Mark Dreyfus (Isaacs, Australian Labor Party, Cabinet Secretary) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

The Anti-Money Laundering and Counter Terrorism Financing Amendment Bill 2024 implements long overdue major reforms to Australia's anti-money-laundering and counterterrorism financing, or AML/CTF, regime. 'Tranche 1' of these reforms was introduced in 2006, and this bill will finally deliver on vital 'tranche 2' reforms.

These reforms are a key pillar of the Albanese Labor government's efforts to protect the community from serious and organised crime, and growing national security threats.

Right now, Australia is an attractive destination to store, launder and legitimise proceeds of crime. That cannot continue—and this bill will put an end to it.

Money laundering is not a victimless crime. Each year, billions of dollars of illicit funds are generated from criminal activity such as drug trafficking, cybercrime, child exploitation, tax evasion, and other illegal and corrupt practices. It's also used by authoritarian regimes to fuel corruption, and undermine the rule of law across the world.

Money laundering diminishes tax revenue and diverts government resources that could otherwise be used to assist all Australians through greater investments in education and health services. Instead, it increases the burden on law enforcement.

It also distorts markets. Hardworking Australians have to compete in the housing market against criminals with dirty cash or run their businesses against loss-making, criminally owned enterprises.

AUSTRAC's national risk assessments on money laundering and terrorism financing, released on 9 July 2024, found that Australia's economy continues to be exploited by money launderers and risks financing terrorist organisations.

Money launderers still prefer to conduct their operations via traditional methods using cash, banks, luxury goods, real estate and casinos. Lawful domestic financial channels are a significant pathway for money launderers to funnel their wealth and are also the preferred channels for moving funds for terrorism.

For almost 18 years, government inaction has led to significant regulatory gaps leaving Australia vulnerable.

The AML/CTF amendment bill delivers on the Albanese Labor government's commitment to protecting Australians by strengthening our AML/CTF regime. It means preventing criminals from enjoying the profits of their illegal activities and putting an end to funds falling into the hands of terrorists and authoritarian regimes.

There are three overarching elements of these reforms.

Regulating 'gatekeeper' professions

First, we are regulating so-called tranche 2 entities—Australia's 'gatekeepers' against criminal activity and terrorism. They are entities who are internationally recognised as high risk for money laundering and corruption—including real estate agents, accountants, lawyers and precious stone dealers.

'Gatekeeper' businesses will be asked to assess their illicit financing risks and put in place controls to prevent the exploitation of their services. Information from these businesses will help law enforcement and national security agencies to protect the Australian community.

Simplification and clarification

Second, we are simplifying and clarifying parts of the legislation that can be complex for industry to comply with—while maintaining the integrity and strength of the regime. It means more guidance, less confusion, and better financial intelligence to support law enforcement investigations.

Modernisation

Third, this bill will modernise the AML/CTF regime to ensure it responds to the increasingly digital, instant nature of our global financial system. It will close the loopholes that we know increasingly sophisticated, professional criminal organisations can currently exploit.

Regulating Australia's 'gatekeepers'

Regulating 'gatekeeper' professions means partnering with more sectors to monitor suspicious and criminal activity, and it will make a world of difference.

AUSTRAC's national risk assessments found that these professions and the products and services they deal with are often relied upon by criminal networks to facilitate money laundering, either wittingly or unwittingly.

Given their roles as entry points to Australia's legitimate economy, these reforms will strengthen and protect these professions against criminal exploitation and reputational damage.

When businesses implement measures, they will make it more difficult for criminals to launder the proceeds of their crimes—and help weed out the bad actors in those sectors.

Law enforcement in Australia sees case after case of these professions creating structures and obfuscations to hide the proceeds of crime, and facilitating serious financial crimes. This bill puts them on notice.

The bill also provides stronger, more tailored protections for information that may be subject to legal professional privilege. This includes clear exemptions and mechanisms for regulated entities to comply with their reporting and disclosure obligations without being required to disclose privileged information to AUSTRAC and other agencies.

Simplification of existing obligation

Expanding the sectors covered by the AML/CTF regime will have regulatory impacts. But we are minimising regulatory burden wherever possible, while maintaining the overall integrity of the regime.

For instance, the AML/CTF program obligation will now focus on high-level outcomes to be achieved—identifying and assessing the risks of illicit financing, and then taking steps to mitigate and manage those risks. It means the reforms will provide businesses with the flexibility to achieve these outcomes in a way that works best for them, based on the risks of their particular business. This moves the regime further away from prescriptive, tick-box compliance.

The bill will introduce simplified measures for AML/CTF programs, enabling business groups such as corporate groups, franchises and partnerships to implement single, group-wide AML/CTF risk management and compliance frameworks. This better reflects the reality of modern business structures.

The bill will also streamline the ability of Australian businesses to provide services to customers engaged overseas, by clarifying AML/CTF requirements for their foreign branches and subsidiaries.

