Daniel Mulino (Fraser, Australian Labor Party) Share this | Hansard source

When most of us hear the phrase 'anti-money laundering', we think of something that is very dry and complex. We think of financial sector payment systems, of arcane banking standards and of big data. It is true that anti-money laundering is a very complicated area and is becoming increasingly technical and complex. But, as previous speakers have indicated, what is also true of money laundering is that it is a growing problem. It is growing in scale and it is growing in terms of the threat that it poses right across our sector, with very disturbing real-world consequences. That's why it's so concerning that we see a bill today, the Anti-Money Laundering and Counter-Terrorism Financing and Other Legislation Amendment Bill 2019, that is, frankly, too little too late. It's a bill which doesn't address major issues which other countries have dealt with, which have grown over recent years and which this government said that it would deal with years and years ago.

Crime is as old as society, and, of course, dealing with the proceeds of crime is as old as crime itself. We're used to thinking of anti-money laundering, of dealing with the proceeds of crime, as perhaps dealing with stolen goods or bags full of cash. But what we see with money laundering is a crime that has a number of characteristics that are important to note here at the outset. Firstly, with money laundering, we're seeing crime on a scale that is becoming almost unimaginable. We are now seeing money laundering in tranches, through our banking sector, through our real estate sector and right across our economy, that are in the billions of dollars and the millions of transactions. Not only that, but in money laundering we are seeing activities that are changing in their nature and their scale at such a rapid pace that it is absolutely critical that our regulatory system and our regulators keep up with that change.

We are also seeing in money laundering activities that cross the gamut of technical sophistication. In some areas of money laundering we are seeing brown paper bags full of money, but of course, at the other end of the scale, we see the most sophisticated actors that exist in society. We see transnational actors, as earlier speakers have noted—very well-financed transnational actors using multimillion-dollar schemes and multimillion-dollar technology to try to evade regulation. So we're seeing activities that are of such a breadth of technology and complexity that it is extremely difficult for regulators to use a one-size-fits-all approach. Regulation, of course, is also complicated by the fact that, in the anti-money-laundering regulatory space, we see the need to use both proactive and reactive approaches. We have a regulatory system that is also very complicated because the regulators themselves are using a very different range of techniques. In some areas of anti-money laundering, they rely upon reporting from actors in the system. In other areas, they actively look for money-laundering activity. So that again adds to the complexity and the challenges.

In money laundering, we also see a problem that is international in nature, which of course adds to the complexity because we are now dealing with multiple jurisdictions with their own legal systems. One of the challenges that this raises is that it's not just the strength of any particular jurisdiction's regime—the pros and cons of the regulatory approach adopted in any particular regime—that matters; it's the relativities between jurisdictions that matter, particularly in areas where we're talking about transnational money-laundering outfits that are looking to move money across many jurisdictions. So what we see is that it's the relative strength of jurisdictions that matters. Finally, it matters that money laundering is applying in many sectors and has real-world consequences such as affecting housing affordability, facilitating child exploitation and facilitating terrorism.

All of these features mean that the regulatory system that deals with money laundering needs to be constantly updated so that we don't become the weakest link in the world, which is what we are seeing Australia become, particularly among advanced economies. It also means that it's increasingly important that we update the regulatory regime, because the consequences of failing to have a fit-for-purpose scheme are so dire.

Let's have a look at what's occurred over recent years. The government have repeatedly missed deadlines in their own AML/CTF reform timetable. Let's go back to the member for Stirling in September 2016, the then Minister for Justice, who said that the Turnbull government—which seems like a very distant memory now—would be closely consulting with industry on regulation models for tranche 2 entities. When asked for comment in 2017 about how the process of implementing tranche 2 was coming along, Michael Keenan's office responded:

A cost/benefit analysis of extending AML/CTF regulation to certain non-financial business (lawyers, conveyancers, accountants, real estate agents, trust and company service providers and high-value dealers) is well progressed and will be completed by July this year.

That was over three years ago. Back then the government were saying, 'It's about to happen', and years and years later we're presented with a bill that says nothing about tranche 2. According to the previous member for Higgins, who was then Minister for Revenue and Financial Services, the tranche 2 cost-benefit analysis was completed in 2017 and is being considered by the government. Well, it's an extremely lengthy and detailed consideration!

We see a bill that contains elements which we will support, but there are important issues which have been highlighted by the Financial Action Task Force, which have been highlighted by the OECD, and which have been highlighted by the IMF. These issues are growing, if anything, in importance. There are multibillion dollar problems in real estate and multibillion dollar problems that we're seeing across multiple banks—and what we see is a bill that doesn't even address these issues at all.

