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

I rise to speak on the government’s amendments to the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2007, the AMLCTF Act. I think it might suit the convenience of the House if I formally move the second reading amendment standing in my name. 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, and a ninth recommendation thereafter;

(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 late last year;

(4)

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

(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; and

(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 including the embarrassment of having his Bill rejected out of hand twice by Cabinet;

(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 regime, 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)

notes that this bill is again aimed at fixing drafting errors in the principal Act, which was shunted through the Parliament without government accepting an amendment; and

(9)

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”.

Barry Haase (Kalgoorlie, Liberal Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Lindsay Tanner (Melbourne, Australian Labor Party, Shadow Minister for Finance) Share this | Link to this | Hansard source

I second the amendment.

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

Today’s bill amends the principal act. It represents another step in what has been a long and painful process that only last year resulted in the passage of the original act. In fact, it was barely four months ago that this House and this parliament debated the original act, and here we are now, at the start of this year, amending that legislation to pick up mistakes and errors and to make improvements that were raised with the government during last year’s debate. Once again, we see evidence of the government’s lax approach to this critical area of Australian security. Once again, the government tries to talk tough on protecting Australia, yet its actions let us all down.

Before I begin, I would like to make it clear that Labor supports this bill. In fact, it was Labor’s efforts in highlighting the delays to this process that shamed the government into action on the anti-money-laundering and counterterrorism financing front, and it was Labor’s support for business that ensured that we arrived at a workable model. I spoke at some length about those matters when the original bill was before the parliament at the end of last year.

However, here we are again, trying to correct the government’s legislative drafting errors in an act that is still largely to take effect. It should be pointed out that all of these amendments could have been dealt with last year when we were debating the bill that became the principal act. But the Howard government insisted on shunting the bill through the parliament without that bill being corrected. It is no wonder the Howard government has become the master of red tape. It is a government that operates at only two speeds: lethargy and panic. After the passage of this bill, the AMLCTF Act will accumulate another layer of unwieldy complexity. We will have an act, an amending act, a set of regulations and a set of rules.

The bill before us will introduce a range of technical amendments to the AMLCTF Act. The act itself was passed, finally, last year only after what will be remembered as one of the longest and most drawn-out legislative processes in parliamentary history. The impetus for the act was the recommendations of the Financial Action Task Force. That task force is essentially an international cross-government body which sets out international standards for financial security to fight money laundering and updates these from time to time. These are contained in the FATF’s 40 general recommendations. Since late 2001, the FATF has also developed another set of recommendations relating to counterterrorism financing. These were released in the wake of the September 11 attacks. So, all up, there are 40 general recommendations and nine special recommendations representing an international standard for financial security and the prevention of money laundering for terrorist financing.

Let me be perfectly clear about how important these recommendations and standards are. They are fundamental to a properly coordinated fight against international crime and terrorism. The Minister for Justice and Customs, Senator Chris Ellison, said as much in 2002, when he said:

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

Legislation to bring Australia into line with our international obligations was promised back in 2003. Here we are in 2007, still tidying it up. But, as I have already said in this parliament, this minister’s actions and those of the government have not matched their rhetoric. For years, the government dithered and refused to bring legislation before the parliament to bring Australia’s legislation into line with those international standards. The FATF provided the impetus; the government, sadly, provided the inertia.

In fact, in 2005 two international reports were released which slammed Australia’s tardy response. Firstly, the FATF country report found that under the Howard government Australia had met only 12 of the 40 general recommendations and not a single one of the nine special recommendations. That was in 2005, four years after the September 11 disaster, when every nation was put on notice; four years after the international treaty set down the provisions that all responsible nations should enact in order to restrict the funding of terrorist organisations. Perhaps more embarrassing was the United States Department of State report released in the same year, which was also scathing of Australia’s response. Australia was labelled by the United States Department of State as a major money-laundering country and a country of primary concern. In other words, the United States has labelled the Howard government as a soft touch on money laundering and terrorist financing. What an appalling record of incompetence, mismanagement and lethargy by the Howard government in dealing with critical issues associated with the security of Australians and the protection of all of us from the actions of terrorists and organised criminals.

The scathing international criticism of Australia did have one advantage because, combined with the pressure from Labor—and I have to commend my colleague Senator Joe Ludwig, who has had principal carriage of this matter and who I know fearlessly pursued this matter through that period—finally the Howard government became convinced that it needed to do something about reforms. But still the government’s response in late 2005 and throughout 2006 could best be described as a panic in slow motion. We saw the first raft of bandaid solutions contained in the Anti-Terrorism Act (No. 2) 2005. This introduced a few of the measures that were required to bring us closer to those international standards, but it is still not compliant.

