Craig Thomson (Dobell, Australian Labor Party) Share this | Hansard source

I rise to support the Financial Transaction Reports Amendment (Transitional Arrangements) Bill 2008. The bill will enable regulated businesses to continue reporting information to AUSTRAC under the Financial Transactions Reports Act 1988, the FTR Act, as they make the transition to the new reporting arrangements under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, referred to as the AML/CTF Act. Because the reporting obligations under that act begin on 12 December 2008, the amendments need to be enforced before then. From that date, reporting entities must incorporate ongoing customer due diligence systems and processes in their AML/CTF programs. This means that, in order to maintain a proper understanding of their customers, reporting entities may need to collect and verify additional customer identification information if they deem it necessary. Ongoing customer due diligence is a key element of a reporting entity’s control framework in identifying, mitigating and managing any money-laundering or terrorism-financing risks that they may face.

The Australian Transaction Reports and Analysis Centre, AUSTRAC, is Australia’s anti-money-laundering and counterterrorism-financing regulator and specialist financial intelligence unit. AUSTRAC’s purpose is to detect and counter money laundering and the financing of terrorism. Its vision is to be seen as an essential partner in the global fight against crime and terrorism. It is therefore essential to the safety and defence of this country. In its regulatory role, AUSTRAC oversees compliance with the reporting requirements of the Anti-Money Laundering and Counter-Terrorism Financing Act, referred to as AML/CTF Act, and the Financial Transaction Reports Act 1988, or the FTR Act, by a wide range of financial service providers, the gambling industry and other specified reporting entities and cash dealers.

In its intelligence role, AUSTRAC provides financial transaction reports information to state, territory and Australian law enforcement, security, social justice and revenue agencies, as well as certain international counterparts. The information from these reports is retained, compiled, analysed and disseminated by highly qualified AUSTRAC personnel using sophisticated tools. In collecting financial transaction reports information and ensuring signatories to accounts are identified, AUSTRAC assists its partner agencies in the investigation and prosecution of criminal and terrorist enterprises in Australia and overseas.

In May this year, AUSTRAC took significant steps in expanding its global reach by adding four more countries to its international financial intelligence network. AUSTRAC is an active member of the Egmont Group of financial intelligence units, which consists of 106 FIUs and encourages international cooperation. At an Egmont Group meeting in Seoul, South Korea, AUSTRAC signed a memorandum of understanding with the financial intelligence units of the Czech Republic, Germany, Mexico, and St Kitts and Nevis. This brings the total number of countries with which Australia has an MOU to 53. These memorandums allow Australian law enforcement and other government agencies to receive vital financial intelligence from these countries via AUSTRAC. It is vitally important that this international network continues to grow so that we can track this money in overseas accounts as well. It is not something that can be done in isolation. Therefore, it is very important that we continue to look to sign these memorandums of understanding with overseas countries. AUSTRAC’s Chief Executive Officer, Neil Jensen, said at the time:

The sharing of financial intelligence with other countries strengthens Australia’s ability to detect and prosecute money laundering and other serious crimes such as drug trafficking and fraud.

There is little doubt, as Mr Jensen said:

Through globalisation and the increasing use of advanced technology, transnational crime syndicates now have new opportunities by which they can exploit legitimate businesses to conceal dirty money. International cooperation is needed to combat this heightened threat.

As we all know, keeping up with rapidly advancing technology is in itself one of our biggest ongoing challenges.

AUSTRAC works bilaterally with its international counterparts to detect and prevent money laundering and the financing of terrorism. AUSTRAC holds memorandums of understanding with many European countries as well, and also has memorandums of understanding with the United States, Canada, Indonesia, Malaysia, the Philippines, Hong Kong, Singapore, Japan, South Korea, Brazil, Argentina and Chile. The ability to exchange financial intelligence with overseas investigating units significantly supports Australian law enforcement agencies. For example, AUSTRAC was involved in the Australian Crime Commission’s successful Task Force Gordian, which investigated the money-laundering activities of several Asian crime syndicates. This investigation resulted in 64 prosecutions for money laundering, narcotics trafficking and related offences.

