Paul Fletcher (Bradfield, Liberal Party, Shadow Minister for Government Services and the Digital Economy) Share this | Hansard source

I rise to speak on the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024. This is a bill that expands the Anti-Money Laundering and Counter-Terrorism Financing Act. The AML/CTF Act, as it is known, creates a hostile regulatory environment for money laundering and terrorism financing. It currently applies to entities providing a range of designated services, including banks, credit unions, casinos and other high-risk sectors. Summarised in one sentence, this bill extends the AML/CTF regime by applying it to lawyers, real estate agents, accountants, gemstone dealers and other designated non-financial businesses and professions. Almost 90,000 businesses across Australia will now be subject to this complex new regime. It is a massive step, and one that we on this side of the House take very seriously.

Before I get to the substance of this bill and, in particular, some of the hysterical commentary which we've seen from those opposite, it's worth making the coalition's position clear. The coalition has not committed to a position either way on this bill. There are some worrying signs, and we want to hear the evidence. We want to understand what the costs and benefits are. We want to understand the impacts on the ground.

Every elected member in this chamber has something in common when it comes to this bill: all of us in this place have small businesses in our electorates which will face additional costs as a result of this bill. That's not the coalition's perspective; that is what the government's own modelling says. We're talking about $13.9 billion in regulatory costs over 10 years. I'll say that again: $13.9 billion in new costs. Who pays these costs? It's the accountants who do the tax for cafes and bookshops and for mums and dads who engage someone for help with their financial affairs. It's the real estate agents who manage sales and rentals. It's the country lawyers who run small practices in rural and regional areas around our country. These are the people who will be paying for this bill. The odds are, of course, that the additional costs will be passed on to Australian families. So I ask every colleague in this place, particularly the government members: why did this government decide to slug businesses in your electorate—in every member's electorate in this chamber—with $13.9 billion in new costs in the middle of a cost-of-living crisis?

Before I go on, I want to spend a couple of minutes outlining the coalition's position on Australia's AML/CTF regime. We've heard some remarkably hysterical hyperventilating—which is, of course, the worst kind of hyperventilating—from the Attorney-General in response to a series of legitimate questions raised by the coalition about this bill. Frankly, at least some of his commentary was almost unhinged, and I'll come back to it shortly. But, before I do that, there are a few things on which it's worth getting the record straight.

The modern AML/CTF Act is a Howard government initiative which has its roots in international cooperative efforts to combat terrorism after the September 11 attacks. In every term of coalition government since those attacks, we have worked to improve our anti-money-laundering and counterterrorism financing architecture.

It was the coalition government that in 2002 criminalised terrorist financing as part of the Criminal Code and then moved money-laundering offences into the Criminal Code. It was the coalition government that in 2006 introduced and passed the AML/CTF Act, conferring AUSTRAC with the significant and far-reaching powers that it has today. It was the coalition government that in 2015 led Australia through its latest mutual evaluation process. It was the coalition government that upgraded the AML/CTF Act in 2017 to implement the first suite of changes from that evaluation process. It was the coalition government that in 2020 upgraded our AML/CTF regime once again.

It was the coalition government that oversaw civil penalty applications against the Commonwealth Bank of Australia, securing a penalty of $700 million. It was the coalition government that oversaw enforcement action against Westpac and others for systemic failures to comply with the AML/CTF Act and secured a record penalty of $1.3 billion. It was the coalition government that oversaw the application for civil penalty orders against Crown Melbourne and Crown Perth which ultimately resulted in penalties of $450 million.

Our scorecard on this side of the House is clear. When we say, 'We take money laundering and terrorism financing extremely seriously,' the evidence is unequivocally on our side. We can point to enforcement action on our watch which secured penalties totalling around $2½ billion for breaches of Australia's anti-money-laundering and terrorism-financing regime. We can also point to the existence of the AML/CTF Act itself. So, when we ask questions about the bill that is currently before the parliament, we do so from a position of experience. It is because we want to know that the bill will work.

That brings me to the government's own impact analysis and some of the panicked and hyperventilating commentary from the Attorney-General. There are 165 pages of dense legislation in this bill, which businesses only saw for the first time last month. We don't know whether the bill is workable and, in the time available, we can't say how businesses will respond. But let's look at what we do know about this bill, based on the information that the government itself has provided.