The problem with this bandaid solution, though, was that the Attorney-General’s Department failed to consult properly with the affected industries. During the Senate Standing Committee on Legal and Constitutional Affairs inquiry it was revealed that the government had not shown the final draft to industry. In fact, the affected industries and government strongly disagreed on the critical question: the cost of the new arrangements. So here we had slow lethargy from the government and then, finally, action with the bill but, in the process, a complete failure to consult with those in industry who in fact had to make the system work. With little surprise, industry had a better estimate of the costs. Before the bandaid solutions contained in the Anti-Terrorism Act (No. 2) had even commenced, the government was forced to go back and revise them. It was forced to do this because, to quote directly from the explanatory memorandum to that act:

If the amendment to restrict the application of Division 3A of Part 11 of the FTR Act to ADIs—

that is, authorised deposit-taking institutions—

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

We need to understand what that says. This is the government’s own explanatory memorandum of their bill. They needed to make a change, because what they were going to do was put some Australian businesses out of business. That was the product of their incompetence and arrogance in failing to consult with industry. The government were forced to concede that their own legislation had been so poorly drafted that it would have put those businesses out of business altogether had their legislation come into force. This is the low standard of law-making to which the Howard government have declined. We finally saw the completed legislation at the end of last year but, even at the eleventh hour, the government were making last-minute alterations. Explanatory memorandas were written, withdrawn and new ones released.

Even after half a decade of delays, international criticism and bandaid solutions piled upon bandaid solutions, the legislation that was passed by parliament last year does not even contain the full complement of recommendations. The government is still to bring forward a second tranche of reforms to finally bring Australia into line with our international obligations. But, on past performances, none of us would want to hold our breath or hang by our thumbs waiting for the Howard government to bring that legislation forward.

Without the implementation of the full range of recommendations you have, at best, a Maginot line—that is, a wall of seemingly impregnable defences that might look threatening but can be circumnavigated with surprising ease. The legislation we have seen to date delivers only part of what is required.

I now turn to some of the detail in the bill before the House. This legislation continues the government’s piecemeal approach, where legislation is constructed in patchwork—one quick fix at a time. Before us today is the latest attempt by the government to patch up its money-laundering regime. The bill makes a number of changes, the most significant of which I will quickly address. Firstly, the main substantive amendment to the bill is to extend the operation of the AMLCTF Act to the Australian Security and Intelligence Service, or ASIS. It effectively gives ASIS the same access to AUSTRAC information as is currently held by ASIO. In Labor’s view, this is a sensible amendment which will give Australia’s chief foreign intelligence agency the same access to information as Australia’s chief domestic intelligence agency.

To Labor, there does not seem to be any reason not to extend the availability of AUSTRAC’s financial intelligence as proposed in the bill. Labor is in support of the general principle that our intelligence agencies should have the access they need, provided civil liberties are adequately protected. In this case, ASIS is governed by the Intelligence Services Act 2001, which provides for a range of safeguards and oversight mechanisms for ASIS.

Also, a range of technical amendments to the act are being brought in to improve its operation. For instance, the bill will clarify that signatories to a range of types of accounts, rather than simply the holder of the account—as provided for under the current legislation—fall under the aegis of the bill. Similarly, exemptions from certain obligations under the act are extended to merchant terminals. There appears to be a drafting error in the act because the term ‘merchant terminal’ is not defined, although from the explanatory memorandum we can glean that it is intended to refer to EFTPOS and like services, but it does not appear to be defined.

I ask the Attorney-General whether, in his summing-up, he could indicate whether ‘merchant terminal’ was intentionally meant to be read on the plain words, whether it could do with an actual definition, and whether the government has taken into account the possible impact of technology change in this area.

I wish to address the government’s response to a range of recommendations made by the Senate Standing Committee on Legal and Constitutional Affairs, which examined what is now the principal AMLCTF Act. The government has agreed to a number of the recommendations that have been made by the committee and, in some instances, has even gone further. Labor welcomes these improvements.

Unfortunately, there are a range of recommendations that were not picked up by the government but should have been. I foreshadow that Labor will, again, be moving amendments in the Senate to improve the AMLCTF Act. Firstly, I turn to recommendation 4 from the committee report. This recommendation stated that clause 6(7) be deleted from the bill. Briefly, that clause is a Henry VIII clause—a clause which allows regulations to alter the legislation. Clause 6(7) would allow the government to expand the range of products and services to which the act applied merely by regulation. In effect, the government would be able to expand this piece of legislation to include any financial service it wished. Indeed, that is precisely the government’s argument for its retention. Labor does not regard that as acceptable. If there is a need to alter the legislation then a bill should be brought before the parliament and the legislation should be altered in that way. The government, in its response, indicated that these provisions were necessary and gave a commitment that it would not use the power to expand the legislation to include services that were intended to be dealt with in the second tranche of the legislation. But this is beside the point. Whether or not the government intends to expand the operation of the legislation to include tranche 2 services, it still intends to retain the power to expand the legislation to any service it wishes by executive fiat and without adequate parliamentary oversight. Labor do not believe that this is acceptable, and we will be moving amendments in the Senate in line with the committee’s recommendations.

I spoke more extensively about that provision when the original bill was before the parliament at the end of last year. It is inappropriate, in this day and age, to have those sorts of powers to alter the legislation left to the executive arm of government; that is the purpose of the parliament. It is commonly referred to as a Henry VIII power for good reason; it is not something that is best practice for parliaments to adopt, and the government should see good sense and accept the committee’s recommendation on that matter.