While narcotics offences provide a substantial source of proceeds for crime in Australia, the majority of illegal proceeds are derived from fraud related offences. One Australian government estimate suggested that the amount of money laundered in this country ranges from $2 billion to $3 billion per year. Australia recognises and is responding to the continuing challenges posed by increasingly well-resourced and well-organised transnational crime networks.

Criminals use a range of techniques to launder money in Australia. Generally, money launderers seek to exploit the services offered by mainstream retail banks, larger financial services and gaming providers. Visible money laundering is predominantly carried out by using the regulated financial sector, particularly through the use of false identities and falsely named bank accounts, facilitated by forged documents, to structure and transact funds. Over the past five years or so, those in the regulated financial sector have made various moves towards making it tougher for false identities and false names to be provided. Money launderers often move funds offshore by using international funds transfers and also move funds through smaller or informal service providers such as alternative remittance dealers.

Australian authorities also identified other methods that served as money-laundering vehicles. Examples include cash smuggling into and out of Australia and the use of legitimate business to mix proceeds of crime with legitimately earned incomes or profits. Law enforcement has also recognised a growing trend in the use of professional launderers and other third parties to launder criminal proceeds.

A wide range of financial institutions exist in Australia. These include depository corporations such as banks, building societies and credit cooperatives. There are financial markets, insurance corporations and pension funds such as life insurance, general insurance and superannuation funds. As well, we have financial corporations, including financial intermediaries such as financial unit trusts and investment companies, and financial auxiliaries such as security brokers, insurance brokers and floatation corporations. There are also foreign exchange instrument dealers, money remittance dealers and bureaux de change. The full range of designated non-financial businesses and professions exists in Australia. Casinos, which are mainly supervised at the state or territory level, as well as dealers in precious metals and stones, and lawyers are subject to some AML/CTF requirements. Money is also handled by notaries, real estate agents, accountants, and trust and company service providers.

The Financial Transactions Report Act was Australia’s original anti-money-laundering legislation. Importantly, the act provided for reporting of certain transactions and transfers to AUSTRAC. Many of the obligations in the FTR Act will soon be replaced with updated measures under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.

Catching money launderers and financers of terrorists would certainly have been a lot more difficult in days gone by, especially if designated non-financial businesses and professions were used for such criminal activities. For a start there was no specific obligation for financial institutions generally to monitor all complex or unusually large transactions and transactions with no visible economic purposes, or to further examine such situations and to set out any findings in writing. The monitoring obligation was only implied and indirect and it did not cover the full range of monitoring situations. For some years many firms operating in Australia did not have the mandatory customer due diligence. They did not have record-keeping and other obligations as required under recommendations in a 2005 Financial Action Task Force report.

The Financial Action Task Force is an intergovernmental body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing. In that same document, it was reported that there were no specific requirements for most of the designated non-financial businesses and professions to pay special attention to complex and unusual transactions. Suspicious transaction reporting provisions were generally adequate, but there was a limitation of the ‘cash dealer’ definition, which did not apply to all financial institutions.

When the task force wrote their evaluation in 2005, there was a requirement to report transactions suspected of being related to a terrorist-financing offence; however, the evaluation team’s concern regarding the scope of the terrorist-financing offence led the team also to be concerned that this could limit the reporting obligation. At the time the team also stated that legislative amendments were required to oblige financial institutions to have in place institutionalised AML/CTF internal controls and policies. Those obligations were to include requirements for financial institutions to have a designated AML/CTF compliance officer at the management level, have an adequately resourced and independent audit function, establish ongoing employee training and put in place adequate screening procedures.

Most of the financial institutions and professions were not legally required to report suspicious transactions to AUSTRAC. They also were not required to develop internal policies, procedures and internal controls, and ongoing employee training and compliance in respect of AML/CTF. For a long time there were no adequate, enforceable measures to pay special attention to transactions involving certain countries, make their findings available in writing or apply appropriate countermeasures. But all that has changed or is certainly well on track to being tightened up.

