From 1 July, around 100,000 Australian businesses were conscripted into a compliance regime that, on the government's own numbers, costs a fortune and, on the best available evidence, does not work. It is a textbook case of regulating to look busy.
💸 Around 100,000 businesses, most of them SMEs, are now AUSTRAC reporting entities for the first time
💸 The government's own Impact Analysis puts the cost to business at up to $13.9bn over 10 years, an average of $1.851bn every year
💸 The average small business faces around $23,250 in ongoing compliance costs annually, with setup running as high as $85,550 for larger firms
💸 On the government's own numbers, quantifiable costs of $13.9bn exceed quantifiable benefits of $13.1bn
💸 Global research finds these regimes intercept less than 0.1% of criminal funds while compliance costs run more than 100 times the amounts ever recovered
The cost is real and it lands hardest on the businesses least able to carry it. Being a reporting entity is not a box-ticking exercise. Captured firms have to enrol with AUSTRAC, build and maintain an AML/CTF program, appoint a compliance officer, run customer due diligence on every client, report suspicious matters, keep records for seven years, and submit to independent review. For a large firm that is an annoyance. For a sole practitioner or a suburban conveyancer it is a fixed overhead and a chunk of lost fee-earning time that did not exist a fortnight ago. The most damning number is buried in the government's own analysis, which cannot make the quantifiable benefits exceed the quantifiable costs. When the department writing the rules cannot get its own sums above water, business owners are entitled to ask what they are paying for.
The answer is very little. The best research we have on these regimes is brutal. Work by La Trobe researcher Ronald Pol found anti-money laundering interventions capture well under 0.1% of criminal finances globally while imposing compliance costs more than a hundred times the amounts ever recovered. Worldwide the system stops around $3 billion of an estimated $3 trillion in annual criminal money and spends over $300 billion chasing it. If a business ran a process that failed 99.9% of the time and cost a hundred times what it recovered, it would be shut down by lunchtime. Instead the developed world has built an industry around it, and Australia's contribution is to sign up late and copy the design without question.
That is the real problem here. The only defence the government can offer is that everyone else does it and FATF wanted it done, with the unspoken threat of grey-listing if we did not fall into line. That is not a case that these rules will disrupt organised crime, because the evidence says they will not. It is an admission that the point was to be seen to comply. This is regulation introduced where none was needed, imposing billions in cost on small business, so the government can say it acted. We have seen this pattern before and we will see it again. Doing something is not the same as doing something useful.
For the SMEs now caught in the net, none of this changes the immediate task. You cannot opt out, so get your enrolment and program sorted rather than hoping the obligation disappears. AUSTRAC has published free starter kits for small business and has signalled early enforcement will target firms that wilfully ignore the rules rather than those making a genuine effort. Build it into your pricing as a permanent operating cost and move on. The rules are here whether they work or not, and the evidence says not.