The committee made the further recommendation, recommendation 5, that the AUSTRAC CEO be given the power to deregister or refuse registration to an organisation which is seeking registration as a designated remittance service. The government has rejected this with the reasoning that registration did not confer any status on designated remittance providers and existed solely to locate and identify remittance providers. Again, I believe this response from the government misses the point. Quite simply, if there is a repeat offender, then the CEO of AUSTRAC should have the power, as regulator, to refuse to allow it to operate as a designated remittance service provider or to deregister it. Again, Labor will be moving amendments in line with those committee recommendations when this bill is considered in the Senate.

Additional recommendation 1 in the committee report was a recommendation by Labor senators on the committee which went to the oversight of AUSTRAC by the Australian Commission for Law Enforcement Integrity—the ACLEI. At the moment there is no oversight by the Australian Commission for Law Enforcement Integrity because the government claims that it is not required at this stage. This is despite AUSTRAC’s new role as a regulator. Given that AUSTRAC, for the very first time, now holds powers both as a regulator and as a law enforcement intelligence collector, to leave it without effective oversight is not acceptable. So Labor will be calling on the government to rethink its position on this recommendation and will be moving amendments in the Senate to give the Australian Commission for Law Enforcement Integrity oversight of AUSTRAC.

To conclude, we are yet again correcting mistakes in important national security legislation. At some point you have to ask: when will the Howard government actually get it right? The Minister for Justice and Customs likes to talk about security as a work in progress, yet in a large part much of the progress seems to be fixing up the government’s own mistakes. Have no doubt, sloppy legislation is a threat to national security. We have already had parliament recalled to change the drafting of a single word. It is my hope that the Minister for Justice and Customs and the Attorney-General will manage to wake up to themselves and lift their performance. However, notwithstanding the concerns I have raised in this debate, and those raised by my Senate colleagues on the committee, Labor will support this bill as the amendments that are contained within it are appropriate and ones which we agree with. However, in addition, we will be moving amendments to improve the bill and the act. But, I repeat, we will support the bill.

I will turn very briefly to the amendment that has been circulated in my name, moved and seconded. A number of concerns that Labor has are detailed in that amendment. I quickly want to refer to a couple. Point 2 of the amendment:

... 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” ...

That should be an alarm siren to this government. This government is responsible for dragging the chain in fixing these important areas of law. We need to ensure that terrorist financing is restricted and cut off as much as possible. We certainly should not see Australia branded as an easy touch for terrorists to launder money in, as has been the case as recently as two years ago. These bills go some way to fixing that problem, but, as has already been commented, they fail to close the loopholes completely.

We also note in the amendment that, in the interval between indicating an intention to produce the legislation and tabling the legislation, the government, either through collaboration with the Australian Wheat Board or through the grossest of incompetence, enabled the Wheat Board to fleece the UN of some $300 million in funds and to channel them to the evil Iraqi dictator, Saddam Hussein. In March 2005 we saw the US state department release a report from the Bureau of International Narcotics and Law Enforcement Affairs naming Australia as a major money-laundering country.

Again, in April 2005, the minister created a new anti-money-laundering task force but incredibly left off AUSTRAC, the nation’s prime anti-money-laundering agency. The second reading amendment also notes that important antiterrorism legislation was drafted incorrectly and the parliament had to be recalled at substantial expense to fix sloppily drafted legislation by changing a single word. I note that the government decided to announce that there had to be a special sitting of the parliament and that one word had to be changed on the day that their extremely controversial and draconian industrial relations laws were introduced into the parliament. Some commentators could have been forgiven for thinking that the timing of that event might have been more than coincidental and that the government were looking for a good story to replace the industrial relations legislation that they were introducing.

The second reading amendment also notes that the Anti-Terrorism Bill (No. 2) 2005 was drafted incorrectly and had to be amended to avoid significant hardship to Australian business. In October 2005, the FATF reported on Australia’s compliance and found that the government had failed to meet the FATF standards, scoring just 12 out of 40 on anti-money laundering, and zero out of nine on counterterrorism financing. This is not a proud record of achievement and performance. It stands in stark contrast with the political spin the Howard government likes to apply to matters of national security.

The simple fact is that this government and many of its ministers, time and again, wish to wrap themselves in the flag, stand beside the men and women of our defence forces and spin a story of political activity in national security, when the truth is wildly different—when their performance in legislating to meet internationally agreed standards ranks us amongst the worst in the world and when we saw ourselves in 2005 listed by the United States as one of those countries that fails to meet the anti-money-laundering requirements agreed to internationally. The Howard government does not have an impressive record in this area.

This bill is an improvement. In 2007 we are amending a piece of legislation that was put through this parliament, I think, in October 2006, dealing with matters that were agreed to in 2002. Indeed in 2002 the government said it was going to do something about this, and here we are five years later still putting bandaids on the bandaids. The government needs to improve its performance in this area. It should spend a bit more time working on practical solutions rather than the political spin that it has sought to play out in national security matters, particularly over the last six years since September 11 2001.

