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

I rise to speak in the second reading debate on 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. The object of these bills is outlined in clause 3 and basically aims to bring Australia into lin with international compliance regarding measures to combat money laundering by criminals and the financing of terrorism. This bundle of regulatory action is known more generally as anti-money-laundering and counter-terrorist financing or, in short, AMLCTF.

The bills derive their impetus from the OECD’s financial action task force recommendations which consist of, in two parts, 40 recommendations on anti-money-laundering—these were first released in 1990 and have since been revised a number of times, the latest having occurred in 2003—and nine special recommendations on counter-terrorist financing. The bulk—that is, eight out of nine—of these were released immediately after the September 11 attacks in October 2001. The ninth was released in October 2004.

Clause 3 also lists a number of other international obligations and resolutions which I will not go into in detail. After much delay, the government is legislating to ensure Australia’s compliance with the FATF regime. However, it is still in two tranches. The first tranche is these bills currently before the parliament. They cover financial, gambling and bullion-dealing industries, in addition to lawyers and accountants, but only to the extent that they are in competition with the finance industry. The second tranche, which covers other activities of lawyers and accountants, as well as the jewellery and real estate industries, is yet to be released. The government has not yet announced a target date for completion of the second tranche.

The history of these bills is one of delays, failed consultations and subsequent international embarrassment. The Howard government is negligent in leaving Australia inadequately protected from criminals and terrorists who use our financial system to launder money. Only now, five years after 9-11, has it implemented the special recommendations, eight out of nine which were released in the aftermath of those horrendous attacks.

Let us make no bones about the importance of this legislation. It is needed to fight organised crime and terrorism. In September 2002, Senator Ellison, in a press release, made pointed reference to the fact:

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

That statement was made, as I said, in 2002, and the recommendations were released in 2003. It is now five years since the September 11 attacks, five years since the special recommendations were first released, three years since the revised general recommendations were released and three years since the new laws were promised. Yet we are only now seeing them in their final form—and only the first tranche of that, not finally completed.

It has been a botched consultation process. Just as Senator Ellison’s handling of the Customs cargo management re-engineering project was a lesson in how not to manage an IT project, his handling of the AML/CTF legislation has been a lesson in how not to manage the implementation of a complex new legislative regime such as this. The first serious problem was the botched consultation process undertaken through the 2004 and 2005 years. Industry was not fully consulted, or not consulted properly, about the proposed laws and the government has essentially attempted to jam everything through in a one-size-fits-all approach.

The minister attempted to persevere with this approach but, in mid-2005, faced the humiliating result of being rolled by cabinet after a concerted campaign by industry and told to go back to the drawing board and start again. By then we had, in 2005, a FATF report. It was an international humiliation. There were two reports which slammed our response on money laundering and terrorist financing.

Firstly, you had the release in May of that year of a report by the US State Department in which Australia had the dubious honour of being named as a ‘major money laundering country’ and a ‘country of primary concern’. This government’s status as a soft touch on money-laundering and terrorist financing was confirmed later in that year following an investigation and the release of a country report by the financial action task force, which found that Australia was fully compliant with only 12 of the 40 recommendations—and, even more alarmingly, was not fully compliant with a single one of the nine special recommendations relating to terrorist financing. Two years after Senator Ellison had promised the laws, Australia was given a big fat zero.

In the meantime, between the announcement of the laws and the current bill, the government has been forced to rush through a number of bandaid solutions to keep up the appearance of compliance with the recommendations. This has been, let me say, an excruciatingly painful process, when there was no need for it. It has been compounded by the government’s own errors as well.

The first of the bandaids contained in the Anti-Terrorism Act (No. 2) 2005 was passed last year in what can best be described as a slow panic in response to the FATF report. It implemented a number of the FATF recommendations but, before these even commenced, the government was forced to amend a number of these in a later act, the Financial Transaction Reports Amendment Act 2006. It was forced to introduce these amendments because, to quote directly from the explanatory memorandum:

If the amendment to restrict the application of Division 3A of Part 11 of the FTR Act to ADIs is not made, then certain legitimate non-bank money remitters assert that they could be put out of business.

