As organised crime finds increasingly sophisticated ways to outwit financial systems, AUSTRAC regulator Paul Jevtovic is on a mission to work with business to make Australia a safer place.
Paul Jevtovic knows a thing or two about criminals. A “copper” for 27 years with the Australian Federal Police (AFP), he’s now heading the fight against organised crime, money laundering and the funding of terrorism. And he’s doing this as a regulator.
As chief executive of the Australian Transaction Reports and Analysis Centre – or AUSTRAC as it’s known – Jevtovic and his intelligence unit are responsible for identifying threats to Australia’s financial system and acting to protect the country’s economy.
No small task. Some may even suggest mission near-impossible given the scope and sophistication of today’s criminal operators and the vulnerability of a tech-driven marketplace. Organised crime is a global network that legitimately enters the financial sector for illegitimate ends. Its masterminds hire PhDs and use the latest technology. How can a government organisation compete with that?
“My number one priority for AUSTRAC is building the relationship with the private sector.”
Jevtovic says his agency has a better chance of making headway if he can convince the private sector to work collaboratively with the regulator. It sounds counterintuitive until you unpack it. Imagine, he says, what could be achieved if the private sector and the regulator put their heads together? They could create a more lawful operating environment and in turn reduce the need for regulation.
He says Australia’s wealth and its vast superannuation reserves make the country an attractive target for organised crime. As for the financial system, it’s as vulnerable as any other. All professionals, particularly accountants, need to be at the top of their game.
The recent disclosures in the Panama Papers illustrate the reach, intricacy and complexity of the global money trail. Jevtovic says the reams of information unearthed are an opportunity for domestic and international agencies to work together.
Which brings us to culture. He and fellow regulator Greg Medcraft, head of the Australian Securities and Investments Commission (ASIC), have jointly called for boards and companies in general to focus on improving their culture.
On a more personal note, in an interview with the former CPA Australia chief executive Alex Malley in Sydney recently, Jevtovic reveals that two years as deputy director of the Victorian Office of Police Integrity (OPI), during which he was regularly attacked in the media, taught him more about resilience than 27 years as a police officer.
Alex Malley: You were born in Australia to Serbian parents. Tell me about the Jevtovic household in your youth?
Paul Jevtovic: My late grandfather and grandmother migrated from Greece and Serbia respectively, and I was the first male child in a family of six women. To this day, [my grandfather] is the great inspiration for me. How do you just pack up your family and a suitcase and bring them to the other side of the world where you don’t speak the language, you don’t know the culture and you haven’t got two pennies to rub together?
The courage that that must have taken but the belief in wanting to create something better for the future family, that was … inspirational. A lot of people talk about the JFKs and the Mandelas, but I don’t have to go past my late grandfather.
Lessons in leadership
. Malley: You spent 27 years in the Australian Federal Police. Considering how the world has changed, how different was the AFP when you left compared with your induction?
Jevtovic: Worlds apart. And that’s down to the eras of leadership. It does so much for this country, a lot of which can often not be spoken about. I was fortunate to have been there during an era of leadership from which I learned a lot, under [AFP] commissioner Mick Keelty. He was, without question, one of the most forward-thinking police commissioners of the past 30 to 40 years. He took an organisation that was going OK and made it a great organisation.
He understood the political landscape; he had the courage to give a bunch of 30-year-old leaders the opportunity to lead. I learned what it meant to have faith in people if you give them opportunity.
Malley: One thing I’ve noticed from the time we worked together at the OPI is the comfort you now have in yourself; it’s dramatic. [Jevtovic was deputy director of the OPI from 2009 to 2011 and Malley was on the OPI audit and risk committee. During this time, the organisation was accused of abusing its powers by ordering an investigation into a former Victoria Police deputy commissioner.
This sparked an Ombudsman’s probe, with Jevtovic and the OPI being cleared of acting inappropriately.
Jevtovic: From a personal perspective in a leadership context, [that period] really challenged my very fabric. I just had to cop it on the chin. OPI was often on the front page of most papers in Victoria; with the shock jocks, it was an attack once or twice a week, let alone the personal attacks. It got very ugly. But resilience was born from that. I was a copper for 27 years, but I think my two years in Victoria really contributed to my resilience.
Malley: We’ve spoken about the power of culture in organisations. When you took on this role at AUSTRAC, one of your first steps was to survey the staff and to speak to stakeholders. What did you find out through that process and what surprised you most?
Jevtovic: I wanted to understand what my own people thought of the organisation and what our stakeholders thought. How do you introduce a vision and a strategic direction if you don’t know where you’re at? I needed a factual, honest, brutal assessment. There were a lot of good messages, but there was a lot of frustration as well.
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Leadership was an area of criticism [in the survey], more around a lack of consistency of leadership. We are a people organisation, so I needed a leadership group that is going to bring the best out of people – create an environment where people actually want to do better. I wanted leaders that nurture. That extra 10 per cent is always there if you get the motivation right. I’m very proud of the leadership group that we’ve got. They get it and, more importantly, our staff are responding to it.
