Joe Ludwig (Queensland, Australian Labor Party, Manager of Opposition Business in the Senate) Share this | Link to this | Hansard source

I rise to speak on the Financial Transaction Reports Amendment Bill 2006. This bill is essentially a post facto attempt by the government to make up for the fact that it mucked-up the bill the first time around. Perhaps it is worth while going into the history of the government’s muck-up. This bill amends provisions introduced by the Anti-Terrorism Act (No. 2) 2005 which implement the special recommendations of the Financial Action Task Force in combating terrorism funding. The Financial Action Task Force, or FATF, is an intergovernmental body designed to develop and promote policies to combat international money laundering and terrorism financing. To that end, it has developed two different sets of recommendations. Firstly, there were 40 recommendations on anti money laundering. The latest update took place in 2003. In October 2001, following, of course, the September 11 attacks, there was another set of nine special recommendations specifically relating to financing of terrorist activity. So there were 40 more broad anti-money-laundering recommendations from FATF and a further nine dealing with the financing of terrorist activity.

In 2003, the Minister for Justice and Customs promised that Australia’s Financial Transaction Reports Act would be updated and brought into line with both the special and the general recommendations. Currently, it is more than three years and counting since that promise was made and still no bill has been brought to parliament. Last year we saw some small attempt by the government to bring Australia into line with world standards on this issue through the Anti-Terrorism Act (No. 2), which Labor supported. That bill, amongst other things, was designed to bring Australia up to speed with a number of recommendations from FATF, but it was a stopgap measure. The new provisions introduced by the bill were only interim. They were designed to provide a temporary fix while the government’s long-delayed revision of the Financial Transaction Reports Act was being drafted. Unfortunately, it is nearly a year later and there is still no end in sight for that particular piece of legislation.

In any case, the problem with the legislation was simply the utter lack of consultation, and we are seeing the problem being exacerbated again. During the course of the Senate Legal and Constitutional Legislation Committee’s inquiry into the bill, an inquiry that the government wanted to hold over a single day, we found out that the Attorney-General’s Department had not consulted with industry on the final text of the bill. Let us fast forward a few months, and industry has finally managed to convince the Howard government that the changes introduced in the antiterrorism bill that the government have allowed to come into force will devastate sections of it. Surprise! That is not scaremongering by the Labor Party. Let us turn to the explanatory memorandum if you think we are putting it out there. The EM says:

If the amendment to restrict the application of Division 3A of Part II of the FTR Act to ADIs—

that is, authorised deposit institutions—

is not made, then certain legitimate non-bank money remitters assert that they could be put out of business.

That is what they then put forward after they brought forward legislation and this fix to fix their fix.

Now we have come to a situation where the government was forced to go back and amend its sloppy legislation, which was only intended to be a bandaid solution in the first place. There is stopgap after stopgap. But that is not the end of it; we were surprised again. It caught me off guard completely when yesterday afternoon the Senate found there was another amendment to fix the problem in this bill as it appears before the Senate. We now have the government piling ad hoc solutions on top of each other as belatedly as yesterday. They then found that the original stopgap was not enough: there is another amendment to this bill to fix the first bandaid, and now we have a supplementary EM to fix this bill because it apparently did not fix the problem. I do not know how many fixes you need but the fix is on by this government.

Labor will support the legislation. We would have been happy with it if it had not been a bandaid solution and we would have been much happier to support it if the government had consulted on it, got it right and provided an outcome that suited industry, suited the fight against terrorist financing and ensured that the legislation was properly drafted. But we are not happy with it—let us make that plain. We will support the legislation because it is necessary. If we do not then, if the explanatory memorandum is to be believed, legitimate Australian businesses will be put out of business. That is not what the Labor Party stands for; it might be what the Howard government’s unintended consequences do, but they seem to be working pretty hard to try to fix it with bandaid solutions. However, we are not happy with this legislation because it is sloppy. It is a sloppy drafting by this government. It is not acceptable for the government to have the attitude that they can continually bring in poorly drafted legislation and then expect the private sector to do the checking for them, because that seems to be what has happened. The private sector foreshadowed, even after they had not been consulted, that there might be some problems with it. If the government had consulted the private sector in the first place, we may have been able to at least avoid some of this happening now.

But, again, it is important to note that the situation will finally be resolved when the government brings forth its long-awaited—three years and counting, by my reckoning—anti-money-laundering and counterterrorist financing laws to update the Financial Transaction Reports Act. Let us hope that that does not suffer the same fate and is bandaided when we find it in parliament. I can say it has been consulted on. Let us hope it does not suffer the same piecemeal attack.