That is the government in its own words admitting that its legislation was so poorly drafted that it would have put people out of business. It is quite extraordinary, and that is no surprise. The government, in answers to questions on notice from the Senate Legal and Constitutional Affairs inquiry into the Anti-Terrorism Bill (No.2) 2005, had admitted that it did not consult with industry on the final version of that act. So it was forced to continue piling bandaid upon bandaid onto its legislation.

The farce of the government’s poor drafting continued even after the legislation was tabled before parliament. We saw one explanatory memorandum released then withdrawn. We then saw another explanatory memorandum released. Finally, we have seen yet another round of amendments to the EM. All in all, there are over 500 changes to the original EM. Even at the 11th hour, the government are still fiddling with their legislation. I suspect they have not really stopped; they have just paused. My guess is they will be back next year, fiddling with it again. They do not even seem to be able to get the explanatory memorandum right. In addition, this is only the first tranche of the legislation. There are serious holes left in the regime which we are told will be fixed by further reforms.

Labor has called upon the government to release the timetable in which it expects to complete the further reforms. Until they are completed, and Australia is compliant with all of the recommendations in all areas, you have what is essentially a maginot line—that is, a set of scary and imposing set of defences which can easily be outflanked and circumvented by a determined enemy. That is what these crooks who launder money can be. While these are long overdue steps in the right direction, it cannot be emphasised enough that they are only part of what is required. Until Australia completes the second tranche, we will be left defenceless.

I will now turn to the Senate Standing Committee on Legal and Constitutional Affairs and the report into the bill that was completed. There were a range of areas covered and a range of recommendations which the committee made. I do not intend to examine all of those in detail, but some are worth highlighting. I will highlight those that appear to be the most salient and important points. Two areas which the Senate committee report touched on in detail were the issues of consultation and the implementation times for the legislation. That really underscores this whole exercise by the government. On consultation and implementation times, this government stuffs up all the time, in many bills that come before the Senate, particularly the bills in this area. This is another example of that.

For consultation, we saw industry repeating concerns similar to those which it had raised earlier—specifically, I am thinking of the Anti-Terrorism Act. In that case, industry’s concerns were later shown by the amendments to the Financial Transaction Reports Act to be quite valid. They were not properly consulted on the final text. In a similar vein, we saw lacklustre consultation during the early stages of the draft, which resulted in the unusual situation of a minister being rolled in cabinet and told to go back to the drawing board and start again. So consultation problems are not a new concern with this bill, and industry has every right to be wary of any perceived lack thereof. I note from the Senate report, however, that AUSTRAC and the department have taken some steps to allay these concerns. I continue to encourage that.

The implementation period was also of concern. While industry, as noted in the report, was generally happy with the implementation times, an important exception was the use of a staggered approach, particularly as the rules have not yet been finalised for most situations. The report indicates that small businesses and others not currently significantly regulated by the Financial Transaction Reports Act feel especially impacted by this. Certainty is what business needs in this area. I encourage the government to ensure that it can deliver certainty by ensuring that it meets those deadlines and finalises the rules so that business can have certainty and associations and industries can provide advice to their members.

In response, the department has indicated that it will have the rules available by 31 March next year. We can only wait and watch. The Labor Party will continue to monitor this, particularly given the minister’s track record of not giving industry sufficient time to implement required changes, such as was the case in the botched implementation of the Customs cargo management re-engineering project.

Finally, the last area of concern addressed in the report that I will mention—although there were others addressed in the report itself—is the range of sanctions which apply to the offences in the act. Simply put, a number of stakeholders believed these penalties were far too onerous for most of the offences, which were, they said, offences for crimes of omission rather than commission, and that lesser penalties, or other statutory powers for AUSTRAC, were more appropriate.

