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Parliamentary Joint Committee on Law Enforcement
Financial related crime
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Parliamentary Joint Committee on Law Enforcement
O'Sullivan, Sen Barry
Matheson, Russell, MP
Wood, Jason, MP
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Parliamentary Joint Committee on Law Enforcement
(Joint-Tuesday, 9 September 2014)
CHAIR (Mr Van Manen)
Mr Bieytes Corro
- Mr MATHESON
Content WindowParliamentary Joint Committee on Law Enforcement - 09/09/2014 - Financial related crime
ATKINS, Ms Jane Elizabeth (Liz), Executive General Manager, Corporate, Australian Transaction Reports and Analysis Centre (AUSTRAC)
CLARK, Mr Peter, Executive General Manager, Operations, Australian Transaction Reports and Analysis Centre (AUSTRAC)
SCHMIDT, Mr John Lance, Chief Executive Officer, Australian Transaction Reports and Analysis Centre (AUSTRAC)
VISSER, Mr Johann Bertram Jude, General Manager, Intelligence, Australian Transaction Reports and Analysis Centre (AUSTRAC)
CHAIR: I now welcome officers from AUSTRAC. I remind committee members and officers that the Senate has resolved that an officer of a department or agency of the Commonwealth or of a state shall not be asked to give opinions on matters of policy and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for explanation of policies or factual questions about when and how policies were adopted. Thank you all for coming along today. We appreciate that. I now invite you to make an opening statement and then we will move to questions.
Mr Schmidt : Thank you, Chair. I have no opening statement. I am quite happy to go straight into the questions.
CHAIR: I will ask a general question first. What in your experience and in your opinion is the key issue with financial related crimes at the moment? Where do you see a significant gap in our system or framework of laws and protections for ordinary Australians to prevent the perpetration of financial fraud?
Mr Schmidt : I do not believe there is a readily identifiable major gap as such, but perhaps I could talk about the areas of great vulnerability. When we are talking about financial crime, obviously one of the biggest areas being targeted by criminals is privately run super funds and other investments. Australia has a massive amount of money tied up in superannuation, and there have been various law enforcement and other agency operations—I think Task Force Galilee was one that the Australian Crime Commission did some time ago—looking at investment type related scams that are specifically targeting people who have set aside money for their retirement. What you are looking at there are the boiler room scams, which you may have heard about. Do you want me to elaborate a little bit on that?
Mr Schmidt : A classic boiler room scam quite often involves cold calling—people are phoned. Historically, one of the ways these scammers got people's names and addresses was through various share registries and other lists which were publicly available. I am not quite sure whether they are now available to the same extent that they were. They say, 'Look, we've got a fantastic investment opportunity for you.' They lure people in. They are very sophisticated. They have websites which look legitimate. Some of the more sophisticated ones would have what appeared to be genuine share trades, which made profits. So they would bait the hook. Then they would invite investors to put more and more money into these schemes or to buy particular shares, which either did not exist or were worthless. Then the money was gone. There have been a number of examples where people have lost significant amounts of funds through scams of that nature. That is a particular area of vulnerability.
Of a similar nature because of the way that people are approached and the way money is sent offshore are a range of scams such as the Nigerian advance fee scams, which you will have heard about. Historically, some of them are more transparent than others. Some are as simple as—I have received them and you may well have received the emails as well—'I've got US$100 million and I'm trying to get it out of the country, if you'll just please give me some details.' For whatever reason, people get involved in that. Then there are sadder cases. There has been publicity recently about law enforcement agencies looking at romance scams, whereby through websites or even from traveling overseas people strike up friendships with individuals who then approach them and, over a period of time, they are fed a line which induces them to pass over money, and that can build on itself. I think some years ago there was an example in Queensland, where the Queensland police bought some police offers over from Nigeria and took them out to meet individuals who were sending money offshore to some of these scammers. They were told, 'You are being ripped off; you are sending money to scammers; please, these people here are from Nigeria and they will tell you not to do it.' The sad thing was, so I understand, despite the fact that they had met with the police and had those discussions, they proceeded to continue sending the money. That is a very extreme and unfortunate example of how it can end up, and people do commit their life savings sometimes to these scammers.
