An Introduction to International Fund Transfer Instruction Reporting

AML/CTF and IFTI Reports

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is Australia’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regulator. Reporting entities, must have an AML/CTF program documenting how you comply with AML/CTF legislation. The program must document how you identify, mitigate, and manage the risk of money laundering or terrorism financing, and must be appropriate to the level of risk your business or organisation may face.

International Fund Transfer Instruction (IFTI) is a required part of your overall AML/CTF program. AUSTRAC and its partners use the information in IFTIs combined with information received from other reports to help combat 

• Terrorism 
• Human trafficking 
• Drug trafficking 
• Money laundering 
• Tax evasion 

A single report could help stop serious criminal activity. 

If you fail to meet your reporting obligations, AUSTRAC can take ‘Enforcement actions’ against you which include

• Civil penalty orders
• Enforceable undertakings
• Infringement notices
• Remedial directions.

The end result could be a very large fine and serious damage to your company brand.

IFTI Report Types

There are two types of IFTI reports.

1. IFTI-Es are made by financial institutions and apply to transfers of money which are sent or received from another country. These reports must carry all vital information of everyone involved in the transaction (i.e., payee, beneficiary, ordering institution, beneficiary institution, intermediary institution), along with all other transaction details.
2. IFTI-DRAs are made by businesses, organisations or individuals who are not financial institutions such as remittance service providers and casinos. They apply to transfers of money or property. Like IFTI E’s, these reports should contain all information regarding the transfer of money or property with all entities involved, including the transaction information.

IFTI Reports Frequency

An international funds transfer instruction (IFTI) is 

1. an instruction that is accepted in Australia for money or property to be made available in another country.
2. an instruction that is accepted in another country for money or property to be made available in Australia.

If you send an IFTI out of Australia or receive an IFTI into Australia, you must submit an IFTI report to AUSTRAC within 10 business days.

IFTI Reports Submission Formats

IFTI report submissions are done through two predefined standard message formats. Message type (MT) messages are structured according to the specifications of the ISO 15022 standard using the FIN protocol. XML protocol(MX) messages are structured according to the ISO 20022 and will replace MT messages by the end of 2025.

The Society for Worldwide Interbank Financial Telecommunications (SWIFT) will migrate to the ISO 20022 message standard for cross-border and correspondent banking payments (i.e., international funds transfers). This started in November 2022, with full implementation by 2025.

General overview of IFTI reporting application lifecycle

Large financial institutions typically handle the IFTI reporting life cycle in their application and/or system flow. In general, the end-to-end flow consists of a mix of batch, near real-time, real-time, and/or manual processes to satisfy reporting requirements.

 IFTI Daily Reporting Process

1. Source Data extraction: Extract the transactions and other reference data of the customer and account from the upstream or payment systems and store them in a data mart.
2. Data quality and validation: Perform data quality and validation checks on critical data elements, which are mandatory for the IFTI business rules to run and generate the output reporting file. Any identified exceptions are captured, filtered, and sent to relevant systems for further action. 
3. IFTI Rule Engine / Business rules: Validated source IFTI data is ingested into the IFTI rules engine. A series of regulatory aligned business rules will screen all transactions and relevant transactions are reported back to the regulators.
4. IFTI output file generation: Generate the IFTI reporting file in the respective MT or MX pre-defined regulatory specification formats.
5. IFTI File Transmission: Transfer/send the IFTI report file(s) to the regulators thru their existing or new pre-agreed interface exchange mechanism (it could be batch or online or manual).
6. IFTI Exception Process: It is possible to get exceptions during or post-IFTI report file submission to regulators. It could be related to interface failure, incorrect, incomplete, or inaccurate data, etc. There will be an IFTI operations team or the normal application support team who will be responsible for actioning the exceptions until a successful event is registered for each exception occurrence.
7. IFTI Feedback Process:  Feedback is embedded in the process flow for communication, to transmit & record the acknowledgment, signal success and failure messages through real-time, near real-time or batch process.

IFTI Section 49 reporting

Entities may receive a notice from AUSTRAC that requires you to provide more information or documents related to a threshold transaction report (TTR), a report about an international funds transfer instruction (IFTI), or suspicious matter report (SMR) submitted to AUSTRAC. These notices for additional required information are sent under section 49 of the AML/CTF Act.

Section 49 reporting processing is more manual than daily reporting due to the nature of case-by-case validation and evidence to be provided. However, there could be a few high-level application process steps mentioned in the daily reporting process that could get leveraged.

Section 49 reports are generally handled by the same IFTI operations and/or application business operations team. 

Conclusion

All reporting entities, regardless of size, must have an AML/CTF program. These programs can be time consuming, expensive and beyond the resources of many small to medium sized entities. Having a trusted partner assisting you in the design and implementation of your AML/CTF program is imperative to your success. Zencos understands that a one size fits all methodology may work for some but not for most. At Zencos, we pride ourselves on understanding your needs and always delivering the right solution. Contact us for more information.