The Federal Government’sproposed anti-money laundering reforms may undermine the security of Australia’s banking sector, the CEO of the Commonwealth Bank of Australia (CBA) has warned.

As part of CBA’s submission to the Attorney-General’s department on the proposed reforms, CEO Ralph Norris said in their current form, the proposed reforms may in fact encourage identity crime.

“This bank, with the largest retail customer of any Australian financial institution, has the view that the proposed measures to reduce money laundering and terrorism financing may actually increase the potential for identity fraud,” Norris said. “This will not only cause significant issues for the Australian public but will undermine the AML/CTF [anti-money laundering/counter terrorism financing] policy intent and weaken the security of the banking sector.”

Norris also accused Senator Chris Ellison, Minister for Justice and Customs, who is overseeing the reforms, of reneging on promises made at the Minister’s round table consultation. Ellison has constantly cited the round table consultations as evidence that the government is listening to industry.

“Any alternative to the current identification procedure should be as robust as the current system that is based on face to face [F2F] identification,” Norris said. “This principle was agreed in the Minister’s round table consultation but is not reflected in the exposure draft legislative package. The proposed non-F2F methods, electronic verification or accepting certified copies of documents are well below the standard described for the F2F method and represent a weakness that will be easily exploited by fraudsters.”

He added that this approach is inconsistent with the Financial Action Task Force (FATF) and other international guidance which designate non-F2F techniques as ‘higher risk’. FATF is a Paris-based international body which sets global AML standards. Australia is a FATF member and its AML reforms are designed to achieve FATF compliance.