Judi Moylan (Pearce, Liberal Party) Share this | Hansard source

The Combating the Financing of People Smuggling and Other Measures Bill 2011 does make sound amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and the Financial Transaction Reports Act 1998 by strengthening the regulatory framework for remittance dealers, especially by giving AUSTRAC, the Australian Transactions Reports and Analysis Centre, greater scope to refuse or apply sanctions to the registration of people and businesses providing remittance services. However, the name of this bill is somewhat confusing, given that it does little to actually combat the financing of people smuggling. Under the Anti-Money Laundering and Counter-Terrorism Financing Act and the Financial Transaction Reports Act, reporting entities such as financial institutions and bodies dealing with monetary transactions are required to report all international funds transfer instructions, any transactions over $10,000 in physical currency and any suspicious transactions regardless of amount or destination. This information is collected and analysed by AUSTRAC, playing a key role in stopping transnational crime and money laundering activities.

Of these reporting entities, those falling under the alternative remittance sector are recognised as high risk for money laundering and criminal financing. These are usually non-bank entities that specialise in international money transfers or small to medium businesses that provide the service alongside other, unrelated services. The vulnerability of the alternative remittance sector is evidenced by the growing trend in criminal money laundering of cuckoo smurfing. The unusual name is a reference to the cuckoo bird’s habit of laying its eggs in another bird’s nest which then hatches the eggs as their own; and ‘smurfing’ refers to the division of large sums of money into smaller amounts. AUSTRAC’s typologies report of 2008 describes the process in four steps. In the first step, a legitimate customer outside of Australia deposits funds with an alternative remittance dealer to be transferred into an Australian bank account. The second step is that, unknown to the customer, the remittance dealer is part of a criminal syndicate; the remittance dealer provides details of the intended transfer, including the amount and the receiver’s bank details, to a remittance dealer in Australia also working for the criminal syndicate. The actual transfer of funds does not take place. In the third step, the criminal remittance dealer in Australia deposits dirty money from the proceeds of crime into an innocent Australian receiver’s bank account. As both the amount and the transfer details match with what was legitimately arranged, the receiver believes the overseas transfer has occurred. Finally, in the fourth step, the clean money, retained by the criminal remittance dealer overseas, is passed on to the criminal syndicate. The process is repeated numerous times until all the illicit funds are laundered into clean overseas currency. In one case documented by the Queensland Crime and Misconduct Commission reported in the Australian on 21 January 2010, $1.7 million in drug money was deposited into the unwitting recipient’s Australian based bank account over a six-week period, through 61 separate cash deposits ranging from $3,500 to $150,000.

Cuckoo smurfing relies on remittance dealers engaging in illegal activity. Members of organised crime syndicates may become remittance dealers or may coerce previously legitimate dealers to engage in laundering. Unfortunately, even where remittance dealers are known to have or are suspected of having links to organised crime syndicates, the Chief Executive Officer of AUSTRAC currently does not have the discretion to refuse an application to become a remittance dealer due to the unsuitability of the applicant. Section 76 of the Anti-Money Laundering and Counter-Terrorism Financing Act states that, if a person makes a written application to the AUSTRAC chief executive officer for their details to be entered on the register of providers of designated remittance services, and the person’s name is not already on the register, then the AUSTRAC chief executive officer must enter the person’s details.

The result of this inflexibility, stated in the explanatory memorandum to this bill at page 7:

… means that criminals are able to legally operate as an alternative remittance dealer.

Schedule 1 of this bill introduces measures to remedy this anomaly. These include requiring a person seeking registration to provide information which will assist the CEO of AUSTRAC to determine that person’s suitability; allowing the CEO of AUSTRAC to refuse, suspend, cancel or impose conditions on the registration of a provider of remittance services; and introducing enforcement measures, including penalty provisions and infringements, to assist in regulating the sector.

Whilst being welcome changes—as some of my colleagues have said, we welcome these changes—these measures are targeted towards remittance agents who knowingly deal with funds in a criminal manner, such as in cuckoo-smurfing money-laundering systems. Cuckoo smurfing is described by AUSTRAC as a ‘sophisticated money-laundering technique’, with all examples outlined in AUSTRAC’s case study reports and the media involving only the laundering of funds from illegal drugs.

How this measure in this bill will disrupt payments to people smugglers is somewhat unclear. This point is reaffirmed by Western Union’s submission to AUSTRAC on 9 December 2010 regarding this bill. The submission states at paragraph 6.1:

Western Union does not refute that money remittance services may have been used in order to fund people smuggling activities. But we submit that the reference to “people smuggling” in the title of this Bill is fundamentally misleading. More to the point, the Bill is concerned with improving the efficiency of regulation of the money remittance sector. No aspect of the Bill relates directly to people smuggling.

