AUSTRAC’s decision to appoint an external auditor to Mercedes Benz Financial Services Australia has sent shockwaves through the non-bank lending world. The regulator identified practices that undermine the spirit of the AML/CTF Act—treating nearly all customers as low risk, lacking systems to detect suspicious transactions, and failing to escalate red flags. As the first major action in a broader compliance campaign, this audit lays bare vulnerabilities across motor-vehicle financing, personal loans, equipment leasing and mortgage providers and sets a new standard for non-bank lenders.

Mercedes Benz AML audit highlights compliance gaps

On 15 May 2025, AUSTRAC revealed that Mercedes Benz Financial Services Australia had assumed that almost every customer posed minimal money-laundering risk, without documented assessments or enhanced due diligence for those truly deserving greater scrutiny. The financier lacked an automated transaction-monitoring system capable of flagging unusual patterns, meaning that complex or rapid movements went unnoticed. Moreover, there was no clear protocol for escalating potential suspicious activity to senior compliance officers. AUSTRAC’s CEO, Brendan Thomas, emphasised that these shortcomings constitute material breaches of core obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. By appointing an independent auditor, AUSTRAC intends not only to map existing controls and pinpoint weaknesses, but also to ensure that Mercedes Benz implements meaningful improvements. Depending on the audit’s findings, further enforcement actions, such as infringement notices or court proceedings, may follow.

Regulatory campaign spotlights sector-wide vulnerabilities

The audit of Mercedes Benz follows a wider AUSTRAC campaign that targeted non-bank lending and financing providers. In letters to the entire sector, AUSTRAC highlighted alarmingly low reporting rates on suspicious matters. Nearly 90 per cent of non-bank lenders failed to report a single suspicious transaction in 2024, while just two businesses accounted for roughly half of all sector-wide reports. Equally concerning was the claim by 89 per cent of entities that they had no high-risk customers at all. Such figures suggest that the vast majority of lenders are neither identifying nor escalating potential criminal exploitation, allowing money-laundering schemes to flourish undetected. Although some firms have already taken steps to reassess risk frameworks and enhance monitoring, the overall picture remains incomplete, and the sector must accelerate its efforts.

Brendan Thomas on industry risks

AUSTRAC CEO Brendan Thomas made clear why non-bank lenders can no longer afford complacency. He warned that without robust identification of high-risk customers and diligent reporting of suspicious matters, more businesses will find themselves under audit scrutiny. He stated, “This industry is vulnerable to money launderers and organised criminals. We need to get better at shutting down avenues for criminals to profit from crime.” Thomas reiterated that no financial services provider is immune: “No business is devoid of risk. With such low reporting rates, the full picture of potential criminal exploitation remains hidden.” By publishing audit results and compliance benchmarks, AUSTRAC hopes to empower customers, investors and boards to hold their lenders to account.

Steps for building resilient AML/CTF frameworks

Non-bank lenders can strengthen their compliance programs by embedding risk-based controls into everyday operations. A comprehensive risk assessment should evaluate each product line against money-laundering and terrorism-financing threats, categorising services and customer segments into low, medium and high-risk buckets. Customer due diligence processes must verify identities through reliable documents and data sources, and higher-risk profiles—such as politically exposed persons or cross-border transactions—should trigger enhanced due diligence procedures, including additional source-of-fund checks. Automated transaction-monitoring tools, configured with dynamic rule sets, can identify anomalies, structuring attempts and rapid fund movements, ensuring that potential red flags are immediately brought to the attention of senior compliance staff. Clear escalation pathways must be documented so that frontline personnel know exactly when and how to lodge a suspicious matter report. Regular independent reviews—performed by internal audit teams or external specialists—should test the effectiveness of controls, pinpointing gaps and driving continuous improvement. Finally, ongoing training that incorporates real-world case studies and typologies will cultivate a compliance culture where employees feel empowered to speak up at the first sign of irregularity.

Conclusion: A roadmap for non-bank lenders

AUSTRAC’s Mercedes Benz AML audit transcends a single regulatory intervention. It represents a rallying call to the entire non-bank lending community: AML/CTF compliance is non-negotiable. Firms that do not embrace risk-based approaches, robust monitoring and diligent reporting will face intensifying scrutiny and potential penalties. As the audit findings emerge, Mercedes Benz and its peers can either view them as an isolated event or leverage them to drive a sustainable uplift in compliance culture. By prioritising thorough risk assessments, customer due diligence, automated monitoring and independent reviews, non-bank lenders can transform regulatory pressure into a competitive edge, strengthening trust with customers, regulators and the broader financial ecosystem.

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Related Links

• Anti-Money Laundering and Counter-Terrorism Financing Act 2006
• AUSTRAC’s guidance for Non-bank lending sector guidance
• Suspicious Matter Reporting AUSTRAC guide
• AML/CTF AUSTRAC Core Guidance

Other FinCrime Central Links About AUSTRAC’s Recent Actions

• Innovative Fintel Alliance Boosts AUSTRAC’s Fight Against Money Laundering
• AUSTRAC CEO Focuses on Gambling Industry Compliance: Action Promised
• Austrac’s Crackdown on Crypto and Remittance Firms Over AML Failures

Source: AUSTRAC

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