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

I rise to speak on the Anti-Money Laundering and Counter-Terrorism Financing Bill 2006 and the Anti-Money Laundering and Counter-Terrorism Financing (Transitional Provisions and Consequential Amendments) Bill 2006. The objective of these bills is outlined in clause 3 of the legislation. Basically they aim to bring Australia into international compliance in measures to combat money laundering by criminals and the financing of terrorism. This spectrum of regulatory action is known as anti money-laundering counter-terrorism financing, commonly known as the AMLCTF regime. The bills derive their impetus from the OECD’s financial action task force recommendations. Those task force recommendations consisted of 40 recommendations on anti-money-laundering matters and nine special recommendations dealing specifically with counter-terrorism financing. Clause 3 also lists a number of other international obligations and resolutions.

After much delay, the government is now legislating to bring Australia into compliance with those FATF regimes—that is, the financial action task force regimes—but doing so in two tranches of legislation. The first tranche is these bills currently before the parliament. They cover financial, gambling and bullion-dealing industries in addition to lawyers and accountants, but only to the extent that they are in competition with the financial industry. The second tranche, which covers other activities of lawyers and accountants as well as the jewellery and real estate industries, is yet to be released. The government has not even announced a target date for the completion of that.

Rather than incorporate and amend the existing financial transactions reporting regimes under the Financial Transaction Reports Act 1988, the government has adopted the unwieldy approach of formulating a separate legislative scheme, which the AMLCTF Bill creates. This bill is very timely indeed because, as the name suggests, the bill deals with money laundering and the operation of terrorists and their need for financing. Only yesterday, the Cole commission handed down its report—Report of the inquiry into certain Australian companies in relation to the UN oil for food programon the AWB. The presentation of this bill today has given me an opportunity to make some comments about the connection between those two. Make no mistake: if the Howard government’s record on money laundering and financing of terrorism was not so soft or weak, Commissioner Cole would have had the option of recommending similar charges against the alleged perpetrators of misconduct to the ones we are now intending to enact in this very bill.

Of course, the greatest shame is that the inquiry’s terms of reference were limited only to certain companies in relation to the UN oil for food program. As Commissioner Cole himself noted, in volume 4 at page 21:

The Inquiry’s terms of reference do not extend to investigating and reporting on whether the actions or conduct of the Commonwealth, or any of its officers, might have constituted a breach of a law of the Commonwealth, a State or Territory.

It has been well canvassed today in question time and by the Leader of the Opposition and the member for Griffith in the censure motion that the government did its best from the outset to restrict the Cole commission’s inquiry to ensure that it could not inquire into those matters. Cole went on to say that, had he become aware of offences by Commonwealth officers detected under his limited terms of reference, he would have investigated. Given those terms of reference, it is no surprise that he found none; they put blinkers on the inquiry and tied both arms behind his back.

It is a great failing of this government that, when charged with enforcing sanctions against one of the most evil men of the last generation, the Howard government wilfully—and I believe corruptly or negligently—facilitated or turned a blind eye to some $300 million in payments to the ‘Butcher of Baghdad’. The Howard government would have to be the most morally bankrupt government to hold office in this land. They have been so arrogant that they cannot even smell the stench of corruption that reeks all around them. Indeed, they had the hubris to conduct celebratory drinks yesterday evening to enjoy their moment.

Kym Richardson (Kingston, Liberal Party) Share this | Link to this | Hansard source

Mr Speaker, I rise on a point of order. I was wondering whether we could get the member for Brisbane to make his comments relevant to the bill.

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

It’s about counter-terrorism; you should have a look at it.

Bob McMullan (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

The member for Brisbane is within the parameters of the bill.

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

The bill, of course, deals with the financing of terrorist activities. The AWB’s $300 million kickback to Saddam Hussein under the watch of this government and the opportunity that presented for terrorist organisations to get their hands on a tidy sum of money is very much about the financing of terrorism. It is an indication of this government’s disjointed approach to this matter that they can sit there and think that there is no connection between their mismanagement of the AWB scandal and the fact that we are now debating a bill that deals with money laundering and financing of terrorists. Of course there is a connection. That is what the whole Cole inquiry was about. That is why the United Nations sanctions were put in place: to stop money from being provided to those people who perpetrate acts of terror. This bill, had it been in place some time ago, might have afforded the Cole commission the opportunity to recommend charges that are provided for in this bill. I certainly am keen to contain my remarks to the bill, and that is exactly what I have been doing.

The story of the bill—which, I have to say, Labor supports—is yet another case of a minister who has been asleep at the wheel. This legislation should have been in place years ago and its provisions should have caught the culprits responsible for the Australian Wheat Board scandal. This bill will hopefully take Australia some of the way towards final compliance with our international obligations. Unfortunately, I have to say ‘some of the way’ and not ‘all of the way’, because even at this late stage it represents only the first of two tranches to reform our woefully outdated laws. We are still waiting on the government to announce even a timetable to bring forward the rest of the reforms. Labor supports the bill but will be moving amendments in the Senate on at least two issues, which I will deal with later, and, I suspect, a range of other issues that might arise as a result of the Senate committee’s investigation and report into this bill.

As I am sure the Senate and the House of Representatives are aware, the amendments being introduced to the act by this bill are designed to bring Australia into compliance with important international obligations dealing with the threat of terrorist financing and, more broadly, money laundering activities. Specifically, they will bring us into line with two sets of recommendations released by the Financial Action Task Force, FATF, which is an important international intergovernmental group that has been tasked with the development of standards to combat money laundering for illegal activities, including terrorism. This is a welcome development and one supported by the Labor Party although, as I said, we will be moving amendments to improve aspects of the legislation that we think are deficient. However, it is a development that has been far too long in the making.

The history of this bill is one of delays, failed consultations and international embarrassment. It is more than five years after the September 11 attacks. Finally, this sluggish government has now brought a bill before the parliament dealing with these important matters. The Howard government is negligent in leaving Australia inadequately protected from criminals and terrorists who use our financial system to launder money. Only now—five years after 9-11—do we see an implementation of the special recommendations, of which eight of the nine were released in the aftermath of those horrendous attacks in 2001. Furthermore, we should make no bones about the importance of this legislation in the fight against organised crime and terrorism. In 2002, Senator Ellison, in a press release, made pointed reference to that fact when he said that criminals and terrorists:

... will continue to take advantage of jurisdictions where the law enforcement and regulatory powers are the weakest.

Of course, he was right. That is exactly what terrorists and criminals will seek to do. That statement was made in 2002. Recommendations were released in 2003. But it is now five years since the September 11 attacks, five years since the recommendations were first released, three years since the revised recommendations were released and three years since the new laws were promised, and only now are we seeing the bill for the first time here in the parliament. That is not the performance of a government in command of the tasks of dealing with money-laundering problems and anti-terrorism financing.

