The Australian anti-money laundering regulator has thrown a potential lifeline to the country's bitcoin industry by reiterating that the anti-money laundering and counter-terrorism laws do not support the "de-banking" of entire industry sectors."Australia's AML/CTF Act does not impose requirements on a reporting entity to close accounts or terminate a business relationship, although we understand this may be an example of a risk control considered by a business," Paul Jevtovic, chief executive of Austrac, said in a statement.Jevtovic said banks were required to develop risk-based systems and controls proportionate to the level of money laundering and terrorism financing risk associated with their customers.Banking sources said bitcoin exchanges had been triggering red flags in the banks' AML systems and controls and this had prompted the crackdown. They said this was behind the so-called "de-banking" of large numbers of clients in the remittance and payday lending sectors.In many cases where customers are assessed as high risk, banks deem the cost of conducting enhanced due diligence on those customers to be too high and simply close the accounts. This does not necessarily mean that the transactions are suspicious, or that money laundering has occurred. It may mean that the cost of scrutinising those accounts makes that line of business unprofitable.In addition, banks are highly sensitive to the reputational damage that accompanies being implicated in a money laundering or terrorist financing incident. In 2013, for instance, Westpac hit the headlines when it emerged that a A$6 billion money laundering operation, using a virtual currency provider from Costa Rica, was moving funds through three Westpac accounts. Westpac was not accused of any wrongdoing but the case demonstrated the potential reputational fallout associated with providing banking services for digital currency.Sources said this case had been instrumental in making Westpac and the other major Australian banks highly risk-averse when it came to virtual currencies. The current round of account closures is potentially fatal blow for at least 17 Australian bitcoin exchanges. If the exchanges are unable to move their accounts elsewhere they may be forced to close or move abroad, according to a spokesman for the Australian Digital Currency Commerce Association. This type of "de-banking" has already decimated the Australian remittance sector and is posing huge headaches for payday lenders.The trend towards wholesale account closures also creates problems for AML regulators as they lose visibility over those "de-banked" sectors and no longer receive intelligence through SMRs and other transaction reports. In the case of cryptocurrencies and remittances, Austrac is concerned that the industries may move underground or use the internet to base their operations offshore.Bitcoin startup CoinJar recently moved to London following concerns about the tax and regulatory treatment of cryptocurrencies in Australia. ADCCA said the bank account closures, if they proceeded, could make the bitcoin industry in Australia disappear completely.Sources said this was a worrying trend as it could cause the public and businesses to turn against the AML/CTF regime on the basis that it was forcing the closure of large numbers of small businesses.The Australian Competition