Open banking in Australia: anti-money laundering and counter-terrorism financing considerations

Open Banking is designed to give customers more control over their financial data, allowing them to request their bank to securely share product, pricing and transaction data with other banks or authorised third-party providers. Open banking relies on application programming interfaces (APIs) – the bridge that allows two systems to communicate and share data without an intermediary via a common language. This will put banks domestically and internationally in competition with a range of new players, from FinTech start-ups to technology companies. However, implementation of broad data-sharing arrangements, and opening systems to access by APIs, may raise questions about whether open banking exposes banks to significantly more money laundering and terrorism financing risk. This is an assessment that all banks will need to conduct when launching or implementing any kind of new business practice, service or developing technology, and would feed into the overall enterprise-wide assessment of money laundering and terrorist financing risks faced by the bank. This chapter aims to shed light on the implications of open banking regimes for money laundering and terrorist financing risks, with a view to providing recommendations for enhancing financial integrity in the Australian financial sector.