Arch Bevis (Brisbane, Australian Labor Party, Shadow Minister for Aviation and Transport Security) Share this | Hansard source

It is both extraordinary and disappointing that nearly a year from the passage of the Anti-Terrorism Bill (No. 2) 2005 the parliament is already returning to fix the Howard government’s sloppy legislation. We should be under no illusions about what this bill amends, despite the innocuous-sounding title. This bill represents a significant rewrite of important provisions of the Anti-Terrorism Act (No. 2) 2005 which are yet to take effect.

To that extent, this is a backdoor revisitation of the Prime Minister’s joint communique with the states and territories at the special COAG meeting on counterterrorism last year. The measures we are amending today were themselves brought forward for the government’s long-delayed anti money laundering regime. The Anti-Terrorism Act (No. 2) 2005 purported to implement the special recommendations of the Financial Action Task Force in relation to combating terrorism funding.

The Financial Action Task Force, the FATF, is an intergovernmental body designed to develop and promote policies to combat international money laundering and terrorist financing. To that end FATF developed two different sets of recommendations, firstly the 40 recommendations on anti money laundering, the latest update of which took place in 2003; and then, following the September 11 attacks, in October of 2001 another set of nine special recommendations specifically related to the financing of terrorist activity.

In 2003 the Minister for Justice and Customs promised that Australia’s Financial Transactions Reports Act 1988 would be updated and brought into line with both the special and general recommendations. As is the way with the Howard government, by 2005 almost nothing had been done. An FATF task force visited Australia and reviewed our operations and legislative framework to evaluate our compliance with the recommendations.

The report of the task force is an embarrassing read. It is a list of failures of the Howard government to keep Australia up to date with international standards designed to fight terrorism. It is inexcusable that fully five years after 11 September 2001, the Howard government is yet to deliver a comprehensive legislative response to the threat of terrorist financing.

The FATF report found that Australia was compliant with only nine out of the 40 recommendations on anti money laundering. Nine out of 40—less than one quarter! That, on its own, would be an international embarrassment for Australia, but the report went on. Of the nine special recommendations dealing with antiterrorism financing, Australia was not compliant with a single one. Zero out of nine for counter-terrorist financing!

The FATF findings confirmed what we all know: the Howard government has been soft on financing of terrorism. It is big on rhetoric; soft of action. Australia’s complete and absolute failure to deal with terrorist financing is on display for the world to see. For all of the Howard government’s tough talk on terrorism it is unable to bring in legislation to ensure that Australia has world’s best practice standards on money laundering and on antiterrorism. This is why Labor says that the Howard government is soft and weak on terrorist financing. All we see is inadequate consultation, shoddy legislation and delay after delay in getting strong laws that are needed put in place.

Thankfully, the international embarrassment of the FATF report seems to have spurred the government into some activity. Last year we saw some small attempts by the government to bring Australia into line with world standards on this issue through the Anti-Terrorism Act (No. 2) 2005. That bill, amongst other things, was designed to bring Australia up to speed with a number of the recommendations. However, the new provisions introduced by that bill were only a stopgap measure. They were designed to provide a temporary fix while the government’s long-delayed revision of the Financial Transactions Reports Act 1988 was being drafted. Unfortunately, it is nearly a year later and there is still no end in sight.

In any case, the problem with the legislation was simply the utter lack of consultation, and we are seeing that now. During the course of the Senate committee inquiry into the bill we found that the Attorney-General’s Department had not consulted with industry on the final text of the bill. In a characteristic display of arrogance and hubris, the Anti-Terrorism Bill (No. 2) 2005 was sprung on parliament and the government attempted to ram it through on Melbourne Cup day. Similarly, the Senate inquiry was to be limited, effectively, to a single day.

Ultimately the government was forced into a back-down and later managed to extract a week-long Senate inquiry—evidently not long enough. Fast forward a few months and industry has finally managed to convince the Howard government that the changes introduced in the Anti-Terrorism Bill (No. 2) 2005 will, if allowed to come into force, devastate sections of industry. This is not scaremongering by the Labor Party; this is stated explicitly in the government’s own explanatory memorandum, which says:

If the amendment to restrict the application of Division 3A of Part II of the FTR Act to ADIs is not made, then certain legitimate non-bank money remitters assert that they could be put out of business.