Just like Senator Ellison’s handling of the Customs container management re-engineering project, this has become a lesson in how not to implement complex new laws. The first serious problem was the botched consultation process undertaken throughout 2004 and 2005. In fact, the term ‘consultation process’ is too kind a term to use. Industry was not consulted. There was no proper consultation process about these proposed laws, and the government essentially attempted to jam everything into a one-size-fits-all approach. The minister attempted to persevere with that approach and in the middle of 2005 faced the humiliating result of being rolled by cabinet after a concerted campaign by industry and then being told to go back to the drawing board and start again.

In 2005 Australia faced the further international humiliation of two reports which slammed our responses to anti money-laundering and counter-terrorism financing. Firstly you had the release in May of that year of a report by the United States State Department in which Australia had the dubious honour of being named alongside Haiti and the Dominican Republic as a ‘major money-laundering country’ and a ‘country of primary concern’, owing to the Howard government’s weak legislative framework. We should contemplate that. The people of Australia would be appalled to know that the negligence of the Howard government resulted in our listing in a United States State Department document as being a major money-laundering country. Bear in mind that it was Senator Ellison who pointed out, quite correctly, that terrorists seeking finance and international criminals wishing to launder money will shift their operations to those jurisdictions with the weakest law. We happen to be in that category alongside the dubious company of Haiti and the Dominican Republic. That was the assessment of our closest ally, the United States.

Australia’s status as a soft touch on money laundering and terrorist financing was confirmed later that year following an investigation and the release of a country report by the FATF which found, incredibly, that Australia was fully compliant with only 12 of the 40 general recommendations. But, even more alarmingly, it found that Australia was not compliant with a single solitary one of the nine special recommendations relating to terrorist financing. Our record on the international stage has been an appalling embarrassment and an indictment of the mismanagement that the Howard government has brought to this important issue. Two years after Senator Ellison had promised the laws, the international community gave Australia a big fat zero out of 10.

If there is an upside to the international humiliation, it is that it seems to have finally spurred the Howard government into some activity. In the meantime the government has been forced to rush through a number of bandaid solutions to keep up the appearance of compliance with the recommendations. The government’s approach to this legislation has been more like watching a really bad movie that never seems to end rather than any proper process of legislative management and reform. It has been an excruciatingly painful process, when there has been no need for it. It has been compounded by the government’s own errors.

The first of these, contained in the Anti-Terrorism Act (No.2) 2005, was passed last year in what can best be described as a slow panic in response to the FATF report. It implemented a number of the FATF recommendations, but before these had even commenced the government was forced to amend a number of these in a later act, the Financial Transaction Reports Amendment Act 2006. It was forced to introduce these amendments because, to quote directly from the government’s own explanatory memorandum:

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.

Those are the government’s own words. The government, in its own words, was saying that the legislation that it had presented and put through the parliament was so poorly drafted that it would have put legitimate businesses out of business. That is no real surprise. The government, in answer to questions put on notice at the Senate committee inquiry into the anti-terrorism bill, admitted that it did not consult with industry on the final version of the bill, so it was forced to continue piling bandaid upon bandaid onto the legislation. More than half a decade after the September 11 attacks, the Howard government has decided that it is finally time to bring Australia into line with our international obligations and introduce legislation to attack terrorist funding at its source.

As I said before, with some provisos: this is only the first tranche—Labor will be supporting it. There are serious holes left in the regime which we are told the government will fix in further legislation. Labor calls upon the government to release the time frame in which it expects to complete those further reforms. Its track record to date does not give either the Labor Party or affected industry in Australia any great confidence. Until those reforms are completed and Australia is compliant with all the recommendations in all the areas, you have what is essentially a Maginot line. It is a set of scary and imposing defences that on the face of it seem impenetrable but that in actual fact are easily outflanked and circumvented. That is precisely what the government has created here. While these bills are a long overdue step in the right direction, it cannot be emphasised enough that they are only part of what is required. Until Australia completes the second tranche, we are going to be left with the Maginot line.

I will now turn to the Senate committee, which I believe is due to table its report into the bill at some point today. I make these remarks without the benefit of having read the report. However, to get some understanding of the issues before the committee, we can turn to the evidence presented in submissions, transcripts and answers to questions. For consultation, we saw industry repeating concerns similar to those it had raised earlier—specifically, I am thinking of the Anti-Terrorism Act. In that case, industry’s concerns were later shown by the amendment of the Financial Transaction Reports Act to be quite valid, because they were not properly consulted on the final text on that occasion. In a similar vein, we saw lacklustre consultation during the early stages of the draft, which resulted in the unusual situation of a minister being rolled in cabinet on his own bill and told to go back and start again. So the consultation process is not a new concern with this bill, and industry has every right to be wary of the perceived lack of consultation so far. I hope that the minister, AUSTRAC and the department have taken some steps to allay the stakeholders’ concerns.

Equally, the implementation period of the legislation is of great concern. The bill places an onus on the private sector to monitor and report to AUSTRAC suspicious transactions or transactions over $10,000. So we need to make absolutely sure that the private sector are able to come to grips with the obligations imposed by this bill. The private sector have told the Senate committee, in submissions and hearings, that they need certainty so that they can start building systems and training staff before the legislation comes into effect. In response, the department has indicated that it will have the rules available by 31 March next year. The Labor Party will continue to push for this, particularly given the minister’s track record of not giving industry sufficient time to implement the required changes.

I foreshadow that my colleague Senator Ludwig will be moving a range of amendments in the Senate on Labor’s behalf. In addition to such amendments as arise from the committee report, there are two matters I will flag here in the House today. Firstly, Labor will be moving to strike out section 6(7), which gives the power to regulations to effectively override and amend the act. This is what is commonly known as a Henry VIII clause, after the well-known king’s penchant for legislation of that type. Simply stated, it provides the opportunity for legislation passed by the parliament to be changed by subordinate authority. This is not the normal practice of our parliament or, indeed, any parliament in the Westminster system. If legislation needs to be altered, that should be the job of the parliament, not regulations. So we will be moving to strike out that clause. From the point of view of good governance, Henry VIII clauses are always to be opposed unless there are very sound reasons to support their existence. They are of particular concern in this bill given the extensive exemptions and delegations it already contains. The government’s argument for flexibility is, in Labor’s view, not enough to authorise these unusual procedures.

Secondly, Labor will be moving an amendment to bring forward the date of review. This is currently set at seven years, which, for a piece of legislation of this complexity, is simply too long. We will be moving amendments to shorten that review period. Let me state again that the Labor Party supports the bill. We will be moving amendments to improve it, but we fundamentally support it, as we have supported all reasonable legislation designed to protect Australians and fight terrorism and crime. Our concerns about this bill arise primarily from the fact that such an important piece of legislation has taken so long to reach the parliament. Our concerns are about a minister who refuses to consult and work with industry to achieve appropriate outcomes. Senator Ellison has been a repeat offender at botching consultation with industry, as his efforts to implement the new Customs cargo system showed us at about this time last year.

