George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

AUSTRAC oversees the compliance of Australian businesses defined as 'reporting entities' under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and the Financial Transaction Reports Act 1988. The legislation requires reporting entities to implement programs for identifying and monitoring customers and for managing the risks of money laundering and terrorism financing; report suspicious matters, threshold transactions and international funds transfer instructions; and submit an annual compliance report.

In its intelligence role, AUSTRAC provides financial information to state, territory and Australian law enforcement, security and revenue agencies and certain international counterpart agencies. The Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy Bill 2011 seeks to: (1) give effect to the 2010-11 budget announcement that AUSTRAC would recover the costs of its supervisory activities from 1 July 2011; (2) allow the minister for justice to determine by legislative instrument the amount of levy payable by a leviable entity in any given financial year; (3) provide for the collection of the levy imposed by the levy bill and related administrative matters, such as issuing notice of assessments and late payment penalties; (4) provide the AUSTRAC CEO with the power to waive part or whole of the levy or late payment penalty; and (5) amend the Anti-Money Laundering/Counter-Terrorism Financing Act to make it mandatory for reporting entities to enrol with AUSTRAC within 28 days of providing or commencing to provide a designated service.

The Senate Legal and Constitutional Affairs Committee conducted and inquiry into the bills and reported yesterday. I note that my colleague Senator Guy Barnett, the ranking Liberal senator on the committee, is in the chamber, and I expect that he will have a word to say on this matter in a moment. Liberal senators, under the able leadership of Senator Guy Barnett, noted the concerns raised by the Scrutiny of Bills Committee in its Alert Digest No. 5 of 2011. In that digest, the scrutiny committee drew attention to the potential for AUSTRAC to overcollect its regulatory costs. The coalition considers that this situation should be closely monitored. Liberal senators take the view that the current safeguard that has been proposed by the government of reviewing the calculation methodology after five years is inadequate because a five-year review period is too long—at least in the initial stages of the new scheme.

Liberal senators note that the first year in which the levy will be collected is the 2011-12 financial year. Given that the bills are therefore due to commence on 1 July 2011, the Liberal senators were concerned to ensure that adequate consultation and education has preceded the measure. This is what concerns the coalition: the rushed process and lack of proper consultation behind the introduction of these bills, particularly where there is additional red tape and expense for business as a result of them. That is a matter for which we hold the government responsible.

The committee heard concerns that the levy will place Australia and its financial institutions at a substantial competitive disadvantage. Citigroup's submission to the committee complained:

The levy will have unintended consequences in relation to Australia's ability to compete in the Asia-Pacific region given the additional significant costs that the levy will impose on Australian financial institutions. We recommend that the composition of the levy be re-assessed to ensure a more equitable distribution reflective of the designated services that AUSTRAC monitors and supervises.

The government's rationale for basing the large entity component of the levy on the earnings of the entity or group is that AUSTRAC incurs greater expenses in regulating larger entities because larger entities have more customers and usually provide more complex products. However, this calculation does not take into account the extent to which a leviable entity's earnings are related to the provision of designated service.

Under the formula prescribed by the bills, an entity with high earnings may incur a large entity component even though the entity only provides a small volume of designated services. There therefore exists the potential that the levy may have a disproportionate effect on those large entities which only provide designated services as an incidental part of their business. The Australian Bankers' Association Director, Tony Burke, said the government's clear objective was to recover costs rather than to provide any benefit to those subject to the regulation. He said:

As the paper currently stands, the potential cost of compliance would be high.

Charge-backs to internal groups and agencies would add significant overheads in tracking costs and reconciling payments.

The Institute of Chartered Accountants Executive General Manager, Lee White, told the Australian newspaper on 17 January this year that members already incurred signifi­cant costs in supporting AUSTRAC's regulatory aims and it was unreasonable to ask them to bear more. He said:

Our members provide legitimate services to clients who overwhelmingly are law-abiding individuals and businesses.

If these legitimate services are exploited by criminals, it is these wrong-doers who create the need for regulation and who should contribute to the costs through the confiscated proceeds of their crimes.

These concerns are, in the coalition's view, legitimate, and accordingly we will closely monitor the effects of the legislation. To alleviate our concerns and to facilitate parlia­mentary oversight of the effects, including the possible unintended conse­quences to which I have adverted, I can foreshadow that the coalition will be moving amendments in the committee stage of the bill. The amend­ments will provide for a review of the operation of the legislation and the levy calculation methodology after two years operation of the regime, particularly having regard to the regulatory and fiscal burden on small business, and a moratorium on late payment penalties for the first six months of the regime's operation to allow for an appropriate transition and for small busin­esses to be properly informed of their obligations.

