An audit has warned that most of WA’s government departments are at risk of non-compliance with anti-money laundering and counter-terrorism obligations.

WA auditor-general Caroline Spencer says two departments in particular are missing “key program elements” and are at a “greater risk of non-compliance, and money laundering or terrorist financing activity”.

The state’s auditor-general set out to see how easy it would be for someone to use parts of the WA government to hide money obtained through criminal activities.

She said that if anti-money laundering programs are inadequate and cannot detect when it is occurring, the state government risks “significant reputational damage and financial consequences”.

Ms Spencer looked at the eight parts of the state government that have requirements under the Commonwealth anti-money laundering and counter-terrorism financing law; The Perth Mint, Keystart Home Loans, Racing and Wagering Western Australia, Country Housing Authority, Department of Education low interest loan scheme, Fire and Emergency Services Superannuation Board, Government Employees Superannuation Board and the WA Treasury Corporation.

The names of the agencies were anonymised in the audit report so that potential exploiters would not know where to target their activities. 

Ms Spencer found that five of the eight agencies lack proper risk assessment protocols, which she describes as akin to “letting people into your house without knowing anything about them”.

“You aren't aware of what they may be doing, how carefully you need to monitor them, or whether you should report their presence to law enforcement,” she explained.

Half of the eight agencies were found not to be adequately monitoring transactions to detect indicators of money laundering or terrorism financing.

One agency needed to better train its staff, Ms Spencer said, while another agency was “unaware that the type of transactions it had undertaken were covered” by the federal legislation.

Another two agencies had not fully resolved issues that had been identified previously.

The state government said all the entities considered by the auditor-general have all “agreed with and accepted” Ms Spencer's findings.

“Entities have already started actioning the recommendations and will continue to engage with [AUSTRAC] to monitor and improve anti-money laundering and counter-terrorism financing compliance programs,” a spokesperson said.

“As part of the 2019-20 mid-year review, the state government funded establishment of a new forensic audit team within the Office of the Auditor General.

“The team was specifically tasked with undertaking these sorts of review activities, to improve financial risk management across government.”