This bill will help businesses that are making the transition to the new reporting arrangements. The AUSTRAC Chief Executive Officer may only take action against a reporting entity for a breach of the AML/CTF Act if he or she is satisfied that it has not taken reasonable steps to comply with its obligations under that act. This grace period ends on 11 March 2010. Between the commencement of the new AML/CTF Act obligations on 12th December 2008 and the end of the grace period, there are likely to be a significant number of businesses that are not fully compliant with the new reporting obligations. It is important that these businesses are permitted to continue reporting relevant transaction information to AUSTRAC under the FTR Act until such time as they become compliant with the AML/CTF Act.

The bill contains amendments to the FTR Act. The amendments will establish transitional provisions to authorise certain cash dealers to continue reporting suspicious transactions, international funds transfer instructions and significant cash transactions to AUSTRAC under the FTR Act up until the end of 11 March 2010 or until they become compliant with the AML/CTF Act, whichever comes first. It will authorise solicitors, solicitor corporations and partnerships of solicitors to continue to provide AUSTRAC with cash transaction reports under the FTR Act up until the end of 11 March 2010 or until they become compliant with the AML/CTF Act, whichever comes first. It will also authorise cash dealers to enter transactions into their exemption register up until the end of 11 March 2010.

The amendments maintain the regulatory status quo under the FTR Act. They do not impose any additional regulatory burden on business. The Office of Best Practice Regulation has granted a regulatory impact statement exemption. If the amendments are not in force by 12 December 2008, regulated businesses will have no legal authority to report relevant transactions to AUSTRAC under the FTR Act and will have no legal protection if they continue to do so. That is why it is vital this bill is passed. Primary responsibility for compliance with the requirements of the FTR Act and the AML/CTF Act rests with each reporting entity’s own board—if they have one—and senior management. It is anticipated that most entities will seek to comply with their obligations. However, there will be some who do not comply with the law through ignorance, failure of their systems, lack of effort or even, on occasion, a wilful or dishonest intention.

As the regulator, AUSTRAC is responsible for promoting compliance with legislative requirements. To this end, AUSTRAC has been given powers to monitor the level of compliance being achieved by the entities. Through its monitoring activities, AUSTRAC aims to foster an environment of continuous voluntary compliance. The agency also aims to identify the level and extent of any noncompliance for the purposes of formulating a rectification plan that is proportionate to and appropriate for the problem and ensuring that the integrity of the FTR Act and the AML/CTF Act is upheld.

Just three weeks ago AUSTRAC released a reporting implementation policy to assist reporting entities with new obligations under the AML/CTF Act, which takes effect from 12 December 2008. Reporting entities will need to report suspicious matters and, if applicable, threshold transactions and international fund transfer instructions to AUSTRAC. AUSTRAC has throughout the staggered implementation of the AML/CTF Act focused on supporting reporting entities in understanding and complying with their new obligations. That support has included developing new tools and systems and providing education and guidance such as the policy released three weeks ago. The policy outlines the seven new reportable details forms and the four reporting methods AUSTRAC has designed to meet the size and technology requirements of reporting entities. The policy also provides information for new reporting entities, as well as those entities who have been reporting to AUSTRAC as cash dealers under the FTR Act.

The reforms under the Anti-Money Laundering and Counter-Terrorism Financing Act are aimed at addressing the risk of money laundering in Australia and the threat to national security caused by the financing of terrorism. The first instalment of reforms, covering the financial sector, includes banks, credit unions, building societies and trustees and extends to casinos, TABs, wagering service providers and bullion dealers. The second group of reforms covers real estate agents, dealers in precious metals, dealers in precious stones and a range of non-financial transactions provided by accountants, lawyers and trust and company services providers.

This is a very important bill for ensuring that those laundering money for either criminal or terrorist purposes are tracked both internationally and here in Australia. It is therefore important that this parliament pass it as quickly as possible. I commend the bill to the House.

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