Even the Minister for Home Affairs’s own media release on 9 February this year speaks of ‘the role the remittance sector can inadvertently play in facilitating people smuggling’. As I have described, the measures in this bill target remittance agents who knowingly deal with funds in a criminal manner, not those who inadvertently or unknowingly transfer money which ends up in the hands of people smugglers.

On 13 April 2010 the Daily Telegraph reported on the people-smuggling trade in an article titled ‘Dreams die in a Palace of Lies’. The article makes sobering reading. It says:

… for anyone who has ever wondered how people can pay exorbitant travel fees—

and I mean people-smuggling fees—

the answer is that many do not pay upfront … the agent pays for the journey … [the travellers]—

the asylum seekers—

must pay that money back.

This is not just something that happens to asylum seekers; there is also prostitution and other criminal activities that this applies to. But for those who pay smugglers upfront offshore, this legislation will have no effect. For those transferring money from within Australia, establishing whether payments are to smugglers can be difficult. Money can be legitimately sent to family, friends or relatives overseas, who can then pass on the funds to smugglers. Alternatively, amounts under $10,000 can be withdrawn in Australia without the need for them to be reported and physically passed to agents in Australia who then on-send the money.

At this point I wish to impress that people who are paying off their debt are victims of this pernicious people-smuggling trade. In fleeing desperate circumstances, they utilise desperate measures. Smugglers threaten their lives or the lives of their family members to ensure that the debt is paid. The Daily Telegraph article quotes their source as saying:

… if they run away, maybe it’s ‘bang’—

they are shot—

maybe their family members in their own country will suffer.

We often hear a lot of talk about how these people can afford to come to Australia, but I can assure you, Mr Deputy Speaker, that often the cost they pay is the ultimate cost, the life of themselves or their family when that money is not paid back.

Whilst the initial transaction destination outside of Australia can be traced, the flow of money from then on is much more difficult to ascertain. Throughout South-East Asia and the Middle East the informal system of hawala is used to transfer money. Upon receipt of money, hawala brokers, or hawaladars, call other brokers and give instructions on how or to whom money is to be paid, with a promise that the debt will be settled at a later date. No formal transaction takes place and no records are kept of individual transactions except for a running tally of the amount owed by one broker to another.

In some countries hawaladars are required to be licensed but no records are kept of transactions; in other countries the system is unregulated or exists illegally, although tolerated to some extent by local authorities. Tracing proceeds to final recipients, the organised crime figures who profit from this trade, is therefore almost impossible.

Combating the finance of people-smuggling therefore requires great emphasis on regional cooperation through bilateral agreements and multilateral organisations such as the Asian Development Bank, which has been assisting countries in the region to formulate regulatory frameworks for all types of money transfers, including hawala. Through improved regulatory systems and financial intelligence cooperation, funds can be tracked to their destination recipient. Complementing this investigative ability, however, must be effective laws prohibiting not only people-smuggling but also the possession and receipt of funds gained through people-smuggling. Such laws are in their infancy in our region. Malaysia and Indonesia only last year committed to introduce laws outlawing people-smuggling. Australia must work cooperatively to ensure that such laws are maintained and continually strengthened as needed.

Criminalising money laundering is not an end in itself. The Australian government simply must work with regional counterparts to investigate effectively and prosecute people-smuggling rings and to investigate the criminal elements within Australia who stand over the victims of this trade. Australia must do more to reduce the demand for such services, working at the other end of this. That can be done by working with UNHCR to establish proper processing points in the region.

I have spoken in the House previously about practical measures that we can take to avoid the terrible tragedies and the spectacles that we have witnessed: last year, the drowning of many people in the boat that crashed at Christmas Island and, recently, the overcrowding of Christmas Island together with the use of teargas and plastic bullets, which, it seems to me, is totally unacceptable. We have to work at the other end of this, but we must do so in accordance with our responsibilities under the refugee convention, in a manner that demonstrates our social and moral obligations to people fleeing for their lives from places where terrible violence has been inflicted upon them.

While this bill is supported—I have heard a number of my colleagues speak on it today—it will not do a great deal to stop people-smuggling, because combating people-smuggling is a complex task. It requires effective international cooperation, rigorous investigation and targeted measures. While I welcome the provisions in this bill, as I am sure all in this House do, to stop money laundering—hopefully it will take some steps towards stopping money laundering—I have to say that the name of this bill belies the true effectiveness that these measures will have.

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