Going to some of the background: this bill introduces a number of changes to the legislation. Basically, the bill does three things. It provides a new definition of ‘account’ for certain parts of the act. It provides a new definition of ‘customer information’ for parts of the act. It removes non-ADI—that is, authorised deposit institutions; basically banks—cash dealers from the operation of certain sections of the act. I will deal with each of these in turn.

Firstly, the bill alters the definition of ‘account’ under the act. The new definition of ‘account’ will apply only to division 3A of the act—that is, the division dealing with international funds transfer instructions. The changes to the definition of ‘account’ bring this section into line with that in the draft AML-CTF bill and were brought about due to concerns of industry. Bringing the definition of ‘account’ into line with the draft AML-CTF bill means the industry will only have to go through one rather than multiple system changes. Let us hope that that is still the case with the current round. Under the new section an account includes:

(a)

a credit card account; and

(b)

a loan account (other than a credit card account); and

(c)

an account of money held in the form of units in:

(i)

a cash management trust; or

(ii)

a trust of a kind prescribed by the regulations.

Labor supports these matters; they are needed by AUSTRAC, the government and financial institutions to ensure that they can conduct legitimate business under this legislation. It also properly addresses the area. However, a further point of contention has been raised by the Australian Bankers Association with the current definition and the inclusion of credit cards. This is because credit card account numbers are quite often used as stand-alone loans in a transaction and no signature is required if the credit card is being used to purchase something over the phone or the internet.

The Attorney-General’s Department has indicated that it will discuss the matter of credit card accounts further with the ABA. However, I think we really seriously have to ask ourselves why this was not done before the current bill was introduced. Are we going to be back here in another couple of months amending the legislation yet again because the Attorney-General’s Department has found another hole in its ad hoc, bandaid solution—as we found out only yesterday that it had? If the government had listened to industry, I suspect they would have remedied it a lot earlier than this, but be that as it may.

The next change that this bill makes is the alteration of the definition of ‘customer information’ to allow a greater latitude for the use of ID numbers attached to international funds transfer instructions. Currently, every time a bank sends an instruction for the transfer of funds to another institution overseas, a range of information must be included. The range of information that may be included was expanded substantially yesterday afternoon when the government brought forward its supplementary amendments—perhaps I could call them the bandaid to the bandaid solution. There is now a wide range of information that may be included, including the customer’s address, business number and date and location of birth. In any case, the proposed amendment will allow for much greater use of identification numbers rather than account numbers. Account numbers will now only be required to be included when the instruction relates to the transfer of money directly from a single account held by the customer. In other cases an identification number will suffice. This amendment is designed to simplify the transfer of IFTIs and provide a more practical option for financial institutions.

Turning to cash dealers, as per division 3A under the legislation as it stands—unless there is a late amendment: although it is not yet in force, a cash dealer is required to supply customer information alongside an international funds transfer instruction where the cash dealer who is not an ADI is acting on behalf of another person who is not an ADI. So, if I am a cash dealer and I am sending an international funds transfer instruction on behalf of another person who is not an ADI then I am obliged to include certain information to identify the customer—account numbers, names and addresses. This is a requirement of special recommendation VII of FATF. However, one of the main changes of this bill is to significantly restrict the application of this section. The bill will effectively remove non-ADI cash dealers from the operation of division 3A—that is, there will not be any requirement for those dealers to include customer information with any outgoing international funds transfer instructions. The stated reason for this is that it seemed impractical to require the IFTIs sent from one institution in one country to the same institution in another country to include originator information, because in effect this would require the institution to pass on the information to itself. That makes sense.

These changes are necessary to compensate for poor drafting and a lack of proper consultation in the first place. But we have no wish to see legitimate cash dealers put out of business through no fault of their own. The Howard government, in this instance, has brought shoddy legislation before parliament, amended its own act and has now brought in further amendments to amend it. I will take the opportunity in the committee stage to ask whether that was a matter that you consulted on in the supplementary EM as well. I am sure you will be able to arm yourself with a response during the second reading debate.

However, these changes cannot stand in the long term. If you have a situation where some cash dealers are subject to these requirements but others are not then you are essentially erecting a maginot line—a strong, impenetrable fortress that can easily be circumvented, that you can go around. As I noted above, the requirements for cash dealers to include customer information in the IFTIs are stated under the FTAF special recommendation VII and there are serious concerns that the bill before us would effectively step back, in terms of compliance, from those standards. That seems to be the case, although it is a little confusing. I am sure the department and the minister will be able to tell me whether I am right about that. It is only a temporary solution. The longer term solution of course will be with the AML-CTF bill when it hits parliament and is steered through.

The department has suggested that the current framework of the FTR Act is unsatisfactory for the proper implementation of this requirement and that the special recommendation VII obligations will be properly enacted when the final version of the AML-CTF bill is released. Perhaps the minister could advise when, and whether that will be in the first or second tranche. We have no date for when the second tranche of the AML-CTF bill will be brought forward. However, this still leaves this problem with the final version, which we have not seen as yet.