This is important legislation and it is high time it was brought before the parliament. It is high time we improved our standing in the international community and removed ourselves from the list of easy touches on the international money-laundering market, alongside Haiti and similar countries. It is time we removed ourselves from a list we should never have been on. It is a black mark against the Howard government that it has taken so long to bring these measures forward. I move:

That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House:

(1)

notes that the Financial Action Task Force (FATF) took swift action after September 11 2001, adding eight special recommendations on Counter-Terrorist Financing to the forty recommendations on Anti-Money Laundering by October 2001;

(2)

notes the Minister for Justice (Senator Ellison)’s statement of June 5 2002 that “criminals and terrorists will continue to take advantage of jurisdictions where the law enforcement and regulatory powers are the weakest”;

(3)

notes that the Government promised to meet FATF standards in 2003 and further notes the failure of the Minister for Justice to progress this legislation from that time until the present;

(4)

notes that, in the interval between indicating an intent to produce legislation and actually tabling it:

(a)

the Government, either through collaboration with AWB or the grossest incompetence, enabled AWB to fleece the UN of some $300 million in funds to channel them to the evil Iraqi Dictator, Saddam Hussein;

(b)

in March 2005, the US State Dept Report Released by the Bureau for International Narcotics and Law Enforcement Affairs named Australia as a “major money laundering country”.

(c)

in April 2005, the Minister created a new anti-money laundering taskforce, but incredibly left off AUSTRAC, the nation’s prime anti-money-laundering agency.

(d)

important anti-terrorism legislation was drafted incorrectly and the Parliament had to be recalled at great expense to fix sloppily-drafted anti-terror legislation by changing one word;

(e)

further, provisions of the Anti-Terrorism Bill (No. 2) 2005 were also drafted incorrectly and had to be amended to avoid significant hardship to Australian business.

(f)

in October 2005, the FATF reported on Australia’s compliance and found the Government had failed to meet the FATF standards, scoring just 12 out of 40 on anti money laundering, and 0 out of 9 on counter-terrorism financing.

(5)

condemns the Government for allowing criminals and terrorists to launder money for three full years while the Minister fumbled the drafting and consultation process;

(6)

condemns also the Government’s collaboration with AWB or gross incompetence in allowing the channelling of funds to Saddam Hussein;

(7)

notes that the present legislation, while a substantial improvement on the past five years of soft and weak legislation on terrorist financing, still represents just the first tranche of the required reforms;

(8)

calls on the government to outline a timetable for passage of the second tranche, so Australia will no longer be a target for criminals and terrorists seeking to take advantage of the Government’s soft and weak AML/CTF laws”.

I note this matter will be carefully considered, clause by clause, in the Senate. My colleague Senator Ludwig, who has been intricately involved in the work of the committee and the Senate and is shadow minister with direct responsibility for these matters, will pursue detailed amendments—the two that I have mentioned and I suspect others that may come to light as a result of the consideration of the Senate committee. I would urge the government to look carefully at the recommendations that come from that Senate committee and at the amendments my colleague Senator Ludwig will move in the other place.

Peter Lindsay (Herbert, Liberal Party) Share this | Link to this | Hansard source

I thank the member for Brisbane. Can I ask for clarification in respect of amendment (1), which has been circulated. I think the member changed a date from 2000 to 2001.

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

The printed document contained an error in listing 11 September 2000, when it clearly should have been 11 September 2001.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

Is the amendment seconded?

Bernie Ripoll (Oxley, Australian Labor Party, Shadow Parliamentary Secretary for Industry, Infrastructure and Industrial Relations) Share this | Link to this | Hansard source

I second the amendment and reserve my right to speak.

Kym Richardson (Kingston, Liberal Party) Share this | Link to this | Hansard source

I rise today in support of the Anti-Money Laundering and Counter-Terrorism Financing Bill 2006 and the Anti-Money Laundering and Counter-Terrorism Financing (Transitional Provisions and Consequential Amendments) Bill 2006. Back in 2003 it was agreed that Australia would implement the financial action task force’s 40 recommendations on money laundering and nine special recommendations on terrorism financing.

This government has undertaken a lengthy and detailed consultation process, the purpose of which was to ensure that, while complying with our obligations in relation to money laundering and terrorism financing, we also ensured that legitimate businesses did not suffer adversely as a result of the implementation of the legislation to put the recommendations into effect. These new regulations will cover the financial sector, gambling sector and bullion dealers as well as lawyers and accountants who provide financial services in direct competition with the financial sector.

From the outset, let me say that we cannot underestimate the importance of dealing with the methods used by terrorists and their organisations to obtain financial support for their cause. Without the ability to finance their attacks on our freedom and on our way of life—without the ability to finance their brutal and barbaric attacks—they have no means by which to invoke fear. Legislation like this is an important aspect of the government’s war on terror and is an important weapon in our arsenal in our fight against terrorism.

This bill imposes obligations on reporting entities when they provide designated services. Those services include things like opening an account, issuing a credit card or making a loan. The obligations include customer due diligence—that is, identification, verification and ongoing monitoring requirements. The obligations also extend to reporting requirements, including in relation to suspicious matters, threshold transactions, internal funds transaction instructions and compliance reports and record keeping.

This bill implements a system whereby reporting entities will determine the way they meet their obligations based on their assessment of the risk of whether providing a designated service to a customer may facilitate money laundering or terrorism financing. The transitional bill makes a number of consequential amendments to various acts—for example, the Privacy Act, which will now be extended to all reporting entities with respect to their compliance with these new regulations.

After consultation with industry it has been determined that this legislative package will be implemented over two years and that there will be an amnesty period of 12 months after each stage of the bill comes into effect. During amnesty periods AUSTRAC will concentrate its efforts on education.

This bill puts into effect a number of measures which are, quite simply, common sense. If we as a nation failed to implement these measures we would leave the Australian financial market open to abuse by money launderers and those who finance terrorism.Furthermore, failure to meet the international standard would put our reputation at risk, along with the reputations of our financial markets, international business relationships and individual companies. This bill seeks to meet our international obligations. It makes common-sense amendments to our existing laws and, in the long run, protects Australians from the far-reaching impact of terrorism. For these reasons I commend this very important bill to the House.

Michael Danby (Melbourne Ports, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Anti-Money Laundering and Counter-Terrorism Financing Bill 2006 and the Anti-Money Laundering and Counter-Terrorism Financing (Transitional Provisions and Consequential Amendments) Bill 2006. Both these bills are designed to bring Australia into compliance with international standards to combat money laundering by both criminals and terrorist organisations. The bills thus have a criminal justice dimension and a national security dimension. The bills are needed so that Australia will be in compliance with the recommendation of the OECD’s Financial Action Task Force, known as FATF. Initially developed in 1990, the FATF recommendations were revised in 1996 to take into account changes in money-laundering trends and to anticipate potential future threats.

