AUSTRAC flags financial crime risks in foreign-owned banks over low AML reporting and money mule activity

Australia’s financial intelligence agency has warned that gaps in monitoring and reporting by foreign-owned banks are creating opportunities for criminals to exploit the country’s financial system. The concerns follow two separate supervisory campaigns examining suspicious transaction reporting and money mule risks across different parts of the sector.

The Australian Transaction Reports and Analysis Centre (AUSTRAC), the government's anti-money laundering (AML) and counter-terrorism financing regulator, said on Friday, April 10, the reviews found weaknesses in controls, low reporting of suspicious matters, and exposure to cross-border financial crime.

Low suspicious reporting raises concerns

In the first campaign, the regulator examined foreign bank branches operating in Australia and found many believed their operations carried low money-laundering risk. However, officials said that assumption could create blind spots.

AUSTRAC CEO Brendan Thomas said some businesses may appear low risk but still have exposure to higher-risk clients such as politically exposed persons (PEPs), trusts, foundations, and high-net-worth individuals. “Low reporting doesn’t mean low risk – it means blind spots criminals can exploit."

He added that global money flows increase exposure to international crime networks. “If you’re moving money globally, you’re exposed to global crime risk," he said.

The campaign also found that anti-money laundering systems in several banks were not strong enough to detect unusual or suspicious transactions.

According to AUSTRAC, the 50 foreign bank branches in Australia moved about $2.5 trillion in and out of the country last year. Despite such large volumes, only a small number reported suspicious activities. “Moving trillions of dollars but barely reporting suspicion is a concern for us,” Thomas said.

The agency expects both the number of banks reporting suspicious matters and the volume of reports to increase, especially after new anti-money laundering requirements came into effect on March 31.

Money mule risks in foreign subsidiaries

The second campaign focused on foreign bank subsidiaries offering retail services. The regulator identified a high exposure to “money mule” activity. As per the Federal Bureau of Investigation (FBI), "A money mule is someone who transfers or moves illegally acquired money on behalf of someone else."

Scams, fraud, drug trafficking, and other crimes often link these accounts. AUSTRAC said risks appear both during customer onboarding and after accounts become active.

Thomas noted that cross-border transfers through mule accounts remain a major concern, including cases involving fake online gambling schemes where victims deposit money but never receive winnings.

“Each of these banks has room to improve, even those that already have strong controls in place,” he said.

AUSTRAC’s call for stronger controls

AUSTRAC has urged banks to strengthen anti-money laundering systems, improve monitoring of suspicious transactions, and enhance customer checks. The regulator said that better detection and reporting are critical to preventing criminals from exploiting Australia’s banking system.

“Your actions are critical to safeguarding Australia from financial crime and keeping your customers safe,” Thomas said.