In its recommendations, the committee and the government backbenchers picked up a lot of the concerns which had been aired by stakeholders during the inquiry. Recommendations 1 to 3 took up the concerns of industry relating to the drafting of rules and other parts of the legislation, as I mentioned earlier, and recommended more consultation in future when AUSTRAC is making or amending rules. What I do not want to see is a Senate committee faced with an Attorney-General’s Department and the minister again saying, ‘We haven’t consulted in respect of this bill’. My recollection is that we have had it more than just once—more than was needed—in respect of this bill and other bills. If the minister can take one lesson from this it is that consultation can avoid a lot of harm and heartache.

Labor supports the other recommendations which call for the government to amend sections of the bill relating to low-risk, low-value solutions; periodic audits of AUSTRAC by the Privacy Commissioner; and to subject portions of the bill to state, territory and Commonwealth discrimination laws, amongst others. Labor supports these recommendations, and we urge the government to adopt them. These are changes which are supported by Labor and supported by the government’s own backbench. In addition, I will foreshadow at this point that I will be moving a range of amendments on behalf of Labor. We will be moving amendments to implement recommendations 4, 5 and 13 as well as additional recommendations that were not in the committee report.

But let me make this point clear: the Labor Party supports this bill. We will be moving amendments to improve it, but we fundamentally support it, as we support all reasonable legislation designed to protect Australia and fight terrorism and crime. Our concerns about this bill arise primarily from the fact that such an important piece of legislation has simply taken so long to reach parliament. Our concerns are about a minister who refused to consult and work with industry to achieve a decent outcome. It is imperative with this style of legislation, where it impacts upon business and requires business to put in systems and processes, that you consult with business about how best to effect it while still maintaining a hard line about what you need to fight terrorism and crime.

Senator Ellison has been a repeat offender at botching consultation with industry, as his efforts to implement the new Customs cargo system showed us at about this time last year. It is important legislation. It is high time it was brought before parliament. It is a black mark against the Howard government that it has taken so long to bring it forward. Along with the amendments that I will move in the committee stage, I commend the bill to the Senate.

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

The Anti-Money Laundering and Counter-Terrorism Financing Bill 2006 and related bill implement changes to Australia’s anti-money-laundering and counter-terrorism financing regulatory regime regarding identification, management and litigation of money laundering and terrorism financing. The bills introduce reporting obligations for the financial sector in relation to customer due diligence, reporting of certain matters, development and maintenance of money-laundering and counter-terrorism programs and record keeping. The changes are to be phased in over two years and incorporate a risk based approach to compliance. They also expand the regulatory role of AUSTRAC to provide advisory, monitoring and enforcement functions across a range of industry sectors. The bills provide for review of the operation of the provisions, regulations and money-laundering and counter-terrorism rules at the end of seven years.

These bills are the first tranche of the anti-money-laundering legislation to implement reforms which are proposed to cover the financial sector, gambling sector, bullion dealers, lawyers and accountants to the extent that they provide financial services. It imposes obligations on businesses, including customer due diligence, reporting, record keeping and developing and maintaining an anti-money-laundering program.

These bills have been a long time in coming because of slow, ongoing consultation with industry and stakeholders. Of specific concern to the Australian Democrats with respect to the exposure draft of the Anti-Money Laundering and Counter-Terrorism Financing Bill 2006 was the lack of appropriate balancing of matters of privacy, matters of security, issues relating to commercial needs and the competitive needs of the business community in international trade. However, as I have said in the past, a less than perfect anti-money-laundering regime is essential and much better than continuing with the present minimalist regime.

Australia must become truly serious about combating corruption and ensuring that criminals cannot live in luxury off the proceeds of their crimes. Recently, we have seen the fallout from corruption and bribery with the AWB scandal, and the Australian people will pay the price for that scandal, not just the wheat farmers of Australia. I will use the right language for a money-laundering bill. With AWB, ministers have washed their hands of any ministerial responsibility. Bribery, corruption, crime and money laundering are irrevocably intertwined, and any steps the government takes to counter that axis of evil will be for the better. This government has not shown itself too keen on implementing effective and wide-reaching domestic legislation against bribery, something which was negatively commented on by the OECD recently, and this failure will no doubt be reflected in whether or not successful prosecutions can be secured against AWB officials under the bribery of foreign officials legislation. It is arguable that stronger antibribery legislation would have allowed much stronger legal action against AWB officials caught in the scandal.