In October 2001, a few weeks after the September 11 attacks, FATF held an emergency session in Washington in which it agreed that a whole new legislative regime was needed to combat terrorist-financing networks. More recently, in order to bring member states into compliance with these requirements as quickly as possible, FATF has completed a thorough review and update, known as the forty recommendations—perhaps to catch the 40 thieves of the Ali Baba story—which was published in 2003. All OECD member states are expected to legislate for compliance with these recommendations.

Specifically, FATF called on OECD member states to take immediate actions to implement nine special recommendations, and I am going to read these out for a specific reason. Each country should:

1.

Take immediate steps to ratify and implement fully the 1999 United Nations International Convention for the Suppression of the Financing of Terrorism.

2.

Criminalise the financing of terrorism, terrorist acts and terrorist organisations.

3.

Implement measures to freeze without delay funds or other assets of terrorists, those who finance terrorism and terrorist organisations.

4.

Require financial institutions and other businesses to report promptly their suspicions to the competent authorities if they suspect that funds are being used for terrorism, terrorist acts or by terrorist organisations.

5.

Afford other countries the greatest possible measure of assistance in connection with proceedings relating to the financing of terrorism, terrorist acts and terrorist organisations.

6.

Take measures to ensure that persons or legal entities that provide a service for the transmission of money or value, including transmission through an informal money or value transfer system or network, should be licensed or registered.

7.

Take measures to require financial institutions, including money remitters, to include accurate and meaningful originator information on funds transfers and related messages.

8.

Review the adequacy of laws and regulations that relate to entities that can be abused for the financing of terrorism, including non-profit organisations.

9.

Have measures in place to detect the physical cross-border transportation of currency and bearer negotiable instruments.

I have taken the time to read these recommendations into the Hansard because they are a benchmark by which Australia’s performance in this area should be judged. As the honourable member for Brisbane has noted—and I will come back to this shortly—we are a long way short of measuring up to these benchmarks.

Labor generally supports these bills, which reflect international agreements on the best ways to combat money laundering by criminals and terrorists. However, we are opposed to several procedural aspects of this bill, particularly the Henry VIII clause, which allows the minister to override provisions of this bill at his discretion. Senator Ludwig, the shadow minister for justice in  the other place, will be moving amendments to remove, among other things, this unacceptable overriding of the rights of parliament to decide what the law is.

Despite our general support for the bills, however, we have to ask why it has taken three years for the government to respond to the FATF recommendations. We do not deny that there are a number of complex technical matters in these bills and that many interested parties needed to be consulted. Nevertheless, in a matter of such urgency it seems to us that it should not have taken three years since FATF published its recommendations and five years since the OECD’s original call to action after September 11 to bring this bill before the House, particularly when we realise that these bills are only the first in a series of bills which will be needed to bring Australia into full compliance with the recommendations from FATF that I just read out. In 2002, the Minister for Justice and Customs, Senator Ellison, told us:

… criminals and terrorists … will continue to take advantage of jurisdictions where the law enforcement and regulatory powers are the weakest.

Yes, Senator, that is quite true; so what has been happening for the last four years? Senator Ellison told us that this was an urgent matter for the government. I do not think that long delays in producing these bills meet any definition of ‘urgent’.

The honourable member for Brisbane has outlined the reason these bills have taken three years to develop. Senator Ellison made a complete mess of the consultation process during 2004 and 2005, effectively wasting two years. The government failed to consult properly with those who would be most affected by the new laws and then tried to push through a one-size-fits-all approach. After intense lobbying by industry, Senator Ellison was rolled in cabinet in mid-2005 and told to go and start again.

Industry had legitimate grounds for complaint. The provisions of the Anti-Terrorism Act (No. 2), passed in such haste in 2005, implemented a number of recommendations, but the bill was so badly drafted that the government was forced to amend many of its provisions in a later act, the Financial Transaction Reports Amendment Act 2006. The act as first drafted would have put some legitimate non-bank money remitters out of business.

I hope the government’s incompetence in this area will not prevent the charging and trial of individuals recently identified by AUSTRAC’s Mr John Visser and the Australian Federal Police who allegedly have been, during a recent period, transferring thousands of dollars to Hezbollah, an organisation identified by this parliament as terrorist. I also hope that legislation that is now being passed can still be used to effect against people who have been involved in such activity if it is proved to be so.

Another year was wasted while a new bill was drafted and another round of consultations was held. This is how the Howard government deals with ‘urgent’ matters such as bills that have not only huge financial implications for Australian industry but also important national security dimensions. We can be sure that terrorists and organised crime bosses have not spent the last three years waiting for the government’s legislation. They have been developing increasingly sophisticated ways of making money, moving money around and concealing their actions from governments.

It is now more than three years since I spoke in the House about the need for tighter scrutiny of bogus charities, such as some of those based in Saudi Arabia which serve as fronts for terrorist groups such as al-Qaeda, raising funds from the zakat, the voluntary tax for charity which the Muslim faithful pay, and diverting it to terrorism. I referred then to testimony before the US Congress about ‘the Golden Chain’, the Saudi Arabian based funding system for al-Qaeda which is based on bogus Islamic charities that launder zakat funds and pass them on to al-Qaeda.

I also referred to Omar al-Faruq, who, after his arrest in Indonesia in 2002, told his interrogators that al-Qaeda’s operation in South-East Asia was funded through a Saudi charity known as the al-Haramain Foundation. According to al-Faruq, this money was laundered through the al-Haramain Foundation by donors in the Middle East who were close to Osama bin Laden. It is very good to see that the Indonesian authorities have made some moves against al-Haramain over the last few years as well.

In the US at any rate, these bogus charities are now under much tighter supervision. The unofficial financial transfer system known as hawala, widely used in the Islamic world, is also being brought under closer scrutiny, since it is well known that this system has been exploited by al-Qaeda as a fundraising mechanism. The ‘Golden Chain’ is apparently still operating in Indonesia and Malaysia, however, providing the infrastructure for terrorist groups such as Jemaah Islamiah. Although I know that progress is being made by Asian countries such as Indonesia in cutting off funding to these terrorist networks, this work is far from complete, and it makes it all the more urgent that we prevent Australia being used as a base both for fundraising and for money laundering.

One of the most alarming trends in recent years has been the closer cooperation that exists between organised crime and terrorism. Since it is becoming more difficult for terrorists to raise funds from fake charities, they have moved into money laundering. Terrorists are now working with drug traffickers and other criminals to launder the proceeds of crimes such as drug dealing, prostitution, intellectual property theft and smuggling. They use these activities to fund their operations, using legitimate businesses such as hotels and taxi operators as fronts to launder money. They are now also moving money through the new online payment systems as well as international ATM transfers. These transfers are very good because citizens travelling all round the world can make use of any ATM, but they are obviously of great benefit to people with nefarious purpose who can also use ATMs all round the world to transfer money. In the face of these trends, governments cannot afford to be complacent.