So the Howard government’s own initial legislation was so poorly drafted and so little consultation was held that the government was not even apprised of the fact that its changes would spell ruin for many Australian businesses. Thank heavens the Howard government has now come to its senses and accepted industry’s point of view that the shoddy legislation will destroy jobs. Labor will support this legislation, but we are certainly not happy with it. We will support the legislation because we have to. If we do not, then if the explanatory memorandum is to be believed legitimate Australian businesses will be put out of business.

The bill introduces a number of changes to the legislation. Basically, the bill does three things: it provides a new definition of ‘account’ for certain parts of the act, it provides a new definition of ‘customer information’ for parts of the act and it removes non-ADI—that is, authorised deposit institutes; basically banks—cash dealers from the operation of certain sections of the act. I will deal with each of these in turn. Firstly, the bill alters the definition of ‘account’ under the act. The new definition of account will apply only to division 3 of the act—that is, the division dealing with international funds transfer instructions. The changes to the definition of account bring this section into line with that in the draft AMLCTF bill and were brought about due to the concerns of industry. Bringing the definition of account into line with the draft AMLCTF bill means that industry will only have to go through one rather than multiple systems changes. Labor supports these changes.

However, a further point of contention has been raised by the Australian Bankers Association with the current definition and the inclusion of credit cards. This is because credit card account numbers are quite often used as stand-alones in a transaction. No signature is required if the credit card is being used to purchase something over the phone or over the internet. The Attorney-General’s Department has indicated that it will discuss the matter of credit card accounts further with the ABA. However, I think we seriously have to ask ourselves why this was not done before the current bill was introduced.

The next change that this bill makes is the alteration of the definition of ‘customer information’ to allow a greater latitude for the use of ID numbers attached to international funds transfer instructions. Currently, every time a bank sends an instruction for the transfer of funds to another institution overseas, a range of information must be included. The range of information that may be included was expanded substantially when the government introduced a raft of new amendments. There is now a wide range of information that may be included, including the customer’s address, ABN and date and location of birth. In any case, the proposed amendment will allow for much greater use of identification numbers rather than account numbers. Account numbers will now only be required to be included when the instruction relates to the transfer of money directly from a single account held by the customer. In other words, an identification number will suffice. This amendment is designed to simplify the transfer of IFTIs and provide a more practical option for financial institutions.

Division 3A under the legislation as it stands imposes substantial obligations on certain types of cash dealers—that is, those who are not authorised deposit institutes. An authorised deposit institute, or ADI, as I mentioned earlier, is essentially a bank. It is defined in legislation to be a body corporate for the purposes of the Banking Act 1959, the Reserve Bank of Australia or a person who carries on state banking within the meaning of the Constitution. The legislation as it stands—that is, prior to this amending bill—although it is not yet in force, requires a cash dealer to supply customer information alongside an international funds transfer instruction where the cash dealer who is not an authorised deposit-taking institution is acting on behalf of another person who is also not an authorised deposit-taking institution.

So if I am a cash dealer and I am sending an international funds transfer instruction on behalf of another who is also not an ADI then I am obliged to include certain information to identify the customer: account numbers, names, addresses et cetera. This is a requirement of special recommendation VII of the FATF. However, one of the main changes of this bill is to significantly restrict the application of this section. The bill will effectively remove non-ADI cash dealers from the operation of division 3A. That is, there will not be any requirement for those dealers to include customer information with any outgoing international funds transfer instructions. The stated reason for this is that it is impractical to require IFTIs sent from an institution in one country to the same institution in another to include originator information, because in effect this would require the institution to pass on the information to itself.

These changes are necessary to compensate for poor drafting and a lack of proper consultation in the first place. We have no wish to see legitimate cash dealers put out of business through no fault of their own but because the Howard government brings shoddy legislation before parliament. However, these are changes that cannot stand in the long term. If you have a situation where some cash dealers are subject to these requirements but others are not, then you are essentially erecting the financial equivalent of the Maginot line—a strong, impenetrable fortress that can be easily circumvented.

As I noted above, the requirement for cash dealers to include customer information in IFTIs is stated under FATF special recommendation VII, and there are serious concerns that the bill before us would effectively be a backwards step in our compliance with those standards. The department has suggested that the current framework of the FTR Act is unsatisfactory for the proper implementation of this requirement and that the special recommendation VII obligations will be properly enacted when the final version of the AMLCTF bill is released. Of course, this still leaves the problem of when we are actually going to see the final version of the AMLCTF legislation. We are still waiting for the final legislation some 3½ years after it was promised.

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