These two amendments reflect recommendations made by the Liberal senators on the Legal and Constitutional Affairs Legislation Committee inquiry. The Liberal senators who participated in that inquiry recognised the importance of ensuring that AUSTRAC can continue to provide a regulatory environment that maintains community confidence in financial flows and minimises the risk to business of exploitation for money laundering or terrorism financing. The coalition acknow­ledges the importance of introducing a supervisory levy to enable AUSTRAC to recover the costs of its supervisory activities. For that reason—subject to the reservations that I have expressed, which will find form in our amendments—we support the bill.

Whether the bills will achieve their aims without imposing an unnecessarily heavy regulatory and fiscal burden remains an open question. The opposition's amendments will assist the parliament in making the necessary assessment when the new regime has had two years of operation against which to assess its workability. Subject to those reservations, the coalition supports the bills.

Guy Barnett (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I stand on this side of the chamber to associate my remarks with those of our shadow Attorney, Senator Brandis. I refer to the additional comments of the Liberal senators on the Legal and Constitutional Affairs Legislation Committee, of which I am deputy chair, in the report that was tabled in the Senate yesterday afternoon. It had a range of recommendations in it, but can I say upfront that we are very strongly in support of the bill before us, the Australian Trans­action Reports and Analysis Centre Super­visory Cost Recovery Levy Bill 2011, though we believe there are areas that have been overlooked and areas for improvement.

It has been noted at Senate estimates and in other places that this country incurs an estimated cost to the community of some $15 billion a year as a result of the social and economic impact of organised crime. The type of measures in this bill will assist the government and our community in combat­ing organised crime, people smuggling and other untoward activities by untoward people and groups.

It is noted that the government indicates the supervisory levy will collect some $118.3 million over the forward estimates period, which is the four-year period 2011-15. It is also noted that there was a discussion paper and there was consultation with key stakeholders last year, and that was made available for public comment. Senator Brandis referred to some of the feedback from the community, including to our Senate committee inquiry, which had to be short, sharp and to the point. It was advertised on 25 May. We got 12 submissions, considered those and then delivered our report.

I refer specifically to the report of the Scrutiny of Bills Committee. This Senate is very well served by the Scrutiny of Bills Committee. They have made some observations which we Liberal senators picked up in our additional comments. They sought the minister's advice as follows:

… as to whether consideration has been given to including a safeguard in the legislation to provide that any overcollection will be adjusted.

They indicated that in respect to the retrospective application of the bill that the clear intention of the bill is that the levy imposed may be charged to cover a period that precedes the commencement of the relevant legislation, and they drew that to the Senate's attention. Obviously, when they do that it is very important.

That is one of the reasons one of our amendments ensures there is a proper, full and comprehensive review of how this legislation will roll out in practice. It is all very well to stand here in the Senate or in government and say, 'This is what we want to do.' We know that this will have implications for business right around Australia, not just for the large entities that will be paying the bulk of the charges that are flowing from this legislation but for the small businesses. In that regard, the advice I have received is based on government information that 199 of the large entities will be paying the bulk of the charges, their levy component. They will be paying between $14,000 and $425,000 per entity in the 2011-12 year, according to the summary of charging arrangements set out in the cost recovery impact statement by the government. It also identifies some specific information about AUSTRAC's projected recovery of the levy. It also refers to and identifies 8,500 other entities that will be subject to the base component, remembering there are some 17,000 entities across the country that relate to this legislation. This legislation specifically targets the 199 that will be paying the bulk, those whose turnover is $100 million or over. But the smaller entities, which are small businesses of five to 20 employees—the definition of a small business is one of 20 employees or fewer—will be paying $284 each. That is the base component for the first year of operations in 2011-12.

We are saying that it will have an impact, and not just on the 199 entities who will be paying the bulk. I am very thankful for the information I received through the committee secretariat. I put on the record my thanks to the committee secretary and the wonderful support of the committee. I want to acknowledge Sandra Kennedy for her good work and her assistance in pulling the Liberal senators report together in very quick time; under challenging circumstances she made it happen as swiftly as possible. For that, on behalf of the Liberal senators, I am thankful. The smaller entities, according to that advice, will pay $284 in the first year. We want to know the impact of the costs of compliance and regulation for those smaller businesses. We think that should be reviewed very carefully.