Unfortunately, complacency is what we see all too often when we consider this government’s record on matters related to counter-terrorism. The government is happy to exploit fears of terrorism for political gain but is slow when it comes to actually doing what needs to be done to protect Australia against terrorism and to prevent Australia being used as a base for terrorist fundraising, recruiting and money laundering. We saw this most conspicuously with the recent spate of maritime and aviation security bills—far too little, too late and inadequate legislation in any case, because this government always puts the interests of its various lobby groups ahead of the national interest.

These bills cover the financial, gambling and bullion-dealing industries, as well as lawyers and accountants. They expand the provisions of the Financial Transaction Reports Act 1988. The provisions of the bills will apply to a wider range of businesses than the 1988 act and will impose a wider range of obligations on them. We will apparently have to wait even longer for the second stage of the government’s compliance legislation, which will cover other activities of lawyers and accountants as well as the real estate industry. We do not even have a date for that legislation. It is no wonder that the May 2005 report of the US State Department ranked Australia with Haiti and the Dominican Republic as a ‘major money-laundering country’ and as a ‘country of primary concern’. It is disgraceful that Australia is ranked along with countries like Haiti and the Dominican Republic by our great American ally.

The fact is that, in 2005, four years after September 11 and four years after the OECD’s call for urgent action to combat money laundering and terrorist financing, a FATF report found that Australia was fully compliant with only 12 of the 40 recommendations that I identified earlier and that it was not fully compliant with a single one of the nine special recommendations, which I read out, relating to terrorist financing. This is a truly disgraceful state of affairs, and one that is being only partly rectified by these bills. We still have no idea when the government intends to make Australia fully compliant with the 40 FATF recommendations.

Labor support this bill as far as it goes, as we support all reasonable legislation which serves to protect Australia and to fight terrorism. But, as the honourable member for Brisbane has foreshadowed, we will be moving a range of amendments in the Senate. The deficiencies of this bill, as was the case with previous terrorism legislation, derive from the peculiar combination of delay and haste which so often marks this government. It does nothing for years, allows important matters to fester while it makes cheap political points and tries not to offend its own constituencies and then rushes in a bill so hastily and poorly drafted that it has to be amended even before it comes into effect. This seems to be the government’s way of dealing with such vital matters of national security. It is not good enough.

Luke Hartsuyker (Cowper, National Party) Share this | Link to this | Hansard source

I welcome the opportunity to speak on this important piece of legislation. The Anti-Money Laundering and Counter-Terrorism Financing Bill 2006 seeks to address one of the core threats to Australia’s quality of life. It is now more than five years since the September 11 attacks but the threat of terrorism is still front-of-mind, and the need to take measures which will protect our citizens remains a priority of the coalition government. Tens of thousands of words have been written about the horror of September 11, but there remains a need for nations such as Australia to continue to assess what measures can be taken to ensure our people can live in a safe and secure environment.

The vision of the twin towers crumbling in New York has left an indelible scar on our memories. Today’s war on terror is like no other war. We are not fighting any one country; rather, we are at war with a loose network of cells and organisations that seek to undermine the values of Western civilisation. Across the world, governments have taken action which aims to prevent or reduce the level of terrorist activity. And while their vigilance has been successful in nullifying many potential threats, the bombings in places such as London and Bali serve to remind us of the reality.

Recently, I was reading a column in the Australian newspaper by its editor-at-large, Paul Kelly, in which he made a number of points that I believe summarise the impact of 9/11 and the subsequent actions on the war on terror. He wrote:

That assault from the sky did more than kill 3000 people. It violated the US, destroyed its immunity, provoked its religious, cultural and political passions and unleashed an American strategic response under the leadership of George W. Bush ... The civil war within Islam that inspired 9/11’s aggressive martyrdom has escalated rapidly. It invades the globe like a noxious gas as fanatics and recruits to jihad launch murderous attacks on civilians from Bali to Madrid, Baghdad to London.

The costs and consequences of the events on that day in New York and Washington are still with us. Not only are they shaping the way we live; they are still shaping the way we think. I am referring specifically to those organisations and individuals who are financing terrorist activities. Governments clearly have to take action not only against those individuals and groups who plan and carry out terrorist attacks but also against their sympathisers who finance these activities. We should also act against those who assist terrorists and who do so not out of sympathy with their aims and beliefs but out of a desire solely to make money.

The Anti-Money Laundering and Counter-Terrorism Financing Bill 2006 specifically targets those who financed these killers in New York, London, Bali and Madrid. These reforms will bring Australia into line with international standards set by the financial action task force, or FATF, with its 40 recommendations on money laundering and nine special recommendations on terrorism financing. The FATF recommendations provide an enhanced and comprehensive framework of measures for combating money laundering and terrorism financing.

I would like to take a few moments to talk about the financial action task force, because its composition and actions bring credibility and discipline to this anti-terrorist legislation. The Financial Action Task Force on Money Laundering is an intergovernmental body whose purpose is the development and promotion of policies at both national and international levels to combat money laundering and terrorist financing. The task force is a policy-making body which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. FATF monitors members’ progress in implementing necessary measures, reviews money-laundering and terrorist-financing techniques and counter-measures, and promotes the adoption and implementation of appropriate measures globally.

In performing these activities, FATF collaborates with other international bodies working in this area. Recognising the threat posed by these financial activities to the banking system and financial institutions, FATF was established by the G7 in 1989 from G7 member states, the European Commission and eight other countries, including Australia. The FATF was tasked with examining money-laundering techniques and trends, reviewing the actions taken at a national or international level and setting out the measures required. In April 1990, FATF issued a report containing a set of 40 recommendations which provided a comprehensive plan of action needed to combat money laundering. Since then, FATF has expanded its membership, has completed additional rounds of mutual evaluations of member countries and has continued to examine and report on the methods used to launder money.

The bill imposes obligations on reporting entities when they provide designated services—that is, opening an account, making a loan or issuing a credit card. These obligations include customer due diligence such as identification, verification and ongoing monitoring. There is also provision for reporting suspicious matters, threshold transactions, international funds transaction instructions and compliance reports. The banking sector will be obliged to conduct due diligence of its correspondent banking relationships and ensure that appropriate identifying information is included in international electronic funds transfers.

The bill implements a risk based approach to regulation. This means that reporting entities will determine the way in which they meet their obligations based on their assessment of the risk of whether providing a designated service to a customer might facilitate money laundering or terrorism financing. The approach has been endorsed by the banking industry. It recognises that reporting entities have the experience and knowledge needed to assess and mitigate risk and that the legislation will impose costs on industry. Importantly, it is worth noting that similar approaches have been taken in both the United States and the United Kingdom.

