac case was instrumental in making Australian banks oppose crypto services. Currently, when banks identify clients as high risk, they de-bank them, considering the cost of incorporating Enhanced Due Diligence (EDD) to be high.

A spokesman for The Australian Bankers Association said, “A core obligation is for banks to be able to trace and report where the money comes from and where it flows to. Given the level of anonymity in some digital assets and trading platforms, this means it is often not possible for banks to provide a service in compliance with their AML and sanctions obligations.”

The large-scale de-banking has put the Australian cryptocurrency exchanges in danger, 17 bitcoin exchanges closed. Bitcoin businesses are moving out of Australian territory because of concerns regarding virtual assets regulations and tax treatments. The Australian Digital Currency Commerce Association (ADCCA) has also made it clear that the Australian crypto industry may completely disappear if de-banking practices continue.

“AUSTRAC expects banks and all regulated businesses to adopt a case-by-case approach to managing ML/TF (money laundering/terrorism financing) risks. This expectation extends to the importance of continuing to assess the particular risks relating to their business customers in line with the risk-based approach,” AUSTRAC representative said.

Suggested read: AUSTRAC Denounces De-banking Practices To Prevent Financial Crimes