In recent guidance provided by AUSTRAC to the superannuation industry, SMSFs were highlighted as an area of risk, as individuals with terrorist affiliations can utilise the non-APRA-regulated sector to finance extremist behaviour.
“Terrorism financing has been identified as a small but emerging and serious threat for the superannuation sector,” the report outlined.
“Self-managed superannuation funds (SMSFs) can be used to transfer superannuation balances out of the APRA-regulated sector. Funds are rolled over into an SMSF bank account and can then be withdrawn to other bank accounts unrelated to either the member or the SMSF.”
The guidance follows on from a 2016 AUSTRAC report that investigated the risks of money laundering and terrorism financing to the superannuation sector.
The report, which analysed two years of suspicious matter reports (SMRs) issued to AUSTRAC by superannuation fund trustees, found foreign terrorist fighters (FTFs) pose a potential risk to the super industry.
According to the findings, individuals who travel abroad to fight for terrorist groups are a risk to the sector as they are likely to attempt to access their superannuation to help finance their travel, equipment and activities.
“There is evidence that some FTFs have rolled over payments from APRA-regulated superannuation funds to SMSFs, with the money ultimately being used for terrorism financing,” the report stated.
Over the two-year sample period, 19 SMRs, or 6 per cent, concerned potential terrorism financing.
A total of nine superannuation funds submitted the relevant reports in relation to funds collectively worth $259,790.
“While small in number, some of these SMRs were assessed by AUSTRAC as highly likely to be related to terrorism financing and referred to law enforcement and national security agencies for further investigation,” AUSTRAC stated at the time.