Reporting entities will manage operational risks through anti money-laundering and counter-terrorism programs developed in accordance with the rules associated with anti money-laundering and counter-terrorism finance. The Australian Transaction Reports and Analysis Centre, AUSTRAC, will monitor compliance with these programs and will assess the reasonableness of the entity’s risk assessment.

The Anti-Money Laundering and Counter-Terrorism Financing (Transitional Provisions and Consequential Amendments) Bill 2006 makes a number of consequential amendments to various acts. For example, obligations under the Privacy Act 1988 will be extended to all reporting entities with respect to their compliance with the AMLCTF Bill. The transitional provisions bill will also amend the money-laundering offences in the Criminal Code 1995 to include proceeds of an offence against state and territory law. The legislative package will be supported by operational rules to be developed by AUSTRAC in consultation with industry. The use of the rules instead of subordinate legislation allows for flexibility in ensuring that the rules are appropriate to sector-specific needs.

It is important to note that the government has consulted widely on this bill. In 2003, federal cabinet agreed to Australia implementing the financial action task force’s revised 40 recommendations on money laundering and nine special recommendations on terrorism financing. Importantly, the cabinet also agreed to consultation on the anti money-laundering and counter-terrorism financing reforms, including the release of an exposure draft of proposed legislation. Extensive consultation with industry took place between December 2003 and October 2005, during which agreement was reached on the broader need for AML-CTF reforms in the form of a risk based regulatory framework with head legislation supported by operational rules.

In October 2005, cabinet agreed to progress the reforms in two tranches. The first part focused on covering the financial and gambling sectors and bullion dealers. Lawyers and accountants would also be covered to the extent that they provide services underpinning the financial sector. The second part covers real estate agents, jewellers, lawyers and accountants and will be progressed following implementation of the first tranche.

Following the release of a draft in December last year, a consultation process of four months ensued. The bill was referred to the Senate Standing Committee on Legal and Constitutional Affairs, and a report of their findings was published in April of this year. Feedback from the consultation through submissions and the report has prompted further changes. The revised drafts were then released for consultation in July this year. Over 70 submissions were received during the second consultation period. The lengthy consultation process has resulted in a legislative package that will ensure that Australia complies with its international obligations and maintains its status in the region with respect to prevention of money laundering and terror finance with minimal impact on legitimate business.

I believe this legislation is an important further step in our nation’s fight against terrorism. If we can prevent the perpetrators of terrorist activities from laundering money, then we are restricting their capacity to create fear and inflict terror on our society. This particular legislation has been carefully drafted to reflect international best practice and a comprehensive consultation process has been undertaken. As I said earlier in my contribution, this is not a traditional war, and a major part of winning this war is winning control of the finances of the terrorists. I commend the bills to the House.

Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

I rise with a sense of relief to contribute to this debate on the Anti-Money Laundering and Counter-Terrorism Financing Bill 2006 and Anti-Money Laundering and Counter-Terrorism Financing (Transitional Provisions and Consequential Amendments) Bill 2006, because I and many others in this place were wondering whether these bills would ever be presented to this parliament. In his second reading speech, the Attorney-General made efforts to categorise this bill as ‘the product of extensive consultation between government, business and the community’. If you examine the real situation more closely, you will find that the legislative package that we have before us today is more a product of actions stemming from considerable international embarrassment. I will address that matter a little later on.

I would like to indicate at the outset that I am generally supportive of the provisions in these bills. I am certainly supportive of taking action to combat the threat of terrorism, and I agree that one of the most powerful actions that we have at our disposal is shutting down the means by which terrorist organisations finance their operations. Terrorist organisations—like any other business, quite frankly—rely on the smooth transfer of money to fund their operations. Shutting down that flow of funds severely curtails their ability to organise and get operations off the ground. Stopping the flow of funds therefore severely hinders the ability of terrorist or criminal organisations to take or disrupt the lives of ordinary citizens.

I indicated that I was pleased to be able to contribute to this debate, as I did not think it was ever going to occur. I say that because in February 2004 the Attorney-General rose in this place and gave a ministerial statement extolling the virtues of the government’s actions when it comes to tackling head-on the issue of terrorism. As part of the statement, he indicated:

... I have made it my business to ensure that the government is doing everything it possibly can to discharge its most important duty—that of protecting our country and our people—to ensure that our way of life, our values and our freedom to be safe in our own homes are protected and, in doing so, to defend the right of all peoples to live in peace.

That is quite noble. From that statement, you would think that this government has been setting a cracking pace when it comes to putting in place all appropriate measures to deal with the threat of terrorist activity, whether it takes place in Australia or whether it is organised or funded by Australian based organisations. On genuine reflection upon what has occurred, I have to say that that is not the case at all.

Despite the illusion that this government has tried to create of the pace of its response to terrorism, it would be described best as being disappointingly slow. It talks about action but certainly takes considerable time to deliver on its commitments. I raise this in the context of this bill because, given the importance of addressing terrorist financing, I feel it has taken far too long for this bill to come before the parliament. In December 2003 the government made a commitment to implementing the 40 revised recommendations of the OECD financial action task force. This commitment was confirmed in response to a question on notice asked by the member for Barton in May 2005. Interestingly, the Minister for Justice and Customs said in that response:

Australia is already compliant with many of the FATF 40 Recommendations, while the rest will be implemented following the passage of new anti-money laundering legislation.

It is interesting that the minister may have created the impression that we as a nation are subscribing to and implementing the majority of the 40 recommendations of the task force. But, in 2005, the financial action task force visited Australia to review Australia’s operations and legislative framework to evaluate the level of our compliance. As the member for Brisbane has said in this place, the task force report was an embarrassing read, to say the least. The task force reported that the government had yet to deliver a comprehensive response to the threat of terrorism financing. That is after the commitments made in 2003 and after the response to the question on notice. The position from the audit undertaken by the task force was that we had yet to deliver a comprehensive response to the threat of terrorist financing.

In fact, it was found that Australia was only compliant with nine of the 40 recommendations on anti money laundering—nine, which is even less than a quarter. Of course that was not the only finding the task force made in auditing the level of our compliance. The task force also reported that Australia was not compliant in any of the nine special recommendations dealing with antiterrorism financing. That is a pretty sad indictment of the Minister for Justice and Customs, as was his response to the member for Barton when the minister indicated that we were compliant with many of the 40 recommendations. Not to put too fine a point on it, the word ‘many’ implies that it is the majority or close to the majority. The finding of the task force was that only nine recommendations had been adhered to—less than a quarter—and none of the special recommendations had been adhered to. It is a pretty poor reflection of this government’s efforts to address the terrorism threat.