Danna Vale (Hughes, Liberal Party) Share this | Link to this | Hansard source

I appreciate the opportunity to speak on the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2007. This bill makes technical amendments to the legislation affected by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. Besides addressing technical issues, the bill takes into account concerns raised by reports from the Senate Standing Committee on Legal and Constitutional Affairs and the Senate Standing Committee for the Scrutiny of Bills.

In general terms, money laundering is most often described as the turning of dirty money into clean money. To put it plainly, the act of conversion and concealment is considered crucial to the laundering process. Perhaps the simplest definition is that money laundering is the process of converting cash or other property which is derived from criminal activity to give it the appearance of having been obtained from a legitimate source. Successful money laundering enables criminals to remove or distance themselves from the criminal activity generating the profits, thus making it more difficult to prosecute key organisers. It allows them to distance profits from the criminal activity to prevent them being confiscated if the criminal is caught, it allows them to enjoy the benefits of the profits without drawing attention to themselves and it allows them to reinvest the profits in future criminal activity or in legitimate businesses.

Accurately estimating the amount of money laundering that is occurring worldwide has proven to be problematic, largely because it is, by definition, a concealed activity. Money laundering would certainly seem to be a significant problem, amounting to at least hundreds of billions of dollars a year. The IMF has estimated it to be between two and five per cent of global GDP per year. Part of those funds would be adding to an international stock of illicit cash and assets purchased with proceeds of crime, thereby increasing the strength of a number of transnational organised crime groups. It can also be understood that global money laundering now presents not only a problem for criminal justice systems but also a macroeconomic problem because it has the capacity to destabilise the financial institutions and financial systems of national governments.

The reason to implement anti-money-laundering measures is to stop criminals achieving the benefits of their unlawful activity. But the consequences of money laundering found at a macroeconomic level arise due to the absolute size of criminal proceeds entering the financial system each year and the even greater mass of accumulated funds and assets. These negative consequences are a feature of the money itself and thus are relevant to any jurisdiction in which these funds move. A large-scale money-laundering operation involving one or more of the jurisdiction’s financial institutions could, once detected, put at risk a smaller nation’s entire financial system through the loss of credibility and investor confidence. Even the potential for financial institutions to be used by money launderers can greatly damage a jurisdiction’s financial reputation and the institutions themselves.

A 1996 paper by the International Monetary Fund on the macroeconomic implications of money laundering reported that the level of money laundering is highly significant in determining currency and money balances and may have a noticeable influence on economic growth rates. It canvassed available empirical estimates to identify macroeconomic consequences of money laundering, which included: policy mistakes due to measurement errors in macroeconomic statistics arising from money laundering; the volatility in exchange and interest rates due to unanticipated cross-border transfers of funds; and the development of an unstable liability base and unsound asset structures of individual financial institutions or groups of such institutions, creating risks of systemic crisis and hence monetary instability. Other consequences included the effects on tax collection and public expenditure allocation due to misreporting and underreporting of income, the misallocation of resources due to distortions in relative asset and commodity prices arising from money-laundering activities, and the contamination effects on legal transactions due to the perceived possibility of being associated with crime.

Until the mid-1980s, no jurisdiction had in place legislation specifically to address the crime of money laundering. In most jurisdictions today, money laundering and terrorist financing are seen as issues for financial markets as well as criminal justice systems, raising questions about governance, anticorruption measures, reputation and financial stability. To move forward, many jurisdictions now involve central banks, finance and justice ministries and law enforcement agencies in their strategies to address the issues.

The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 is Australia’s main legislation with regard to money laundering and terrorism financing. The purpose of the act is to combat money laundering and the financing of terrorism by ensuring Australia has a financial sector which is hostile to criminal activity and terrorism. The act encompasses reforms which cover the financial sector, the gambling sector and bullion dealers, as well as lawyers and accountants.

The main government agency responsible is the Australian Transaction Reports and Analysis Centre, otherwise known as AUSTRAC. It is Australia’s anti-money-laundering regulator and specialist financial intelligence unit, originally established under the Financial Transaction Reports Act 1988, and it continues now in existence with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 is one of a range of reforms the federal government is currently implementing which are designed to improve and strengthen Australia’s anti-money-laundering and counterterrorism-financing system in line with international standards issued by the Financial Action Task Force on money laundering, of which Australia is a member. Since its creation, the Financial Action Task Force has spearheaded the effort to adopt and implement measures designed to counter the use of the financial system by criminals. It established a series of recommendations in 1990, revised in 1996 and in 2003, to ensure that the measures remain up to date and relevant to the evolving threat of money laundering and set out the basic framework for anti-money-laundering efforts which are intended to be of universal application.

In response to mounting concern over money laundering, the Financial Action Task Force on money laundering was established by the G7 summit that was held in Paris in 1989. Recognising the threat posed to the banking system and to international financial institutions, the G7 heads of state or government and the President of the European Commission convened the task force from the G7 member states, the European Commission and eight other countries. The task force was given the responsibility of examining money-laundering techniques and trends, reviewing the action that had already been taken at a national or international level and setting out the measures that still needed to be taken to combat money laundering. In April 1990, less than one year after its creation, the task force issued a report containing a set of 40 recommendations which provide a comprehensive plan of action needed to fight money laundering.

