What is counter-terrorism finance?

Anti-money laundering follows dirty money: it asks where funds came from and tries to stop criminal proceeds being dressed up as legitimate. Counter-terrorism finance runs the other way. It asks where money is going, because funds destined for a terrorist organisation may be perfectly clean at the start, such as wages, business profits or charitable donations. That is why CTF controls lean on screening and on the purpose and destination of transactions rather than only on the source of funds.

In Australia both are handled under one Act, one regulator and one AML/CTF program, so a lender does not run two separate systems. The everyday onboarding checks a lender or broker performs are the front line for both.

First, identify the customer against government-issued ID and, where the applicant is a company, trust or partnership, identify and verify the natural persons who ultimately own or control it. Second, screen every customer against the consolidated Australian sanctions list maintained by DFAT and the UN lists, ideally with an automated tool, at onboarding, again at approval and periodically after that. A confirmed match means do not deal with the customer or the asset and report it to DFAT's Australian Sanctions Office, contacting the AFP where required; a suspicious matter report to AUSTRAC is a separate step.

Third, if you know, suspect or have reasonable grounds to suspect that a customer, transaction or loan purpose is linked to terrorism, lodge a suspicious matter report with AUSTRAC without delay, setting out the facts and any steps taken. Fourth, keep monitoring during the life of the loan: changes in stated purpose, requests to pay unexpected third parties and links to high-risk countries all warrant escalation to the compliance officer.

Terrorism financing rarely announces itself, so the signals are patterns. Company structures that obscure the true owner, or reluctance to explain ownership. Customers who are politically exposed persons or connected to high-risk jurisdictions. A loan purpose that does not fit the declared occupation or business. Funds to be paid to, or received from, unrelated third parties.

Add to that structuring, where several small applications or deposits sit just under reporting thresholds; unusual urgency and pressure to skip normal checks; cash-intensive businesses where money is hard to trace; and transfers to charities or non-profits with little governance or transparency. None of these proves anything on its own. Together they justify a closer look and, if the suspicion holds, a report.

Lenders that make loans are reporting entities under the Act; whether a broker is caught depends on the services it provides, though licensees are expected to have CTF procedures whatever their size. The workable setup is simple: a standard onboarding form that captures identity, beneficial ownership, business purpose and source of funds; a sanctions screening step before approval; and a nominated AML/CTF compliance officer with a short escalation and reporting process.

Keep records of every verification, screening date and report for the statutory period, which the Act sets at seven years. Train staff on the red flags using real enforcement examples, test the screening tool and review past reports at least annually, and keep the board informed of CTF risks and any AUSTRAC correspondence. Never tell a customer that a report has been lodged: tipping off is itself a breach.