I would have thought that in the international community it would reflect pretty poorly on Australia’s ability to uphold its end of the bargain when it comes to shutting down the finances or having the capability to shut down the finances of terrorist organisations. Once again, it seems that, for all of those pieces of government rhetoric on national security, their actions just do not extend past the distribution of fridge magnets and Australia’s involvement in the conflict in Iraq. Regrettably, it is big talk and little action—and what action we have is slow in coming.

We had a commitment given in December 2003. We are now on the cusp of December 2006. It is some three years later and we are finally debating the legislative framework that will be the guide for that commitment. Three years is a long time. Three years is a heck of a long time when we are talking about terrorism. I am sure that the members opposite will not like being reminded of the fact that it has taken so long for this legislation to come before the parliament. I am equally sure that members opposite will not like the fact that the myth of strong activity and taking a tough stand against terrorists that this mob have shrouded themselves in has been exposed as an illusion with this legislation taking three years to come before the parliament.

I acknowledge that the government has taken some action in relation to combating terrorist activity, but these have been largely stopgap measures, hastily drafted and introduced without the proper examination that such legislation would ordinarily deserve. Do not forget: some of the legislation has been on the basis of ‘let us put it in now and revise it later’. There was even a situation where an amendment was introduced to change one word in a piece of legislation so that it could be operative. Despite the embarrassment that that has incurred, the task force’s report on Australia’s compliance stands as an indictment of this country and its level of meeting its commitments to and compliance with its earlier undertakings.

It has sent a clear message to the heart of the government that it can no longer make small attempts to bring Australia in line with the rest of the world when it comes to putting in place all of the necessary conditions to limit the activity of terrorist organisations. It has prompted actions that the proper process for consultation has resulted in the legislation before us today. The task force has shown that temporary fixes are not enough. The process that has led to the introduction of this legislation has shown that it cannot get away with sloppy drafting when it comes to addressing these serious situations.

As I have said, this bill is long overdue. It is long overdue and it is overly complex, but I must admit it will deliver significant improvements to Australia’s historically poor record when it comes to dealing with anti money laundering and counterterrorism financing. To that extent, I support the objectives of this bill. There has been extensive consultation on this bill to make sure that it is workable, given the serious concerns previously expressed, particularly by the business community. Therefore, we on this side of politics are largely supportive of this approach.

However, this support is not without some concerns. There is a particular concern about clause 6(7) of the bill and I am of the view—as are many on this side of the chamber—that this clause should be struck out. All too often with this government we are seeing legislation being drafted and passed that uses extensive reliance on regulation to bring the provisions of the legislation into effect. While it is acknowledged that this is sometimes the best way to achieve the desired outcome, it is also the best way, quite frankly, to avoid proper scrutiny. In some instances this method is appropriate, but it concerns me that this government has a tendency to defer to the use of regulation rather than legislation. It defers to the use of regulation because it is the easiest to change and the changes can effectively be introduced by a ministerial media release where the biggest risk for the government is a bad story for a couple of days in the tabloids rather than having the changes being subject to proper questioning and debate of the parliament.

Clause 6(7) of the bill affords the government the power to amend the tables of designated services in the act. Currently, the designated services include activities such as: provision of accounts or transactions to and from accounts; taking of deposits; loans and acting as guarantor of loans; factoring a receivable; forfeiting a bill of exchange or promissory notes; leasing, and the supply goods by way of lease; supplying goods by hire purchase; cheque accounts; bills of exchange, promissory notes or letters of credit; debit cards; stored credit cards; travellers cheques—and the list goes on.

As I have indicated, while regulations like clause 6 are used to amend sections of legislation, they should only be used in limited circumstances and should only be used for compelling reasons. I do not believe that the case has been adequately made to provide us with enough comfort to allow the government to change designated tables by administrative fiat, as outlined in clause 6. The explanatory memorandum to this bill indicates that the reason for the inclusion of clause 6(7) has been to:

... allow the Bill to keep pace with business changes and changes in the techniques used by money launderers and terrorist financiers.

It is a claim of flexibility. This is a claim that I tend to question. This legislative package contains a number of exemptions and discretions that prompt a number of serious questions about the necessity of allowing changes by regulation. I welcome the amendment by the opposition that would strike out clause 6(7). Flexibility is important, but flexibility can also come to mean different things to different people as time marches on. To allow this degree of flexibility by administrative fiat is too significant, given the nature of the legislation that is being debated before us this evening. It would be short-sighted of us as legislators to simply include provisions in legislation that suit our purposes in the here and now and not be mindful of an alternative interpretation that could be applied in the future.

While recognising the general acceptance by the business community of the regime to be introduced—and certainly I acknowledge that it was introduced after lengthy consultation and follow-up—this bill will impose a significant compliance burden on small business. I think that is a matter of fact. I guess that can be put down as a consequence of the subject matter of these bills. However, it should be realised that a compliance burden is inevitable for small businesses in this country.

As was pointed out to the government in the original drafting of the bill, the poorly drafted provisions that it contained would have hurt businesses. Quite frankly, it would have hit them hard. There was a real and legitimate concern from the business community that it was being asked to pay too high a price through increased business closures. I concede that this is a matter of balance. It is certainly a matter of placing binding commitments on the business community, but quite frankly it has got to be recognised that there are going to be organisations which will struggle to comply and there will be compliance costs. This needs to be noted by government as it passes legislation of this type. For instance, I note that initial funding has been provided for a period of four years to the Office of the Privacy Commissioner and that a number of small businesses will receive additional guidance and assistance with the implementation of measures related to this bill. The fact that the government did get such a stern warning about the impact of the legislation in its original form should stand as a constant reminder that shoddy drafting produces wide-ranging impacts that need to be avoided in producing legislation of this type.

The heightened sense of insecurity pervading the population following a range of terrorist attacks has resulted in a heightened sense of the need for increased protection from terrorist attack. The provisions of this bill will help to make a range of criminal activities less profitable and accordingly less likely to be undertaken. They will also make sure that Australia’s regulatory framework to shut down the financing of terrorist organisations is based on fact rather than on the myth and illusion that the government has previously tried to create around its actions to shut down terrorist operations. This will provide a disincentive for criminal activity and terrorist activity by making it more difficult and by making it less profitable for those organisations to go about their evil intent. (Time expired)

Philip Ruddock (Berowra, Liberal Party, Attorney-General) Share this | Link to this | Hansard source

Can I first thank the members for Brisbane, Melbourne Ports and Werriwa as well as my colleagues the members for Kingston and Cowper for their contributions to this debate. In summary, the Anti-Money Laundering and Counter-Terrorism Financing Bill 2006 and the Anti-Money Laundering and Counter-Terrorism Financing (Transitional Provisions and Consequential Amendments) Bill 2006 form part of a legislative package that reforms our anti money-laundering and counter-terrorism financing regulatory regime. The primary purpose of the package is to ensure that Australia has a financial sector that is protected from abuse by those seeking to engage in criminal activity and terrorism. The reforms respond to increased and more sophisticated criminal and terrorist activity. The legislative package will also implement the better international standards contained in the financial action task force’s—that is, FATF’s—40 recommendations and nine special recommendations on terrorist financing. Compliance with these standards is important to ensure that Australian businesses can continue to operate and compete effectively in other countries that have implemented these international standards.