The task force has continued to examine the methods used to launder criminal proceeds and has completed two rounds of mutual evaluations of its member countries and jurisdictions. A third round of mutual evaluations has commenced. The task force has also updated the 40 recommendations to reflect the changes which have occurred in money-laundering activities and has sought to encourage other countries around the world to adopt anti-money-laundering measures. This includes the development of standards in the fight against terrorist financing.

Australia was also one of the founding members of the Asia-Pacific Group for Money Laundering, the APG, and is currently one of the co-chairs. The establishment of the APG in February 1997 was a regional response to the global threat of money laundering. Australia has undergone a joint Financial Action Task Force and APG mutual evaluation as part of the APG’s second round of evaluations. It is now time for Australia to continue its leadership and help in the fight against money laundering and terrorist financing.

In looking at this bill, we see that the consultation process raised technical issues that have now been addressed, including the provision that reporting entities will gain additional rights to seek review of decisions made by the AUSTRAC CEO under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. This includes a right to a merits review by the Administrative Appeals Tribunal of decisions by the AUSTRAC CEO to appoint an external auditor to carry out a risk management audit under section 161 and of decisions by the AUSTRAC CEO to give a remedial direction under section 191.

In addition, the Administrative Decisions (Judicial Review) Act 1977 will be amended to remove the general exemption given to decisions under the Anti-Money Laundering and Counter-Terrorism Financing Act from review under the Administrative Decisions (Judicial Review) Act and replace it with an exemption, limited to decisions by the AUSTRAC CEO, to apply to the Federal Court for a civil penalty under section 176 and the granting of an exemption from, or declaring a modification to, a requirement of the act under section 248. This amendment will ensure greater accountability for decisions by the AUSTRAC CEO under the Anti-Money Laundering and Counter-Terrorism Financing Act itself.

The bill also provides that the Australian Secret Intelligence Service, ASIS, is to be made a designated agency, thereby granting ASIS officials access to AUSTRAC information to ensure that financial intelligence is available to counter the financing of terrorism. This brings ASIS into line with ASIO, which is also a designated agency. Other amendments covering the secrecy and access provisions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 will ensure that designated national security and intelligence agencies can fulfil their functions under their enabling legislation.

Other minor amendments to the Commonwealth Electoral Act 1918 will ensure that a person who has an arrangement with a reporting entity to verify customer identity under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 will have access to the electoral roll equivalent to that which is currently provided for the purposes of the Financial Transaction Reports Act 1988. Additional minor technical amendments will also be made to the Surveillance Devices Act 2004, the Inspector-General of Intelligence and Security Act 1986 and the Financial Transaction Reports Act 1988.

Australia has a developed anti-money-laundering and antiterrorism-financing system. We are one of the founding members of the APG and currently hold one of the two co-chairs. Australia is also a member of the Financial Action Task Force. Australia has ratified the United Nations Vienna and Palermo conventions. We have also established a financial intelligence unit, AUSTRAC. It is vital that we continue to show leadership in the fight against money laundering and terrorist financing. We now live in a world where this is important not only for the global economy but for global security as well. I commend this bill to the House.

Michael Hatton (Blaxland, Australian Labor Party) Share this | Link to this | Hansard source

Parliament is a funny place, because the bills that come before us sometimes seem to be exactly what is before us. They are simple, clear and contain a series of minor technical amendments to a bill to bring it to completion as a result of a review that has been conducted in the Senate—another step in the process of tidying things up. One could even think that the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2007 might just have been in the Main Committee, because it would be relatively uncontroversial if it were just seeking to do those sorts of things.

The member for Hughes has dealt with the technical aspects that this bill covers, and has dealt with it at length. But it is my experience in this place and elsewhere that what you see is not always what you get. The reality with this bill is that we do not have just a number of minor amendments but a sorry tale of a government that has not applied itself to the minutiae of securing our national security through legislation that is effective in the anti-money-laundering and antiterrorist area.

We did have a government that took a world lead in this, with the Hawke-Keating government in 1988. It took the very first steps to set up AUSTRAC and to look at money being taken overseas. It set a limit of $10,000 that an individual could take with them. When you go overseas now, you have declaration forms. If you have any more than $A10,000 on you, you have to front up.

We know that there are people of evil intent and purpose who take no notice of that whatsoever and who do take large sums of money overseas in an attempt to launder that money so that they are not in a situation in which they have to pay tax here in Australia. They take it to various other places and try to get away with this so that they do not have to do what normal Australians have to do.

The two elements of this legislation that are addressed, money laundering and antiterrorism, are conjoined in terms of the national security situation. But it is also the case that, on a simple, practical level in terms of money laundering, the amendments in the bill we have before us now and in the other bills that we will also get—minor though they are—should have been made previously.

I have direct personal experience of dealing with the federal government’s agencies and responding to information that has come to my office from the public about people involved in money laundering in the millions of dollars—carting stuff off overseas, getting through what we think are the protections in the systems and doing that on a regular basis. We need the very best legislation and the very best process for the people who are involved in this, because, if people can get away with it, they will seek to do it.