First, we know the costs. It's worth reading from the government's own impact analysis. It talks about the costs of implementing the reforms in this bill, which they call option 4. It says in the explanatory memorandum:

Implementing Option 4 is estimated to result in an additional regulatory burden to businesses of $13.9 billion over 10 years …

Let's break down those 10-year costs by sector. If you're in the financial services sector, it's an extra $84 million. If you're in gambling services, it's an extra $99 million. For bullion traders, digital currency exchange providers, remitters and gemstone dealers together, it's an extra $136 million in total. But these are the sectors at the smaller end of the impact scale. If you're a provider of trust and company services, it's an extra $1.136 billion in costs. If you're a provider of legal services, it's an extra $2.883 billion. If you're a provider of accounting services, it's $3.682 billion. For real estate it's $5.892 billion. And that's how we build up to the $13.9 billion over 10 years.

Let's put it in context. The costs of this bill are almost 1½ times the cost of the Housing Australia Future Fund, and all of this money would be coming from the pockets of Australian businesses. So there are serious questions to answer here.

The second thing we know about this bill is that the benefits are uncertain. The government claims that there's somewhere between $2.2 billion and $2.4 billion in quantifiable benefits over 10 years as a result of improvements in combating crime. Keep in mind that none of these upside benefits flow to the businesses that pay the costs in the first place.

Of the $2.2 billion to $2.4 billion, the lion's share—$1.49 billion—does not come from direct action, such as the seizure of assets. To come up with that $1.49 billion in benefits, the government has engaged in an estimation process which could be described as 'creative'. It could be described as 'speculative'. Let me describe to the House what their process involved. First, the government made an estimate of how much more money it would seize in the proceeds of crime if the bill were passed. Next, the government multiplied that estimate by a multiplier. This multiplier is meant to reflect the reduced reinvestment of criminal proceeds over time. How was this multiplier developed? As far as can be deduced, the government looked at some research done in the Netherlands 18 years ago and combined it with a study of Australian drug trafficking done in 2014. In other words, it's a guess. They multiplied the estimate by the guess and then told the Australian people that they'd be getting $1.49 billion in quantifiable benefits. It's quite extraordinary.

But we're really only just getting started, because the third thing we know about this bill is that the government says that we need to pay $13.9 billion in these regulatory costs to avoid the risk of greylisting. Greylisting is an informal term. It refers to enhanced monitoring by the Financial Action Task Force, or FATF, which is the international body which monitors money-laundering and terrorism-financing standards. FATF puts a country under enhanced monitoring where it considers that there are strategic deficiencies in its money-laundering and terrorism-financing framework. In practical terms this can translate into reduced foreign investment flows into the country. The government says that greylisting may be the outcome if we don't regulate so-called tranche 2 entities and, in turn, incur the massive regulatory costs that are associated with this bill.

How do we assess the risk of Australia being greylisted? Normally, risk would be assessed by multiplying likelihood and impact. But, from the outset, the government is clear in its analysis that the relative likelihood of being greylisted cannot be determined on the available evidence. So we have no idea about likelihood. If greylisting happens, there are four different scenarios the government has looked at. The costs over 10 years in these four different scenarios range between $560 million and $10.7 billion. That's more than $10 billion in variation if greylisting happens at all. In other words, we really have no idea of the impact, either. But wait—there's more. The fourth thing we know is that the Attorney-General's Department has explicitly noted that there are significant difficulties associated with quantifying the value of money laundering globally and in Australia. This means that the department is not actually in a position to make an estimate of the benefits of this legislation. Instead, they've provided what they're pleased to call a 'best-efforts analysis'. The fifth thing which is explicitly noted by the department is in the following quotes: 'There is a lack of evidence in the Australian context of the likely impact these reforms will have on the amount of money laundered per year.' The sixth thing that we know about the bill is that the regulatory costs of these reforms will depend not only on the provisions of the bill and, in due course, the act, but on AML and CTF rules that have not yet been written. To once again quote the explanatory memorandum: 'As such, the operational impact of the reforms is difficult to quantify, particularly for tranche 2 entities who have no experience with the AML/CTF regime. Estimates of regulatory burden therefore reflect the best efforts and understanding of the affected stakeholders.' These shortcomings are spelled out in black and white in the government's explanatory memorandum. They are telling us that there is a real risk that the benefits may be smaller and the costs may be larger than has been forecast. Finally, we know that, even if disregard all of that uncertainty and assume the most favourable analysis from the government, we don't achieve a break even. Businesses will pay $13.9 billion if the bill passes. In exchange, the economy as a whole on the most optimistic assumptions from the government, will benefit by $13.1 billion. But I must say that anyone looking at this explanatory memorandum with even a modicum of intelligent scepticism will be deeply unpersuaded that the benefit will get anywhere near this creatively devised $13.1 billion.