It has to be said that the main reason this government has finally set its mind to money-laundering legislation is international pressure to counter terrorism. It should be remembered that most money laundering has its origins in proceeds of tax evasion, crime and other ill-gotten gains and has been going on for decades. This reminds me of an article I read in the Age a couple of weeks ago about the actions of the Victorian police in attempting to trace the money trail of some of the more high-profile drug traffickers in Melbourne. Detective Superintendent Richard Grant is tracing the proceeds of the convicted drug dealer Tony Mokbel and is reported as saying:

It is no longer enough to just lock up some of these people. Many are prepared to risk long stints in jail if they know that on their release they can live million-dollar lifestyles.

This reminds me of those sleazy well-known Western Australian white collar business crooks of the eighties. There are a number now happily enjoying their criminal gains and some of them, unfortunately, are happily strolling down our beaches.

Detective Superintendent Grant also pointed out that organised crime groups use professionals to assist in concealing assets. Although he did not fully articulate it, professionals in that context means lawyers, accountants and brokers. Every successful crook has a professional or two in his pocket, going all the way back to Al Capone. As their past large-scale failure to put in tax returns shows, many lawyers are unfortunately not exactly model citizens. This legislation attempts to curtail the way that dirty money can be washed through a legitimate transaction. The ways in which such laundering can happen are manifold, from property transactions to gambling. Because of the variety of ways in which a corrupt individual can launder money, it is necessary for the legislation to be far-reaching. However, there should still be checks and balances to ensure that the legitimate right of people to privacy is not impacted too severely, that people are able to appeal decisions and that the parliament has some role in monitoring the effectiveness of the legislation in achieving its goals.

The Australian Democrats welcome this bill. There remain some concerns of industry which have not been addressed since the exposure draft and which were brought up in the truncated committee hearings into the bill. The Attorney-General’s Department and AUSTRAC have apparently worked hard with industry and stakeholders to address concerns and to change a prescriptive regime into a risk based scheme. These efforts have broadly met with approval.

There remain difficulties with the bill. Those difficulties were identified in the report of the Senate Standing Committee on Legal and Constitutional Affairs on the bill and should be addressed by the government through amendments. Certainly, both Senator Ludwig and I have amendments to address the recommendations of the committee. I draw the attention of the Senate in particular to recommendation 5, which recommends that the Office of the Privacy Commissioner conduct periodic audits of the compliance of AUSTRAC with privacy obligations in its administration of the bill. This oversight is essential.

However, the Democrats would go further and suggest that the recommendations of Minter Ellison and Privacy Victoria be considered as a further oversight mechanism. Minter Ellison suggested that AUSTRAC:

... should be subject to the scrutiny of and accountable to a Parliamentary Committee. We also believe that it should be required to consult with other regulators of the financial services industry (such as ASIC and the Australian Prudential Regulation Authority), in addition to the industry itself, when making Rules or modifications to ensure that the impact of its proposals are fully considered and understood and to limit any regulatory overlap.

The suggestion has great merit, as it was obvious between the exposure draft and this bill that many of the difficulties which were not foreseen by the drafters were pointed out by industry and have made this a better and more workable piece of legislation.

Privacy Victoria said:

... greater transparency and public accountability should be guaranteed. The Bill should specify the matters that will be examined, establish an independent review committee, compel public consultation, and provide for timely tabling of the review report.

In this regard, I support my committee colleagues from the Labor Party who, in their additional comments to the report, suggested that the Australian Commission for Law Enforcement Integrity, once it is established, would be an appropriate body to perform this oversight role. This suggestion has merit because it means that a separate and separately financed independent entity does not have to be created to perform the oversight role. On the other hand, a parliamentary committee could fulfil the task as well. Just as there is an ASIC oversight committee—namely, the Joint Committee on Corporations and Financial Services—it would be appropriate to have a similar parliamentary committee overseeing the work of AUSTRAC in relation to this. This legislation allows AUSTRAC a high level of discretion. Oversight is therefore extremely important, whatever form it takes.

