Philip Ruddock (Berowra, Liberal Party, Attorney-General) Share 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.

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