Another thing we have recommended in the report is that there be a proper education and information campaign as soon as possible, remembering that this bill is meant to commence from 1 July. When is that? I will tell you when it is: it is Friday week. We are talking a matter of days. In one week and a couple of days this bill will commence and the relevant entities will be responsible for paying the fees. The government has indicated in this legislation that any fees that are paid late will incur a late payment fee. That is why we have recommended a moratorium on any late payment fees for six months following passage of the legislation. Let us give these businesses a chance to get their heads around and understand how this system is going to work. This is new to them. Yes, there was public consultation last year, but the fact is we are here debating this legislation today, it is going to start Friday week and they are going to have to start paying these levies from that day. That is why we have made a recommendation with regard to a moratorium.

We have also made a recommendation with regard to the urgent need for an education, information and awareness campaign designed to advise affected entities of their new obligations. That should be rolled out immediately. Based on the advice I have received, it is not simply about sending a letter to the 199 major entities. If that is not correct, could the minister please prove me and the coalition wrong. The advice we have is that the smaller entities will be paying $284 a year in the first year, and that is why they need to know. And why should they pay late penalties? Why should small businesses across this country have to suffer those consequences? That is the other thing. We are the party of small business, and that is why we have made that recommendation, No. 2, which says:

Given the unknown impact that the introduction of the levy will have on small and micro businesses, Liberal senators recommend that, in that initial review, the government investigate the impact of the legislation on these businesses and in particular, its effects on the costs to them of complying with regulation and red-tape.

Surely that is fair, reasonable and understandable, and I urge the government to seriously consider that recommendation. We have also had concern expressed in the Scrutiny of Bills report. This is a highly regarded committee in this Senate and in this parliament. It has indicated there are con­cerns regarding overcharging and over­collecting by the government.

All that being said, I want to put on record my thanks for the chairmanship by Senator Trish Crossin of the Legal and Constitutional Affairs Legislation Committee during this inquiry. As I said the other day in my valedictory speech—and I want to say it again—it has been an absolute honour and a pleasure to work on the committee, both as chair of the references committee and as deputy chair of the legislation committee. I thank all of the members of that committee, including Senator Crossin for her leadership, cooperation and professionalism in the relationship that we have had over the past few years in those roles. I also want to put on the record my thanks to the secretariat for their good work not only on this matter but on all the other matters over many years. There is professionalism across the board in the Senate committee. The secretariats are wonderful, professional people who do fantastic jobs, under a great deal of pressure with time constraints in challenging circumstances. I have the highest regard for those people and the service that they offer, not just the current members of the various committees but the past members and, no doubt, the future members.

In conclusion, I stand here supporting the coalition and the recommendations that we have made in this report. I hope they are considered positively by the government and I look forward to hearing the government's response. I stand with Senator Brandis in supporting, firstly, the bill and, secondly, the coalition amendments. I thank the Senate.

Russell Trood (Queensland, Liberal Party) Share this | Link to this | Hansard source

Senator Xenophon, do you wish to be recognised in this debate?

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Yes, I do. It is a last-minute addition, Acting Deputy President. I too support the second reading stages of this bill and support the general principles in relation to this bill with respect to Australian transaction reports and dealing with the issue of organised crime. There are costs involved in ensuring that these transactions are tracked and establishing whether there is an organised criminal element to them.

I apologise to my colleagues for the late notice of this. With the volume of legislation, ideally you would like to give more notice to your colleagues, but I can indicate that I will be seeking to move amendments in relation to this to give AUSTRAC increased access to intelligence in order to more easily crack down on money laundering in casinos and other gambling venues. The amendment that I will be moving shortly would require all eligible gambling venues—defined as venues with more than one poker machine—to keep on record the details of any patron who wins more than $1,000 while gambling on a poker machine and for this information to be available to AUSTRAC. Currently there are exemptions for a number of venues. This proposes that there not be exemptions for any venues. Money laundering on poker machines is a serious issue, albeit not one that is particularly well known. I rely on academics who have done research on this issue, in particular Dr Charles Livingstone from Monash University together with a number of his colleagues.

Hotel sources have told the Sydney Morning Herald that nationally $2 billion is laundered through hotel, club and casino poker machines and gambling chips, and as much as 40 per cent of this is in New South Wales alone. That is an extraordinary figure and I believe it ought to be appropriately tested. But that is on the basis of sources to the Sydney Morning Herald. There are also reports that certain venues are known by crime gangs as 'LLs' or 'local laundries'. This is how it works, as I understand it. A player may insert $2,000, $5,000 or even $10,000 into a poker machine and, after playing a handful of lines, decide they want to cash out. They then do so. It is a way of laundering the money. They might spend a few hundred dollars but launder thousands of dollars in the meantime.