What we do know, though, is that those regulatory costs are going to hit in a very significant and burdensome way. Even on the government's most optimistic assumptions, the regulatory costs of passing this bill materially outweigh its benefits. But, on any intelligent assessment, the government's most optimistic scenario is very, very unlikely to be realised. Having looked at the costs and considered the benefits, the coalition, as we examined this bill and its supporting materials, began asking ourselves some questions. Is this bill the best option on the table? Are there better ways forward? You might well think that these are perfectly reasonable questions. But, instead of responding to them in the same reasonable tone, the Attorney-General instead chose to publish an op-ed that contained one of the most bizarre tirades he's delivered in his long career—a career, I must say, which has seen more than its fair share of bizarre tirades. It is worth commenting on this particular article, because it does highlight the surprising and disappointing failure of the Attorney-General to engage in any rational intellectual argument on the merits of the reforms that he is seeking to persuade this House to implement.

In his article the Attorney-General did not calmly run through the benefits he says would be realised as a consequence of passing this bill. Instead, he had this to say:

Opposing these reforms means aiding and abetting the criminal abuse of our financial system by drug traffickers, human trafficking, cybercriminals, terrorists and those who exploit and abuse children.

Having presumably had a pause to chew on some more read meat, he composed an additional sentence in which he described those who had the temerity to ask questions about this bill and its merits as 'standing on the side of terrorists and child abusers'. He described the changes in this bill as 'reforms that will stop criminals in their tracks'. That's a pretty bullish piece of language, and it is interesting to contrast that with the language used by his own department in the explanatory memorandum. Remember, the Attorney-General has said that these are 'reforms that will stop criminals in their tracks'. His department was just slightly more mealy-mouthed. They said, 'There is a lack of evidence in the Australian context of the likely impact of these reforms.' There is a little bit of a disconnect between those two statements.

The simple fact is that the Attorney-General's op-ed piece is ludicrously overstated. There are groups across the board who are, rightly, asking questions about this bill. COSBOA, the peak body for small business organisations, noted the Attorney-General's failure to follow best practice by releasing the exposure draft and said that the bill 'leaves the door open to cost, confusion and compliance headaches for small businesses'. Presumably the Attorney-General thinks these small businesses are also aiding and abetting drug traffickers and cybercriminals, just because they had the temerity to ask these questions.

The Real Estate Institute of Australia referred to experiences in New Zealand, where businesses had been slugged with between $30,000 and $60,000 each in implementation costs in exchange for an unquantified public benefit. I suspect that the Attorney-General has also put the Real Estate Institute of Australia on his list of organisations no longer to receive Christmas cards from him! He no doubt would regard them as also standing with terrorists and child abusers for being sufficiently disrespectful as to point out these inconvenient facts.

The Law Council of Australia responded to this legislation as follows:

The legal profession is already the most extensively regulated profession in Australia, and dual regulation of legal services remains an ongoing issue for the legal profession, not least because increases in regulatory costs inevitably put upward pressure on the cost of legal services.

The proposals are estimated to cost affected businesses (including law practices) an additional $1.8 billion annually over the next 10 years in additional regulatory costs.

I'd highlight here that the figures cited by the Law Council put the regulatory costs at an even higher level than those cited by the government. On the Law Council's figures, we're talking about a cost of $18 billion over 10 years. The Law Council had this to say:

The Law Council is concerned about the impact increased regulatory costs will have on the viability of 93% of Australia's law practices, which are very small 1-4 partner law firms, especially those located in and supporting regional and remote communities.

These are real costs that will be paid by real people who run businesses and provide services to their communities, and it is those people who are asking real questions about the costs and benefits of this legislation.

But instead of responding to those questions in a dignified, courteous and fact based manner, the Attorney-General has chosen to tarnish all those Australians who are asking these perfectly reasonable questions as 'supporters of terrorism and supporters of child sexual abuse'. This kind of evidence-free tantrum detracts from the Attorney-General's credibility and diminishes his standing. He ought to know better. As I've had occasion to observe before, he's not much good without an instructing solicitor.

On this side of the House, we are open to being convinced about the merits of these reforms, but inflated posturing and puerile insults are not the way to get Australians on side. We look forward to a more measured and careful consideration from those in this place, who absolutely care about money-laundering, who absolutely care about all of the rationales of the AML/CTF regime, but who also understand the real world costs that will be paid by business people, men and women around Australia, who are working hard to provide a service to their customers and their communities. I thank the House.

Debate adjourned.

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