A further issue with the bill was identified by the Australian Bankers Association, the ABA, relating to its application to their hub-and-spoke system. As identified in submissions to the Senate inquiry, the ABA noted that a number of their member organisations operated via a system whereby payments sent by one institution to one of their offshore sites are routed through Australia. I bring this up at this point because, once again, the response of the Attorney-General’s Department was that it ‘would like to seek further input from the ABA before any amendments were made to the bill to clarify this situation’. But that was after they did not consult and after they brought the amendment forward. When the ABA appeared before the Senate committee—which the government said could sit for one day—the ABA said: ‘Now we’ve looked at it, there is a problem. Can you fix it?’ The government came back yesterday afternoon and the Senate was presented with amendments that in part deal with exactly the problem that the ABA brought up. Surely this is something that the government should have looked into before the bill was brought into the Senate—at least that way they could have made it a little tidier. My concern is that we will be back here again in a couple of months fixing yet another problem that has resurfaced in the legislation. Is it the case that, when this gets broad application, more problems will arise on the interim solution?

Once again, we will support this bill, because we feel that it is unfair to saddle the legitimate business community in Australia with the mistakes of the Howard government. They are mistakes by the Howard government. It is sloppy legislative drafting, and they know it. They have brought it in piecemeal. We deplore the ramshackle, ad hoc approach that passes for legislative drafting under this government. I will touch on that further in the committee stage.

The approach to this legislation by the government has been down a very troubled path. They have not followed what you would call a model of consultation to ensure they got it right. I will be moving amendments in the committee stage to ensure that the title of the bill more accurately reflects what is intended to be achieved—that is, to fix drafting errors which are present because of the government’s ineptitude and unwillingness to consult before bringing this legislation before the parliament. The government might understand and know these types of amendments because they are the ones who do it. I will move an amendment to rename the bill the Anti-Terrorism (Correction of Government Legislative Errors) Bill 2006. It is the title which most accurately reflects the intent of the legislation before us today. And perhaps I could add an addendum to that: a supplementary amendment that we got yesterday which amends the bill.

This is an arrogant government—it really is. When you look at how it has approached this legislation you will see that. It is an arrogant government which has failed again and again to get it right. It has failed to bring into parliament legislation which would make Australia compliant with the Financial Action Task Force 40 plus nine recommendations. The government’s ad hoc, bandaid solutions seem to only paper over the cracks in the legislation—which is now the subject of a further bandaid solution. They are piling bandaids on top of bandaids trying to fix the legislation—and it is only a short-term fix, in any event. We are still waiting for the major piece of legislation to come before parliament, and I suspect we will see that before the end of this year. It is not good government policy. It is government policy that has been made on the run. And it is government policy that is really moved by panic. I foreshadow that I will be moving that amendment.

It is a stopgap measure to plug another stopgap measure—that is all there is to say about this government’s approach to legislation and accountability. That is what it really is about. That is this government’s approach to legislation and accountability: ‘We’ll be sloppy about it. If we need to fix it, we’ll be driven to fix it. If you point out the error, if it suits us we’ll fix it and we will bring an amendment in here to do it.’ It seems to be the way they deal with legislation and the accountability that goes with it—and that is disappointing. But Labor will support this bill. (Time expired)

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

According to the explanatory memorandum, the purpose of the Financial Transaction Reports Amendment Bill 2006 is to ‘vary the amendments to the Financial Transaction Reports Act 1988 made by schedule 9 of the Anti-Terrorism Act (No. 2) 2005’. The amendments are to the new division 3A, which was inserted by schedule 9 of the ATA at part II of the FTRA. So the shadow minister is quite accurate that this is a bill designed to correct drafting errors and perhaps unintended consequences.

The proposed amendments include: an amendment to the definition of ‘account’ for the purposes of division 3A, clarification of the definition of the term ‘customer information’ in section 17FA of the FTRA, an amendment to the definition of ‘customer information’ for incoming international funds transfer instructions under section 17FB of the FTRA and an amendment to restrict the application of division 3A to authorised deposit-taking institutions only and not all cash dealers.

Australia’s anti-money-laundering program is encapsulated in the Financial Transaction Reports Act and places obligations on financial institutions and other financial intermediaries. Enacted in 1988, it is Australia’s primary anti-money-laundering legislation and was initially aimed at the financial, gambling and criminal sectors. It imposes obligations to report significant and suspicious transactions and international fund transfers, makes it an offence to open a bank account in a false name, and requires cash dealers to verify identities of cash holders or signatories.