This is a huge problem but is one that could easily be fixed if AUSTRAC were able to gather the information it needs to better track the movement of money through casinos, hotels and clubs. There is an old saying that if you want to get to the bottom of a matter you need to 'follow the money'. When it comes to crime gangs laundering an estimated $2 billion a year, according to those media reports, that saying could not be more apt. There is a position at the moment where for certain winnings—in some jurisdictions as low as $1,000—there needs to be a record kept in any event and the winnings need to be paid by cheque. It depends on the jurisdiction. So it would not be onerous for those records to be kept. The fact is, not too many people win big jackpots on poker machines. The house always wins—the venue always wins in the long run, or eventually. So this is a case where it would not be onerous; it would strengthen the purpose of this legislation.

I will address the issue of the coalition's amendments—and I do commend Senator Barnett for the very thorough work that he has done, at breakneck speed given the tight deadlines. People do not appreciate the sort of work the Senate does in Senate com­mittees. Whilst there may be disagreements, there is collegiality and goodwill between senators from different sides of the political fence in getting to the truth of the matter, seeing whether there can be improvements to legislation to sort out unintended conse­quences and the like.

Again, I regret that I have not been able to give earlier notice of this. That is not due to any grand plan; it is just a question of the workload in my office. It would be remiss of me not to raise this issue for this piece of legislation to ensure that they are dealt with appropriately, and I would welcome debate in the committee stage in relation to the amendments that I am foreshadowing. Again, I look forward to further discussion and debate in relation to the coalition's amendments on this bill, but, broadly, I do support the second reading stage of this bill. I believe the legislation is essential but could be improved with the amendment that I have foreshadowed.

Russell Trood (Queensland, Liberal Party) Share this | Link to this | Hansard source

Thank you, Senator Xenophon. It was a late intervention but I think the Senate would like to hear from you more often than not.

Nick Sherry (Tasmania, Australian Labor Party, Minister Assisting the Minister for Tourism) Share this | Link to this | Hansard source

In concluding this debate before the Senate I will focus on some of the issues that have been raised specifically by those who have contributed to this debate.

Firstly, thank you to all those who have contributed to this debate. In relation to the comments by Senator Brandis and also Senator Barnett on the bills through the Legal and Constitutional Affairs Committee report, I can advise that a review of the calculation methodology is planned after five years—or earlier if there are material changes to the AUSTRAC operating environ­ment. However, AUSTRAC will monitor the cost-recovery approach on an ongoing basis.

I would make the general observation—and this is from experience in a number of other areas of financial regulation where levies have applied: insurance, superannuation and, in particular, through ASIC and APRA for companies—that when you apply cost recovery it is always very difficult to satisfy the various entities which are required to pay a levy. Some want to, obviously, pay little or nothing. Whether it is justified or not, some want to shift the levy-paying level from one area to another. That is not an unusual approach. To the best of my recollection, whenever we have been faced with levy bills in this place, there have been relatively common controversies and disputes around who should pay, how much and so on.

The AUSTRAC supervisory level will be set annually. Legislative instruments containing the details of the levy arrangements for the next financial year will be published in draft form after the Australian government budget is released in May and will be issued in a final form prior to the commencement of the financial year. The cost recovery impact statement, or CRIS—another exciting acronym; I quite like that one—will be reviewed over the next 12 months and a new CRIS will be prepared for 1 July 2012. Consistent with the Australian government cost recovery guidelines, a revised CRIS will also be developed should there be any material changes to the cost recovery arrangements.

In relation to small business—which Senator Barnett is interested in and, obviously, as the Minister for Small Business, is an area that I am interested in—the cost recovery model has been modified in a number of ways to reduce the regulatory impact on small business. As a result, many small businesses regulated by AUSTRAC will not be subject to cost recovery at all.

Let me give some examples of affiliates of a registered remittance network, which in the normal course of events you would expect to pay a levy. Affiliates are excluded on the basis that AUSTRAC's primary regulatory relationship will be with registered remittance networks rather than individual affiliates. This removes a range of small businesses from the operation of the levy—licensed post offices and newsagents, for example. This partly goes to Senator Xenophon's gambling amendment, if I could refer to it. We have reporting entities which have been exempted from part 7 of the AML/CTF Act on the basis that AUSTRAC does not incur substantial costs in regulating these entities. Those entities include small gaming venues with an entitlement to 15 or fewer gaming machines. They are exempt from part 7 of the act and would therefore not be subject to cost recovery.