What we have before us is a sorry tale of a government that really does not look at the nitty-gritty and the detail and has not acted with alacrity to fix these problems. The amendment that is before the House today is, I think, about the strongest I have seen from any opposition in regard to any matter. It goes to the very core of the long history of the Minister for Justice and Customs in regard to these money-laundering and antiterrorist matters.

You have to ask: what is happening here? Is there no recognition on the part of the minister that 11 September 2001 happened, that we needed to take direct steps to ensure that the money trail of terrorist organisations was sealed up and that Australia did that as quickly as we could? Looking at the history of it and the fact that it has been so long in getting here, it did not happen in that way.

With these bills there is another indication in terms of process with regard to the Minister for Justice and Customs. We dealt with these bills last November then we dealt with them again. We have had the Senate have a bit of a look at them. We have got a problem in that there has not been appropriate consulting with industry, and that is outlined in the amendment that the shadow minister has moved. There are three parliamentary digests on this covering various aspects of what should be minor technical implementation and so on. But, if you look at the time frame, you can see there is a fundamental problem.

I know the Attorney does his very best to get to the nitty-gritty of things and deal with things in detail. I know that through long experience in dealing with him not only when he was minister for immigration but since he has been Attorney, and that kind of diligence is necessary in the national security area—it is absolutely and fundamentally important. You cannot let things wobble along and hope that they might get fixed up.

Let us look at this process in terms of the response to September 11 and what has happened in regard to this bill and the strongest amendment I have seen. What is point No. 1? Labor notes that the Financial Action Task Force took swift action after September 11, adding eight special recommendations on counterterrorist financing to the 40 recommendations on anti-money laundering by October 2001 and a ninth recommendation thereafter—quick action. But in point No. 2 we note that, in the minister for justice Senator Ellison’s statement of 5 June 2002, he said that criminals and terrorists:

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

certainly a truism. You would expect quick action in relation to that statement. In point No. 3, we note that the government promised to meet the Financial Action Task Force standards in 2003. We also note the failure of the minister for justice to progress this legislation from that time until late last year; indeed, until November last year. We can do a Treasurer-like count and say, ‘2002, 2003, 2004, 2005, 2006; we are up to 2007.’ Why has the minister been so dilatory in regard to this, and why has he put the security of the nation at risk when it has been recommended by that financial task force that these were urgent matters? He recognised in 2002 that this was significant, as evidenced from his very own mouth: jurisdictions which did not take appropriate action would be seen as being ‘the weakest’. On the basis of that performance over those years, you can readily argue that Australia has been amongst those weakest jurisdictions in this regard. It is not good enough and it has to be fixed. This bill goes part way to doing that, and we know there are others in train which will seek to take it further.

There is a series of arguments that the shadow minister has put in the amendment, and they relate to a significant problem the government has got itself into over the Australian Wheat Board and the $300 million that went to Saddam Hussein’s government in the Iraqi wheat scandal. Because these bills have not been corrected in that period of time, there was a window of opportunity for that sorry saga to be carried out in full. It is not good enough, and the particulars go to this.

In March 2005, a US state department report released by the Bureau of International Narcotics and Law Enforcement Affairs named Australia as a major money-laundering country. I know that some of the United States government agencies may be quick at times to label other countries as being deficient in a significant area without taking a good look at themselves but, given the hurry-up call of September 11, for an agency of its importance to designate us as a major money-laundering country, you would think that by 2005 the hurry-up would have been there and that it would not have taken almost two years—about 20 months or so—until we got the bill into the House after that. The minister has not proven that he understands the depth of this problem.

The next few points are very significant. First, in April 2005, the minister created a new anti-money-laundering task force but, incredibly, left off AUSTRAC, the nation’s prime anti-money-laundering agency. Second, important antiterrorism legislation was drafted incorrectly, and the parliament had to be recalled at great expense to fix sloppily drafted antiterror legislation by changing one word. 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. Lastly, in October 2005, the Financial Action Task Force reported on Australia’s compliance and found that—and this is utterly astonishing—the government had failed to meet the FATF standards, scoring just 12 out of 40 on anti-money laundering, and zero out of nine on counterterrorism financing.

What is going on? This is a government that has prided itself from the very outset—using the National Commission of Audit to say that its only real function is to benchmark and audit, not to get into service delivery. Is this the end result of that: in an area that they say they are strong on, national security, to score zero out of nine on counterterrorism financing; 12 out of 40 on anti-money laundering?

What has the Minister for Justice and Customs been doing? What has the Treasurer of this country been doing about an overview of this area to ensure that our national security in terms of our financial systems and the arrangements in place is locked up tight and secure? That is a devastating assessment of the government’s performance, which is not examined closely enough. I cannot think of a single instance in my time here or throughout the Hawke-Keating government period where the government received this kind of report card in an area of such significance. It is a fundamental failing. As the Attorney-General knows, and as I know, there can be significant problems in drafting legislation, and legislation may have to be revisited to address issues you did not see at the time. Indeed, there may be problems in getting people with the right skills to put the legislation together.