It was also clear from the committee hearings that the transitioning period was of concern to a range of businesses. There is no doubt that aspects of the bill put a great deal of pressure on business to check their clients and what they are doing and report suspicious matters. However, business needs to have systems in place before that can be successfully achieved so that customers are not unnecessarily alienated, persons of certain races or ethnic groups are not unnecessarily subjected to increased scrutiny and business is not burdened with the role of detective.

In order to achieve that, the government needs to provide assistance to business and to educate the public about the impact of this legislation on some quite everyday transactions—in particular, on the requirements of customer identification. I have had some sympathy for the government, because it is very obvious that when you are trying to deal with money laundering issues you have to extend the reach so far that ordinary everyday transactions are going to be affected and people who are entirely innocent are going to be annoyed.

Large companies may be able to set in place the appropriate risk based systems required to detect and report on suspicious transactions, but smaller businesses such as suburban accountants or sole practitioners may find it more difficult. In that regard, the government needs to provide tangible assistance to small business, small business associations or professional associations with a small business basis to ensure that they are in a position to implement the changes that this bill requires, rather than telling them what it requires and, if they do not deliver, bringing action against them for not doing so.

Money laundering is an international problem and the remedy therefore must be an internationally coordinated approach. The United Kingdom and the United States have had legislation in place for several years to try to combat it. As many in the Senate know, I have been through an almost decade-long process of actively supporting and campaigning for standard international accounting standards so that there is a common system of reporting accounts all over the world. The same is true of this system: it is only effective if the standards which apply and the enforcement mechanisms that are used are similar internationally.

I have previously spoken about the Financial Action Task Force in relation to the Financial Transaction Reports Amendment Bill 2006, but those comments are relevant to this legislation as well. The FATF are an intergovernmental body designed to establish international standards and develop and promote policies to combat money laundering and terrorist financing. They conducted an evaluation of Australia’s anti-money-laundering and counter-terrorism financing legislation and wrongly estimated that the value of money laundering offences in Australia was between $2 billion and $3 billion a year. Well over a decade ago, the National Crime Commission estimated the value of drug dealing alone at over $2 billion. I have heard estimates of up to $11 billion as the annual value of laundered money in Australia, which would be about one per cent of our trillion dollar GDP. I think that higher figure is likely to be nearer the mark.

Money laundering was a matter high on the agenda of the previous Labor government, but its importance was lost on the Liberal-National government until after the September 11 attacks. It is now of greater concern, thank goodness. It is recognised that terrorism cannot operate at a high level of activity without a significant injection of funds. Of course, the Democrats strongly support antiterrorism bills like this which seek to restrict or stop the financing of terrorists. This new interest in anti-money-laundering will have useful effects mainly 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.

An evaluation of Australia’s anti-money-laundering and counter-terrorism financing laws by the financial action task force on money laundering in 2005 found that our system was falling behind the task force standards. These bills, along with the recently passed Financial Transaction Reports Amendment Bill 2006 are part of the government’s long-in-coming response to international pressure to crack down on the potential for money laundering, particularly with respect to the financing of terrorism.

These bills, like several before them, impact on an issue of central and increasing concern in our society—that of privacy. Privacy is a matter which has rightly concerned this government in its nearly 11 years in office, and it is a matter which concerns our society. Privacy concerns were issues strongly highlighted by the Senate Standing Committee on Legal and Constitutional Affairs in its report on the exposure draft of the Anti-Money Laundering and Counter-Terrorism Financing Bill 2005, and several submissions to the committee on these bills continued to voice concerns.

The Office of the Privacy Commissioner made submissions to the committee in relation to these concerns. The committee, recognising the importance of this matter to many people in an increasingly watched society, made a recommendation that the Office of Privacy Commissioner conduct privacy audits of AUSTRAC on a regular basis. The Australian Democrats will be moving amendments to reflect that recommendation.