It also requires reporting of certain transactions and transfers and creates record-keeping obligations. When division 3A comes into force in December this year it will require cash dealers in Australia to include required information about the ordering customer with an international funds transfer instruction when transmitting international funds transfer instructions out of Australia. It will be an offence not to include this information, which is reported to AUSTRAC, the Australian Transaction Reports and Analysis Centre, Australia’s anti-money-laundering regulator and specialist financial intelligence unit.

When the Financial Action Task Force, an intergovernmental body designed to establish international standards and develop and promote policies to combat money laundering and terrorist financing, conducted an evaluation of Australia’s anti-money-laundering and counterterrorism financing legislation, they noted that the estimated value of money-laundering offences in Australia amounts to between $2 billion and $3 billion per year—and I suspect that may be a conservative estimate. Although Australia has in place anti-money-laundering legislation, it does still continue to represent a major challenge and problem for law enforcement agencies.

Because the hard yards in this particular area of law had been done in the time of a Labor government, money laundering some years ago was considered a fringe issue by this coalition government. But in the wake of the September 11 events in the United States and, over the subsequent years, major terrorist attacks in other countries around the world including Spain and the United Kingdom, anti-money-laundering has moved very quickly up the ladder of geopolitical concern. That is because terrorism cannot operate at this high level of activity without very significant funds. Of course this new interest in anti-money-laundering will have useful effects on criminal and drug activity and the way in which the people involved in those activities move moneys around the world, and on tax evasion.

In recognition of all this, very soon after the United States September 11 events, the Financial Action Task Force expanded its mandate in October 2001 and issued eight special recommendations dealing with specific issues relating to terrorist financing. In October 2004 they published a ninth special recommendation. In conjunction with the nine special recommendations, the 40 recommendations have also been modified and there have been reviews over the years, the most recent being in 2003. According to their 2005-06 annual report, the Financial Action Task Force consider that the so-called 40 plus nine recommendations:

... form a comprehensive framework for governments to develop their domestic efforts against money laundering and terrorist financing.

I note with some approval the scathing comment by Senator Ludwig in his additional comments to the Senate report on this bill. He said at 1.4:

These measures themselves were brought forward from the Government’s long delay in bringing forward the anti-money laundering regime due to botched consultation with affected industries, and were themselves perhaps prompted by the Howard government’s failure to meet the international Financial Action Task Force mutual evaluation on anti-money laundering and counter-terrorism financing, in which the Government scored just 9 out of 40 on anti-money laundering, and 0 out of 9 on counter-terrorism financing.

That sort of criticism really does need to be noted and I, amongst others, have chivvied the government about their delays in getting on with these vital tasks. It is pointless sending our troops and making all the efforts we do around the world to assist in counterterrorism activity when we do not back that up with as much domestic law change as we can in this field concerning the financing or the potential financing of crime and of terrorism.

As a member nation of the Financial Action Task Force, Australia has worked towards maintaining the Financial Action Task Force standards, and has made some changes in response to the changing world in which we live including the introduction of the Suppression of the Financing of Terrorism Act in 2002. The Suppression of the Financing of Terrorism Act is aimed at restricting financial resources available to terrorist organisations and making the financing of terrorists a criminal offence as well as requiring cash dealers to report terrorist financing transactions—a very good intention that lies behind that act.

However, in an evaluation of Australia’s anti-money-laundering and counterterrorism financing laws by the Financial Action Task Force in 2005, it was reported that our system was falling behind the task force standards. The Financial Transaction Reports Amendment Bill 2006 is therefore part of the government’s long-coming response to international pressure to crack down on the potential for money laundering, particularly with respect to the financing of terrorism. I cannot see it simply as a bill designed to correct a drafting mistake; it is part of a continuing response.

According to the Parliamentary Library’s Bills Digest No. 64 on the Anti-Terrorism Bill (No. 2) 2005, the government is particularly concerned with rectifying the non-compliant status that the Financial Action Task Force deemed Australia to have in relation to special recommendation VII, which relates to wire transfer of funds. Whilst such legislation is of critical importance in an age where information exchange is taking place at increasingly rapid rates and through a plethora of national and international channels, such legislation also needs to be approached with care and concern for those ordinary, law-abiding citizens which it captures in its operation.

Although one may suggest that the bill currently under consideration is of a dry and somewhat technical nature, it still does impact upon an issue which is of central and increasing concern in the society in which we live: that of privacy. Privacy is a matter which has concerned this government in its 10 years of office and it is a matter which concerns our society. Privacy concerns were issues strongly highlighted by the Senate Legal and Constitutional Committee in their report on the exposure daft of the Anti-Money Laundering and Counter-Terrorism Financing Bill 2005. The anti-money-laundering and counterterrorism financing laws, of which the Financial Transaction Reports Act is a part, legislates mandatory reporting requirements in relation to people’s personal financial information.

Debate interrupted.