There may be some members or senators who have the background experience to draft the legislation competently, but it is a highly technical job and we have to ensure that it is done well. However, overarching this is the fact that this minister and his department have a hell of a lot to answer for, not just to the parliament but to the people of Australia—and not just about the money laundering but about the antiterror connection. We were promised by the government that we would have absolute certainty—as much as is humanly possible—that Australia would be secure. We have made complaint after complaint, and we have argued that the government has not driven hard enough on airports, seaports and a series of arrangements. Here is yet another example of the government’s poor response.

As I said at the start, I have not seen a stronger amendment than Labor’s, and it should underline the depth of concern not just of the shadow minister but of every single member of this parliament and every single member of the Australian population. It should be part of a reckoning, come the end of this year, on this government’s performance. The government is wonderful at self-projection, self-promotion and marketing, but the reality that we see here in this bill utterly belies that. It is something to keep a note of as we run through the rest of the year.

When you look at the shadow minister’s core assessment, people might think it is counterintuitive. However, I think it goes to the core of the issue. Item (7) of Labor’s amendment notes:

... that the present regime, 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 ...

The drafting stuff still has to be fixed. We know there are a series of other reforms to come. That might seem counterintuitive in terms of the way in which the government promotes itself, but we have had five years of soft and weak legislation on terrorist financing. Who is going to back that up? The US state department’s report by the bureau of international narcotics and law enforcement said that we are a major money-laundering country. I did not think we were in the realm of South American republics—those comparisons might have been made some time gone in respect of our collapse in the terms of trade. We need to fix this, and we need to fix it in terms of how we are seen.

I know the Minister for Justice and Customs is responsible for it, and the Attorney-General, of course, is the responsible minister in this House. With these revelations, the sorry five years of weakness and indeterminacy, it is important that the Attorney acts quickly within the cabinet to get the government to get onto this matter.

So where are we with this? We are in a situation where, in an area where we are particularly vulnerable in terms of money laundering, if we get that reputation badged on us by the US, it affects the way they see us, the way they deal with us and the way our agencies interact, and, in dealing with other governments, the whole antiterror network is based on governments working together in order to solve international problems where we are threatened by terrorist organisations.

Some of the key weapons in the battle of getting al-Qaeda, Jemaah Islamiah and those sorts of organisations are anti-money-laundering and antiterror provisions—following the money trail and trying to stop their easily and readily funded operations worldwide, whether it is in Yemen, the Sudan, in Indonesia, Australia,  Britain, the United States or wherever. We have to choke off their ability to move funds easily and quickly. We have not been doing our job. We have not been doing our part of that process adequately, because the government has not focused on it—or at least one minister has not, and that is why the shadow minister has condemned Senator Ellison and his department for what we see here before us today.

I trust that this is a big enough wake-up call for the government. We dealt with it in November, we had a Senate review and we have a clear and present danger this year with APEC. We have already had initial meetings in Perth. There will be a cavalcade of cars and meetings Australia-wide throughout the rest of the year. We will have a month-long process of ministerial meetings and departmental meetings prior to 8 and 9 September, when the leaders will meet in Sydney. The focus on Australia will be immense, with 35-plus regional leaders visiting from around the Asia-Pacific. The potential for a terrorist incident here is extraordinarily high. What is the government doing about money laundering and antiterrorism? What is it doing about cohering this whole Asia-Pacific region in order to cut off the sources of funds to terrorists and to help to solve that fundamental problem?

This sorry tale of the past five years should not continue for one minute beyond this. The government should really concentrate on what it was elected to do, not electioneering but governing in the interest of all Australians and governing to ensure that our national security is not weak and soft—as the process has been with regard to this legislation—but strong, robust, certain and definite and that we really are secured rather than imperilled by what this government is doing. I will leave it to the Attorney in his summing up and also to the Attorney in practice to take this matter forward as efficiently and diligently as possible. (Time expired)

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

I thank the members for Brisbane, Hughes and Blaxland for their contributions to this debate on the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2007. Of course, an important element for success in the fight against money laundering and the financing of terrorism is a collaborative approach between government and business. We have been very consultative in relation to these measures, and for very good reasons. Throughout that process we have been able to fortify the Australian financial sector against money laundering and also against those who would seek to use the Australian financial sector to fund terror. The financial sector is to be commended on its commitment to this important role.

I note the observations that have been made in the amendment that was moved today. I was looking to find the amendment that was moved on the last occasion that we discussed anti-money laundering and counterterrorism financing. I suspect, from my recollection—I was not able to find that second reading amendment—that, rather than pushing the government to deal with the issues of counterterrorist financing, the emphasis was, in fact, on the need for consultation. When I looked back through the speeches that were made, that was the emphasis that was being put. It is a question of getting the balance right on these matters. The Labor Party is quick to seek Senate standing committee scrutiny of bills. That takes time too. In asking to have a look at these matters, the Labor Party does not say, ‘We’re part of the problem, in causing delay and providing for consultation and leaving unaddressed the recommendations of FATF.’ You cannot have your cake and eat it too in relation to these matters.