Collaboration with the private sector
Malley: You talk about innovation and collaboration with the private sector – what are your ambitions for AUSTRAC?
Jevtovic: The government gave us A$20 million in 2014 to fight terrorism. In the past five years, we’ve seen a fivefold increase in the amount of information we are getting from banks [and] double the amount of suspect reports. They are big numbers – 100 million reports a year.
My number one priority for AUSTRAC is building the relationship with the private sector. It is the first line of defence. Organised crime uses the financial system to launder its money freely. We hope that our checks and balances pick up things, but the bottom line is they can enter the financial sector quite freely and utilise it. Yet when we want to share information that might help us prevent organised crime or terrorists using the financial sector, we have to jump through so many more hurdles.
“We underestimate the intellect of our community. I want to turn my organisation of 300 into one of around 15 million.”
We start off with our hands tied behind our backs … yet the expectation for us to stop organised crime and terrorists is immense. That’s why I believe we need a public debate about privacy in this country. I’m a big believer in privacy and our privacy principles, but they’ve got to be relevant to the 21st century.
A matter of trust
Malley: An interesting word in all of this is trust. Locally, we’ve seen it come to the fore with banks in relation to financial planning.
Jevtovic: Every time there is a breach of trust, it makes our jobs so much more difficult. We need to move to a space where we articulate to the community why it is we do what we do and why we need what we need. How does that make this country a safer place? How does it make the world a safe place?
We are far more secretive than we need to be and that works against us.
We underestimate the intellect of our community; there’s nothing that they can’t google. I want to turn my organisation of 300 into an organisation of around 15 million.
Message to accountants
CPA Australia has obviously lent its support to engaging with AUSTRAC, but what’s your message to the professions?
Jevtovic: Don’t typecast us as a traditional regulator; don’t be afraid of us. We are genuinely committed to collaboration. Come and talk to us early.
The work we are doing with the fintechs is a good example: we want them to come when they are brainstorming about their ideas. Let us inject some thinking. Our ideas might result in capabilities that further bring down regulation – at the end of the day, we’ve all got a vested interest in dealing with risk and threats.
Malley: Considering what we’ve seen over the past 18 months, how vulnerable is the Australian financial system?
Jevtovic: We are as vulnerable as probably any other country. Australia’s affluence and wealth make us an attractive target. We have one of the largest superannuation holdings in the world, if not the largest. Organised crime [is] globally networked. We recruit PhDs to fight the problems; they are recruiting PhDs to find loopholes. They are buying the most recent, modern technology, whereas we have to go through our government processes to do that.
I don’t fear organised crime, because we understand it. We take the game back to them, and, in this country, we are doing a very good job at protecting the integrity of our financial sector. There is more that we can do, and the “more” is through that collaboration between public and private – that’s where we will even further harden the financial sector.
Malley: WikiLeaks and the Panama Papers – do regulators see this as a new source of information?
Jevtovic: Yes. Whistleblowers sometimes have the most direct evidence that one will ever get; their information can be extremely efficient. Looking at the Panama Papers, there’s a number of agencies working together in this country. What does it mean from a criminal investigation perspective? From a tax perspective? From a policy and legislative perspective?
Equally, we are working with a range of international partners.
How do global organisations like the Egmont Group, which represents all the financial intelligence units in the world, maximise this situation? Who allowed that to happen? What was the role of professional facilitators in that journey?
The role of culture
Malley: There is a question of how the banks are going to live in the new era. ASIC in particular says the board should be accountable for culture. It seems obvious, but there’s been significant push back. Did that surprise you?
Jevtovic: People have not really listened to what Greg Medcraft [chairman of ASIC] is saying. He doesn’t desire ASIC or any other regulator to be a culture policeman. He’s suggesting that we can’t ignore culture within organisations, and as regulators it can go to the very heart of systemic issues.
I’m not qualified to tell a private enterprise what kind of culture best suits them. What I can tell them is the kind of culture that is going to draw AUSTRAC’s attention. Surely the board of that organisation is going to want that information, because why would you want a regulator all over you?.
Jevtovic on leadership
I tell my team that leadership is like this tree branch. The branch is always strongest where it connects with the trunk but it gets thinner and thinner. When leadership takes a walk on that branch and it gets thinner [and then] snaps, if you’ve brought your people on that journey, they are going to be there to catch you. But if they know nothing about you, why would they be there when it snaps?
I’ve coached football most of my adult life and I’ve learnt a lot about leadership – breaking bad news to people whose aspirations are to play; they put in a whole pre-season only to get told they didn’t make the cut. How do you do that in a way that doesn’t destroy them but encourages them to keep trying?
What does a regulator look like in the 21st century?
Well it can’t look like a regulator. A lot of people struggle with the concept of how can you be a regulator on Thursday and Friday and then collaborate on Monday? And my answer is, we can; we have to.
We’ve got to be able to deal with the compliance issues of regulated entities, such as the banks or the remitters’ sector or bullion wholesalers. Then we’ve got to move on quickly and work with them again to harden the environment from organised crime. It has to be the way we operate. We are challenging that fundamental model.
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