Reforms to customer due diligence requirements will implement a simpler, risk based approach that reporting entities can more easily understand and comply with. This will support Australian businesses to better prevent financial crimes and result in higher quality reporting to AUSTRAC.

This aspect of the reforms is intended to lower regulatory costs and support industry compliance, while also addressing a number of inefficiencies throughout the AML/CTF regime.

The government will also be repealing the current Financial Transaction Reports Act 1988(FTR Act). When the AML/CTF Act was first introduced in 2006, parts of the FTR Act were repealed or became inoperative. However, other parts of the FTR Act continued to impose residual obligations on cash dealers and solicitors. This created two AML/CTF reporting regimes, which is inefficient and complicated. So, the FTR Act will be gone.

Digital and virtual asset services

These reforms will bring Australia's regime in line with current international standards by expanding the regulation of digital currency services so they are on a level playing field with the rest of the financial sector.

Amendments to the AML/CTF regime in 2017 were intended to be the first legislative step in improving Australia's regime, and expanded it to cover exchange services involving digital currencies such as bitcoin. These amendments made our regime world leading at the time, but we have since fallen behind global partners in recent years.

Currently, the AML/CTF regime only covers exchanges between virtual assets and fiat—or government backed—currencies by digital currency exchange providers. This will be expanded to also include exchanges between different forms of virtual assets, transfers on behalf of customers, administration of virtual assets, and related financial services.

Technological advancements over the past decade have made it harder to detect and track innovative and ever-evolving illicit transactions. These amendments will assist AUSTRAC to generate actionable financial intelligence on how criminal networks are using these services to manage the proceeds of their crimes—and how to stop them.

Updating value transfer regulation

The bill will also help close gaps in AUSTRAC's financial intelligence holdings, which can hinder law enforcement investigations. The bill will update the 'travel rule', which is a FATF requirement about payer and payee information that helps to ensure end-to-end transparency of who is making and receiving payments. Amendments will also reform international funds transfer instruction reports, which are a critical source of financial intelligence.

The bill will streamline value transfer services, which are currently unnecessarily complex and fail to cover the transfer of digital assets.

Enhancing AUSTRAC's regulatory powers

The bill makes a number of timely updates to AUSTRAC's regulatory and information-gathering powers to ensure AUSTRAC can effectively monitor, investigate and enforce compliance with the AML/CTF regime.

These amendments will bring AUSTRAC in line with other regulatory agencies that conduct large numbers of complex investigations.

The reforms are accompanied by safeguards and protections around AUSTRAC's use of these powers.

Consultation and partnership with industry

The Attorney-General's Department conducted two extensive rounds of public consultation with stakeholders between April 2023 and June 2024, with over 270 submissions received, and over 100 stakeholder meetings, including industry roundtables.

The AML/CTF regime is a partnership with industry at the frontline of prevention.

The government is committed to ensuring industry is supported to meet its obligations under the new AML/CTF regime.

We demonstrated our commitment to this task with over $160 million invested to implement these overdue reforms, including comprehensive education and guidance to support newly regulated businesses on the requirements of the act and accompanying AML/CTF rules.

AUSTRAC will commence engagement and consultation with industry on concepts and a draft of the AML/CTF rules in the coming months. This will ensure they are tailored and appropriate for different sectors, and will enable sufficient time for industry to transition to additional obligations.

Grey Listing

Critically, these reforms will bring Australia in line with the international standards for combatting money laundering and terrorism financing set by the Financial Action Task Force, or FATF, the global financial watchdog.

In 2015, the FATF found that Australia had failed to comply with a number of vital standards. They singled out Australia's failure to extend our AML/CTF regime to 'gatekeeper' or 'tranche-two' professions.

Australia was a founding member of FATF, yet today, we are one of only five jurisdictions that are non-compliant with the FATF standards on regulating 'gatekeeper' professions.

Without these reforms, Australia risks being seen by the global community as a jurisdiction with a weak AML/CTF system—or being 'grey listed'. A grey listing would have significant economic impacts for all Australians as the global financial sector and other regulated professions around the world would be required to treat Australia as a high-risk jurisdiction.

It would lead to increased costs for businesses, and damage to Australia's international reputation—and we can not let that happen.

Conclusion

Any further inaction on our AML/CTF regime will enable criminals to continue to exploit our systems and businesses—and launder the proceeds of their crime through the Australian economy.

These reforms are a critical and long overdue step in ensuring Australia's compliance with international standards, so that Australia does not become an international 'back door' for illicit funds.

We are acting now to prevent the criminal abuse of our economy—and the harm and suffering caused to our entire community.

You cannot put a price on the need to fight against terrorism and child abuse. We must do everything we can to protect Australia from the dangers of money laundering—and we are.

This is about protecting the interests of all Australians. It is about keeping us safe—and protecting the fair go.

We are taking up the fight against money laundering and terrorism financing in Australia—and it is about time.

I commend the bill to the House.

Debate adjourned.