We thought it was important to consult. We think it is important to have industry on side in implementing very important measures that deal with money laundering and terrorism financing, but we need to do it in a way that ensures that our financial sector is still able to operate effectively. It is a question of getting the balance right. I would not apologise for being involved in discussions. I know the financial institutions want us to be FATF compliant. It has been said in all my discussions with people about these issues that we do not want Australian financial institutions to be seen as a weak read in addressing these fundamental issues but we also do not want to see them hampered when these same issues are discussed in other jurisdictions. And it has been discussed in the United States and in Britain as to how they deal with these same questions of remaining FATF compliant but still having an effective financial industry.

I am not going to deal with the posturing. When you get AWB run into an amendment of this sort, you know that people are posturing. We obviously oppose the amendment. While I am dealing with matters of form, there were some minor corrections to the explanatory memorandum, and I table a paper dealing with those issues.

I will comment on compliance with the nine special recommendations of FATF. FATF found that Australia was largely compliant with five of the nine special recommendations and partially compliant with three of the special recommendations. The new legislation will significantly improve the way in which we deal with our obligations. With the passage of the AMLCTF Act there were only two outstanding FATF recommendations that were not addressed in their entirety. They were recommendations 12 and 16, which dealt with designated non-financial businesses and professions.

If the Labor Party is saying that we ought to have a comprehensive scheme dealing with the professions—dealing with jewellers, dealing with solicitors, dealing with accountants—and we ought to roll over them without consultation, so be it. But our view was that there needed to be continuing consultation on the second tranche. It commenced in 2004 and it will continue. We will be addressing these matters under a second tranche of AMLCTF reforms.

Issues were raised in relation to the Senate committee recommendations. In the debate in the Senate, the Minister for Justice and Customs provided details of the government’s response to all of the Senate committee recommendations. Since the passage of the act, there has been no further information provided or concerns raised by industry about the government’s approach on these recommendations. Section 251 of the AMLCTF Act requires that the operation of the act be reviewed. This review will be required to be conducted with seven years of royal assent. This seven-year period takes into account the fact that the obligations will not come fully into effect until two years after royal assent. All of the issues raised by the Senate committee can be considered in the review in the context of appropriate operational experience.

The member for Brisbane asked about the term ‘merchant terminal’ and suggested that the term needed to be defined and asked me to deal with that. The advice that we have from the Office of Parliamentary Counsel is that the terms used in the legislation have their ordinary meaning unless otherwise extended or altered by definition. In other words, there was no need to define every single term in the legislation. The term ‘merchant terminal’ will have its ordinary meaning and it will encompass any change in the industry and in the technology used by financial institutions for the purposes of recording and transmitting this information.

A point has been made in this discussion that AUSTRAC was not included in the money laundering task force. The fact is that the task force was set up for the purpose of advising the government and AUSTRAC. In that context, our view is that, in reporting to AUSTRAC, the groups were more appropriate and that it was not necessary for AUSTRAC itself to be included as part of the task force.

The government has been asked why it has taken three years to finalise the bill and introduce it into parliament and whether Australia was left inadequately protected. Our view is that the government moved with appropriate speed to introduce comprehensive, well thought out legislation. It was as a result of extensive consultations that the legislation was presented in its final form.

I think the extent and detail of the consultation process has been widely acknowledged and applauded by affected businesses. IFSA commented that the efforts of the Attorney-General’s Department, along with those of AUSTRAC, had been noteworthy and that the two bodies had worked in a genuine partnership with industry to better understand and resolve important issues. IFSA said that they believed the legislation benefited immensely from the consultative process. The Australian Bankers Association commented that there had been a substantial amount of consultation and that enormous work had been done on both sides to achieve the result that we have. The Securities and Derivatives Industry Association commented:

We also believe that AUSTRAC and the Attorney-General’s Department have worked extremely well with industries affected ...

As a result of this consultation, Australia today has an act which strikes an important balance between the government’s law enforcement and national security objectives and business day-to-day operational reality. The time spent on achieving this balance and limiting the burden on Australian business has been well spent.

It has been claimed that Australia has been a major money-laundering country. The United States international narcotics control strategy report, which is released annually, said that this was so. The report evaluates whether or not a country is a major money-laundering country based on its economy and the complexity of its financial system. It assesses the level of risk of money laundering rather than the effectiveness of the country’s response to that risk. The report identifies countries with large and complex flows of funds as being more vulnerable to money laundering. The 2005 report named Australia, the United States, the United Kingdom and Canada as countries of primary concern, despite their having comprehensive money-laundering laws and conducting aggressive anti-money-laundering law enforcement activities.

The bill deals with technical amendments—matters that have been foreshadowed—and has been the subject of very extensive consultation. While the legislation ensures Australia’s interests in making sure that money laundering and terrorism financing are dealt with and combated effectively, the form it takes will not leave our financial institutions significantly impaired. Getting the balance right in relation to those matters was important. I might say to my colleagues opposite, the member for Brisbane and the member for Barton, that my colleague in another place Senator Ellison has acquitted himself extraordinarily well in terms of what has been a very complex issue and one that has been very demanding in time and effort. Achieving the right balance was the proper approach to take. I commend the bill and hope that it will have a speedy passage.

Alex Somlyay (Fairfax, Liberal 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.