In terms of our general approach to small business, it is correct, Senator Xenophon, that some gambling venues would not be paying the levy; and obviously we will debate the intent of your amendment when we get to that in the committee stage. So far as the government is concerned, it would be unreasonable to apply this levy to entities—including post offices, newsagents and gambling entities with fewer than 15 machines—of this size: We see that as inappropriate. This has been our approach to reduce the impact on what we call small business and, indeed, microbusiness.

We are removing from the levy non-employing entities, sole proprietorships and partnerships without employees, and microbusinesses—businesses employing fewer than five people, as defined by the Australian Bureau of Statistics. These are removed from the base component of the levy. This means that, of the entities which are subject to the levy, 6,800 are expected to be subject to only the base component of the levy, estimated to be $284 in the first year. I think we have taken a very reasonable approach with respect to small business and microbusiness.

AUSTRAC will monitor the impact on all businesses subject to the levy. To the extent that changes need to be made to improve the equity or efficiency of the cost recovery model, these considerations will be taken into account through the review process, to which I have already referred.

In terms of consultation on the proposed arrangements, extensive consultation has already occurred with affected stakeholders. I will make a general point. We often hear criticism and concern about lack of consultation. There has been very significant consultation. The bottom line is: some people do not to pay the levy. That is their attitude, but there can be no complaint about lack of consultation on this issue. Some people disagree. I respect them for that, but it is not a matter of lack of consultation. So often people use this line 'lack of consultation' when they do not agree. They should tell us they do not agree and why. There has certainly been significant consultation on this.

In November last year, AUSTRAC released a discussion paper and held three industry forums, in Melbourne, Sydney and Brisbane. Through the feedback received, the cost recovery model was further refined, and an exposure draft of a CRIS was released in February this year. In March AUSTRAC undertook further limited consultation on the 'large entity' definition of the model, and on 12 May AUSTRAC published a final CRIS on its website. In addition, a draft of the 2011-12 ministerial determination for cost recovery proposed details to be collected through the enrolment process, and a draft privacy impact assessment in respect of the enrolment obligation was also published for comment. Prior to invoices being issued in the 2011-12 year, a final ministerial determination will be made, and AUSTRAC will communicate with industry about the process and time frames for complying with both the cost recovery and mandatory enrolment processes.

Finally, in relation to late payment fees for the first year, invoices for the 2011-12 financial year are not planned to be issued until February or March 2012. Accordingly, there is no intention to issue late payment penalties in respect of cost recovery within the first three months following the passage of this legislation.

To conclude, we know that organised crime is a significant national security threat and it is a challenge. Through the Com­monwealth Organised Crime Strategic Framework, the government is ensuring that Commonwealth intelligence, policy, regu­latory and law enforcement agencies are working together to prevent, disrupt, investigate and prosecute organised crime. The Australian Transaction Reports and Analysis Centre, AUSTRAC, plays a very important and critical role in the fight against organised crime. Through its regulatory activities, AUSTRAC helps to mitigate the risk of Australian businesses being used for money laundering, terrorism, finance and other organised crime. This package is necessary to give effect to the 2010 budget commitment. Consistent with the govern­ment's cost recovery guidelines, AUSTRAC will recover the costs of its regulatory activities from 1 July 2011. This cost recovery process is entirely consistent with that of the former government. In fact, to the best of my memory, the former Liberal-National Party government established this cost recovery process. So it has been a consistent approach across a whole range of areas of government.

The collection bill enables AUSTRAC to collect the supervisory cost recovery levy and establish the necessary framework for administering the levy, including matters relating to collection, invoicing and dealing with late payments. It provides that the amount of levy payable for each financial year will be determined by the minister by legislative instrument and cannot exceed a statutory limit of $33 million in total, indexed. The collection bill also introduces a system of administrative review of a decision by the AUSTRAC CEO to waive a levy or late payment penalty. Significant consultation has occurred with industry around the structure of the levy. Through this process the government has listened to the concerns of business and has made significant adjustments to lessen the burden, particularly in the area of small business.

The consequential amendments bill amends the AML/CTF Act to introduce compulsory enrolment for all reporting entities regulated by AUSTRAC. This formalises current arrangements where AUSTRAC encourages entities to volun­tarily enrol. Mandating this requirement will mean that AUSTRAC can better identify its regulated population for the purposes of calculating and applying the AUSTRAC cost recovery levy. The consequential amend­ments bill also amends the current infringement notice scheme to allow the issuing of notices for failure to enrol and failure to appropriately maintain enrolment details. I commend this package to the Senate and I thank all senators for their contributions.

Question agreed to.

Bills read a second time.