As I pointed out in my speech, in relation to the Financial Transaction Reports Act a great deal of information is required to be collected by banks and all other institutions and professions covered by this legislation. It means that, to fulfil customer identification in compliance with the anti-money-laundering bills, a substantial amount of personal information will be collected. That being the case, the privacy protection measures in these bills should be of paramount importance.

We have already seen that some workers at the tax office think nothing of accessing the tax and financial information of well-known people without authorisation or reason, and this danger should be guarded against when this new regime is set in place. While there is a genuine need for anti-money-laundering and counter-terrorism financing laws, there is also serious need for an increased campaign of public awareness about what goes on in these respects. The government needs to provide the funding for such an education campaign and assistance to those bodies and businesses that will be charged with the collection of much of the information and the duty to report on suspicious transactions.

In all the various legislative responses that have been implemented in the post-September 11 world, it is important not to forget who these laws are meant to protect: the people of the strong democracy of Australia. Recognising the need for some things to change and that we do need a tighter regulatory environment is, of course, entirely acceptable and proper, but it must be done with a recognition and understanding of the consequences and results and how perfectly innocent people going about their business can be caught up in new bureaucratic systems.

I encourage the government in its efforts to implement a sound legislative framework which minimises money laundering, exposes the financing of terrorist and criminal activities and reduces the evasion of tax. However, it is also of fundamental importance that, in enacting such laws, the competing interests of the privacy of personal information be balanced against the need to outlaw and prohibit activities and actions which run contrary to a safe, civil and enduring society. The Australian Democrats support this bill overall, but we will be moving amendments to reflect the recommendations of the Senate Standing Committee on Legal and Constitutional Affairs to ensure the impact of the legislation is carefully monitored for its effects and consequences.

Kerry Nettle (NSW, Australian Greens) Share this | Link to this | Hansard source

Earlier this year, former Justice Ron Merkel was quoted in the Age as saying:

The move to granting ever-expanding coercive power to the executive arms of state and federal governments, to be exercised behind closed doors and without public scrutiny, carries with it grave risks to the democratic values we are trying to defend. ... One must have serious concern as to whether the political hierarchy is deserving of the kind of trust and integrity that the public are entitled to expect of them in administering that power.

The Howard government, the state governments and the federal Labor Party have cooperated to overturn fundamental human rights in the name of fighting terrorism. 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 represent another step down that path. They radically change the level and the sort of information that financial institutions must collect on their customers and the manner in which such information will be used by national security agencies and the police. Another way of describing what this legislation does is that it requires banks to spy on their customers for the government.

The Greens accept that some information collected by financial institutions should be made available to government agencies when it relates to criminal behaviour, including terrorism and money laundering. We have always been prepared to support sensible changes to the law to address the threat of terrorism. For example, we supported the government’s legislation which contributed to the strengthening of security at our airports. However, we do not support changes to the law that diminish or that remove the human rights of all Australian citizens, including the right to privacy and freedom from discrimination.

Joo-Cheong Tham from the law faculty of the University of Melbourne described the bill in this way:

While the bill aims to prevent terrorism, its measures are disproportionate and not subject to adequate safeguards. Its excessive character stems from overly broad ‘financing of terrorism’ offences. These offences criminalise conduct that has no link with violence or attempts to commit violence.

The breadth of these terrorism offences comes, in part, from the broad definition of terrorism which was put into Australian law by this government following the September 11 attacks in 2001. The Greens warned at that time that these changes to the law would begin a process of unravelling civil rights in this country, and that is exactly what we are seeing happen here.

Australia deported American peace activist Scott Parkin on the basis of a secret national security assessment by ASIO. Refugees have been detained on Nauru for five years because of secret security assessments by ASIO. In Australia we now have laws allowing for detention without charge or trial, including the detention of those not suspected of any crime but who merely may have information which ASIO wants. Australian law now permits indefinite house arrest based on speculation that somebody may be a terrorism risk. The Attorney-General has banned the Kurdistan Workers Party on the advice of ASIO.

Debate interrupted.