Clare O'Neil (Hotham, Australian Labor Party) Share this | Link to this | Hansard source

I'm very pleased to make a contribution on behalf of the opposition regarding the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017. Labor will be supporting this bill. In my role as shadow minister for justice, I have the great privilege of meeting with and talking to law enforcement right around the country. I often ask them: if there were one thing they could do to improve the situation for them in the work that they're doing, what would it be? I get a pretty consistent answer, and that is that we need to work harder to take the profit out of crime. One of the key ways that we can do this is through our anti-money-laundering and counter-terrorism-financing regime.

This bill implements the first phase of reforms arising from the recommendations of the Report on the statutory review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and associated rules and regulations, which reported in 2016. The review considered the operation of Australia's AML/CTF regime, its objects and its effectiveness. Out of that review came 84 recommendations for reform, split up into two phases. The bill before us tackles a portion of the recommendations from the first stage.

When Minister Keenan announced to the media the introduction of this bill, he heralded the reforms in this way:

These measures ensure there is nowhere for criminals to hide.

Contrary to the minister's ambitions, this is not an ambitious bill. It doesn't even tackle half of the statutory review's recommendations. It doesn't deal with the many critical issues outlined by the Financial Action Task Force. Indeed, the government's own department has described this bill as including 'the easier parts' of the AML/CTF reform that could be done 'fairly quickly'.

The bill will expand the objects of the AML/CTF Act. It will give the AUSTRAC CEO the power to issue infringement notices for a greater range of regulatory offences. It will allow the AUSTRAC CEO to issue a remedial direction to a reporting entity to retrospectively comply with an obligation that has been breached, and it will give customs and police officers broader powers of search and seizure for AML/CTF breaches.

The most significant measure contained in this bill would bring digital currency exchange providers such as Bitcoin under the AML/CTF regime. The AML/CTF regime was designed in 2006 and, as it currently stands, only applies to an e-currency which must be backed by a physical thing. This excludes a convertible digital currency such as bitcoin. The statutory review found:

The dynamic nature and rapid developments associated with new payment types and systems offer opportunities for criminals to exploit these systems for ML/TF—

money laundering and terrorism financing—

and other criminal purposes.

This is a change that is of particular interest to me in my role as shadow minister for justice. Digital currencies are taking up an increasing share of the currencies used to pay for crime. They're used not just for money laundering and terrorism financing but to facilitate really any criminal activity that requires a level of anonymity. Through the Senate Legal and Constitutional Affairs Legislation Committee inquiry, we learned that the UK Internet Watch Foundation has reported over 200 commercial sexual abuse websites which accept bitcoin for payment. There were only 30 sites which accepted bitcoin in 2014. This is a crucial area of law, one that I'm very, very passionate about, and it is very clear that we are going to need to do a lot better to ensure that bitcoin comes under these and other regulatory regimes.

There is bipartisan sponsorship to support reform in this area. Labor supports the government's decision to bring digital currency exchange providers under the AML/CTF regime. The bill requires digital currency exchange providers to do a number of things, including to enrol and register on a digital currency exchange register, which would be maintained by AUSTRAC; to adopt and maintain an AML/CTF program to identify, mitigate and manage money-laundering and terrorism-financing risks; to identify and verify the identities of their customers; and to report suspicious matters to AUSTRAC. When you hear that list, it's quite concerning, isn't it, that for as long as Bitcoin have been operating they've not had any of these obligations.

One of the things that is unfortunate is that, under the government's proposal, digital currency exchange providers would only need to report on transactions of physical currency of $10,000 or more. I note that this is a back-down from an earlier position contained in the government's consultation paper on digital currencies, which proposed a $0 threshold for digital currency exchange providers to come under this regime. That would have required digital currency exchange providers to report all transactions as threshold transaction reports 'in lieu of an obligation to report international funds transfer instructions'. The government's own regulation impact statement indicates that, because of this decision, 99 per cent of cash transactions will fall below the $10,000 threshold for reporting and will not be captured. We would consider this as a matter to be improved. We support the government's decision to bring digital currency exchange providers under this regime but are disappointed with the light-touch approach that has been taken.

There are a number of recommendations from the first phase of reforms recommended by the statutory review which are absent from the bill. These include the insertion of principles into the AML/CTF Act, a privacy principle, a prohibition on providing a service if customer due diligence cannot be completed, and improving secrecy and access amendments to facilitate information sharing.

I want to close my remarks by speaking about enforcement. In 2015, the Financial Action Task Force found that Australia's AML/CTF regime was non-compliant with six international standards. I want to let that sink in. Counterterrorism financing and anti-money-laundering sit at the heart of organised crime, of terrorism, of so much that we as a federal government need to do to keep Australians safe, yet we have a regime today which is simply not up to standard. In the same year, AUSTRAC sustained a $7 million budget cut in the Abbott Liberal government's 2014-15 budget. Just when Australia was being told to ramp up our AML/CTF enforcement, the Liberal government cut eight per cent from AUSTRAC's budget in one year.

Breaches of this regime are an issue of national security. We cannot afford to take lightly the issues that this scheme faces. The recent charges by AUSTRAC against the Commonwealth Bank, relating to alleged breaches of money laundering and antiterrorism laws, are extremely serious and deeply concerning. We need to ensure that financial institutions and companies do not allow their facilities to be potentially used to fund terrorist activity. Unfortunately, yet again, in the most recent budget, the government has taken the knife to AUSTRAC. The 2016-17 budget contained a $19 million cut to AUSTRAC's work protecting the financial system from criminal abuse. And the government continues to refuse to hold a royal commission into the banking sector. We know that the government loves to talk a big game on cracking down on organised crime and terrorism, but it is not investing in the public institutions and law enforcement organisations that are there to keep us safe.

Labor supports this bill because it contains some small, very moderate steps towards strengthening our AML/CTF regime. The bill alone will not have a significant impact on Australia's ongoing issues with money laundering or terrorism financing. There are many areas that the government has put in the too-hard basket. We are willing and eager to work with the government over the coming months on the more significant challenges Australia faces in responding to these critical issues.

Debate adjourned.