Let's look at the Financial Action Task Force and its assessment of Australia's progress over recent years. The Financial Action Task Force placed Australia on an enhanced follow-up remediation program in 2015, following a major evaluation of Australia's AML/CTF framework which found major non-compliance with international best practice in a number of areas. The Financial Action Task Force sets global standards and promotes effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats. As the member for Cowan said, if this government wants to talk big on how it deals with terrorism, it's simply not good enough for it to—over multiple years—in effect, ignore what the international agency of repute in this area is saying. This mutual evaluation report made clear—and other speakers have quoted this, but it's worth repeating—that Australia 'is an attractive destination for foreign proceeds of crime, particularly corruption related proceeds flowing into real estate'. We have seen this issue persist and, if anything, grow—although by how much who would know, given the current regime. Many other independent and international reviews have supported these criticisms of Australia's regime.

In November 2018, the FATF released their third enhanced follow-up report, and it said:

However, 14 Recommendations remain non-compliant or partially compliant.

So this remains an area where activity is far, far too slow. And, again, we go back more than three years to statements by previous ministers of this government who were saying that reform was around the corner. Clearly, this is an area where even those opposite, I don't imagine, are going to claim that COVID is to blame. This is simply an area where this government has dropped the ball for far too long, which isn't some arcane area of the financial system; this is an area of failure in regulation which is leading to billions and billions of dollars flowing inappropriately in the financial sector. It's leading to billions of dollars of transactions in the real estate sector potentially flowing inappropriately—but, again, who would know?—and having consequences for housing affordability. And, as I mentioned earlier, it's having real consequences in areas such as human trafficking, child exploitation, and terrorism. So it's absolutely imperative that this government adopts a broader reform agenda that deals with the material issues that have been raised by the Financial Action Task Force.

Let's go to the IMF: in 2019, the International Monetary Fund recommended that Australia do more. The IMF said:

… Australia’s real estate sector, which is very attractive to foreign investors, is at significant risk for money laundering …

The IMF also said that Australia should immediately:

Take appropriate steps to address the risk that the proceeds of foreign bribery could be laundered through the Australian real-estate sector.

Let's look at another reputable international agency, the OECD. The 2017 report of the OECD Working Group on Bribery in International Business Transactions found major weaknesses in Australia's regime. The OECD said: 'Recent high-profile money laundering cases have pointed to weaknesses in Australia's AML/CTF regime.' The OECD went on to say: 'The coverage of the AML/CTF regime should expand swiftly to include all non-financial and business professionals, starting with those identified to present higher money-laundering and terrorism-financing risks. This would include real estate agents, lawyers, and trust and company service providers.'

We have the FATF, we have the OECD and we have the IMF. All of these agencies are saying the same thing, and they're not saying these things yesterday, or a month ago; they said these things three, four or five years ago. And we had government ministers three, four or five years ago agreeing with this, committing to addressing it, and saying that their response is around the corner. Well, it was clearly not around the corner—it's still not here.

Let's look at what's happening in our society right now. Let's look at what's happening at Crown, and, as a previous speaker indicated, it's taking a New South Wales inquiry to uncover a lot of this. The New South Wales Independent Liquor and Gaming Authority inquiry is exposing massive and systemic breaches of AML/CTF legislation. In 2017, an AUSTRAC report said:

Casinos are broadly aware of and comply with their AML/CTF obligations regarding casino junkets.

That report also said there was a:

broad understanding of and compliance with AML/CTF requirements in relation to junkets …

I wonder if they've changed their assessment. But it's not only that particular failure. What does it say about this government's approach to regulation in this area overall? It's clearly an area of regulation where we need a more comprehensive approach and we need a strengthening.

Westpac has been fined over $1.3 billion. Let's look at the fact that Westpac was involved in 23 million transactions which involved AML/CTF breaches. Let's look at the fact that CBA has been involved in major breaches. Again, what does this say about our system? What does it say when we have major systemic breach after major systemic breach? No-one is saying that in a large, complicated system like ours there'll be zero breaches. But when we have multiple international agencies saying Australia is falling behind comparable economies; and when we have multiple international agencies—the FATF, the OECD, the IMF—saying Australia is an attractive destination and there are large gaping holes in Australia's regulatory system, should we be surprised that these kinds of incidents occur? And should we be worried about more of those kinds of situations occurring under our noses and us not knowing about it, if we're not fixing up the regulatory arrangements?

Fundamentally, this is another bill that this government has put forward which is very narrow in ambition and, in achieving even that ambition, is sloppy. AFMA and the Financial Services Council have pointed out a number of drafting errors, but to me that isn't the major deficiency here. The major deficiency is that, after three and a half years, this government appears to have indefinitely put on hold major reforms which this parliament should be considering. They've been promising these reforms. They've been saying they're around the corner—well, they're not around the corner. And what we're seeing in the financial services sector, in the real estate sector, and in money that is flowing into and out of this country, with dire consequences, is that those reforms are needed more than ever.

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