Consistent with the government’s commitment to reducing regulatory burdens on business, the legislative package implements a risk based approach to regulation. The risk based regulatory approach recognises that businesses covered by the legislative package have the experience and knowledge needed to assess and mitigate the risk. It will also help mitigate compliance costs by providing industry with tools to concentrate their resources on areas where the risk of money laundering and terrorism financing is higher. Industry has endorsed this risk based approach. The Australian risk based approach is similar to that taken in the United States and the United Kingdom.

Work on this package commenced in December 2003, and industry and other groups have been extensively consulted at all stages in the development of this package over time. This consultation has been vital in formulating a package that accommodates industry’s needs both operationally and on a cost basis. The government will continue to work closely with affected sectors in the implementation of this new strategy to minimise the impact on legitimate business activity while ensuring that Australia’s financial system remains hostile to criminal activity.

In formulating the legislative package, the government has considered and addressed recommendations made by the House of Representatives Standing Committee on Legal and Constitutional Affairs, which conducted an inquiry into the exposure draft of the bill in February and March 2006, and the Senate Standing Committee on Legal and Constitutional Affairs, which has recently conducted a second inquiry into this package and has provided a report to the Senate today. I wish to place on record my appreciation for the work of the committee in producing its report in a short time frame along with other urgent matters that it has had to deal with. The committee has done a commendable job given the complex nature of the bills. The government will be responding to the committee’s report in the Senate. I also wish to thank members who contributed to this debate today, and at this point I will pick up a couple of the issues that have been raised during the speeches that we have heard.

There seems to be some misunderstanding that Australia has been vulnerable to money laundering and terrorism financing because this bill has not been in place. This bill, in fact, builds upon the existing regulatory system that has been there since 1988. This was implemented in the Financial Transactions Reports Act 1988 and when we criminalised terrorism financing in 2002 as part of the Criminal Code, and we also criminalised money laundering in 1987 in the Proceeds of Crimes Act. So, when it is suggested that these are matters that we have not dealt with before, let me say this legislation deals with matters that have been dealt with but deals with them more comprehensively and more effectively.

The member for Brisbane said that compliance with the FATF special recommendations had not been achieved. Let me say that the October 2004 FATF special recommendations found that Australia was largely compliant in five cases, partially compliant in two and non-compliant only on wire transfer rules—and that one is now, of course, fully addressed in the recent amendments which came into force on 14 December. The ninth special recommendation only came into operation in 2005 and is addressed in this bill.

It has been said that our consultation process—and this has been picked up in the opposition amendment—has been somewhat long. We do not apologise for comprehensive consultation. In fact, as the member for Werriwa, who just spoke, observed—and I noted this: ‘There were real and legitimate concerns.’ I would say he was right, and it is appropriate that consultation took place in 2002 on the FATF discussion paper, in 2003 on the FATF recommendations, in 2004 on the five discussion papers to set the framework for drafting this legislation and through 2005-06 on the details of the bill and, now, the rules. I think the member for Brisbane should read the transcripts of the three days of hearings of the Senate Legal and Constitutional Affairs Committee. Every organisation that appeared confirmed that they were consulted and were happy with the consultation and noted the extent to which the department had gone to consult on all relevant issues.

The opposition had some concerns about what is known as a ‘Henry VIII clause’—that is, clause 6(7). In the bill this clause permits regulations to be made to amend an item in the tables in clause 6. The tables in clause 6 identify who will be covered by the bill by setting out a series of designated services. Any person who provides a designated service will become a reporting entity under the bill. Subclause (7) will allow amendments to the definitions of designated services where new products of a similar kind to the existing designated services are created or structured in such a way that they would not be covered by existing definitions or where an industry or sector identifies and attempts to exploit a loophole in this particular table. For example, the financial sector could deliberately structure a product that is in some way outside the definition of a security or a derivative or a foreign exchange contract in item 33 of the table but which would still present the same money-laundering risk as other products. We need to be able to deal with those issues effectively.

There were some other matters raised in relation to some recommendations from the International Narcotics Control Strategy Report. I think it is important in that context to note a number of matters. This report is prepared annually by the United States Department of State for presentation to congress and it describes the efforts of key countries to attack drugs trade and associated crime. The particular report that was referred to by the member for Brisbane was brought down in 2004. In this International Narcotics Control Strategy Report, categorisation is based upon the size of a country’s economy and the sophistication of the financial institutions and transactions. Obviously, countries which have a larger and more complex flow of funds will become more vulnerable to money laundering. In the report it was made clear that categorisation was not based on anti-money-laundering measures taken by that particular country and that Australia, along with the United States, the United Kingdom and Canada, is identified as being of primary concern despite having comprehensive anti-money-laundering laws and conducting aggressive anti-money-laundering efforts.

The report noted that the current ability of money launderers to penetrate virtually any financial system makes every financial jurisdiction a potential money-laundering centre. As a major centre Australia, of course, will be vulnerable to money laundering. It is in response to this that the government and law enforcement agencies continue their efforts to combat that practice both domestically and in the Asia-Pacific region. It is to ensure that we maintain a robust and effective system to combat money laundering that the government has initiated the anti-money-laundering review in response to the revised recommendations of FATF. And, of course, I would say that this legislation is equally important in updating the existing arrangements, particularly those that I referred to earlier.

I note that the opposition has proposed an amendment. The amendment picks up the criticisms that I have addressed. The opposition amendment, looking at the consultation that has taken place over a period of time, states that the House:

... condemns the Government for allowing criminals and terrorists to launder money for three full years while the Minister fumbled the drafting and consultation process ...

As I said earlier, I think this minister, the Minister for Justice and Customs, has been extraordinarily competent, ensuring the government’s objective in implementing these measures, with full consultation, cognisant of our obligations in implementing the FATF recommendations but doing so in a way which, in the words of the member for Werriwa, addressed the ‘real and legitimate’ concerns of the private sector. I do not think he should be condemned in any way, shape or form whatsoever for ensuring that these issues are dealt with in the most effective way. Those businesses concerned about the implementation of those measures were fully consulted. Their views were heard and taken into account.

We are moving to implement measures that ensure that our obligations are met and that we will be largely FATF compliant, in the same way that our major trading partners are in the United Kingdom and the United States, but cognisant of the special situations that people may face in meeting these arrangements. The government will be opposing the second reading amendment proposed by the opposition. I welcome the opposition’s advice that they will not be opposing the bill itself.

Duncan Kerr (Denison, Australian Labor Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Brisbane has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The question now is that the words proposed to be omitted stand part of the question.

Question agreed to.

Original question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.