CHAIR: With respect to AUSTRAC, I suppose a lot of that comes down to education. What, if any, educative role does AUSTRAC have in making the broader community aware of those scams?
Mr Schmidt : Every year, we release a selection of sanitised case studies, which we call our typologies report. If you look through those, and they are all available on our website, you will find examples of that sort of scam. We also work with other agencies. The ACCC has—and I cannot remember the exact—a scam alert type website, which puts information out there. We work with banks and other reporting entities to advise them of what we are seeing, so that they can engage with their customers as well in trying to spot some of these transactions. But it is difficult to get the message out.
Senator O'SULLIVAN: We heard earlier about the issue in relation to the major banks no longer providing banking facilities to remitters—registered remitters. First of all, are you aware of that?
Mr Schmidt : We have had approaches on occasions in the past both from remitters and from the banks themselves who have told us that they have ceased to provide banking services to remitters. As far as I am aware from our dealings with the remit sector, there are examples where people have had a particular bank that no longer provides the service but other banks—second-tier banks, foreign banks and some of the major banks—still do provide the service. As with any customer, whether a bank decides to provide a service to a particular customer is a matter for that bank. I certainly would not be substituting my opinion in relation to an individual decision made by a bank.
Senator O'SULLIVAN: Let us assume for a moment, hypothetically, that all banks have withdrawn banking services and remitters have been driven to operating through offshore banking facilities. Would that be a good or a bad thing in terms of the risk profile for this money transfer?
Mr Schmidt : I do not feel comfortable about commenting on a hypothetical.
Senator O'SULLIVAN: I have had this debate at these tables before. If you are not the source of advice for us then who is?
Mr Schmidt : I will try to answer the question to the best of my ability. I do not see evidence of the remittance sector being driven offshore or underground with our registration processes. I forget the current number of registered remitters, but it is approximately 8,000. That is a combination of the major networks themselves—the top organisations and their affiliates. So there are 8,000 of those who are registered to provide remittance services and that number has been gradually increasing since the new registration arrangements were introduced. If people did not have access to the banking system, presumably they would not maintain their registration with us.
Mr MATHESON: Do you think that all remitters should be registered and all moneylenders should be licensed?
Mr Schmidt : It is a requirement under the legislation that remittance providers are registered. The remittance sector has been identified internationally as a financial service activity which is particularly vulnerable to targeting by criminals to subvert the operators of the remittance sector themselves to be willing participants or unwittingly use their services. At the same time, I am well aware that the remittance service industry provides a very valuable service. There are numerous areas in the world where formal banking facilities just are not available to local populations. Australia being a migrant country, obviously there are people here who are making funds available to relatives and other people in various parts of the world. So they provide that valuable service. But, internationally, they have been recognised as being particularly vulnerable and Australia, as with most other countries in the world, has signed up to the standards established by the Financial Action Task Force, FATF, and one of the requirements in there is that there be some registration or other regime specifically looking at the remittance sector.
Mr MATHESON: Should all moneylenders be licensed?
Mr Schmidt : To the extent that they do provide lending services, they are a designated service under our legislation but they are not registered as such or licensed. Registration or licensing, I suppose, you could use interchangeably for the purpose of our discussion. There is a requirement to register with AUSTRAC if you are a remitter, provide a remittance service, and it is a criminal offence to provide those services if you are not registered. With the moneylenders, if they are making loans and other services which are captured under the legislation, the requirements are to report various transactions to us and also to have anti-money-laundering programs in place in respect of their businesses.
Senator O'SULLIVAN: In relation to the registration, can you give us any examples of or statistics about the number of unregistered remittance services that AUSTRAC has prosecuted for providing unregistered remittance services as against the number of registered remittance providers that have had regulatory action et cetera imposed on them?
Mr Schmidt : We do not prosecute. We are the law enforcement agency. So, to the extent that there is a breach of the criminal law, which is a criminal offence, that would be a matter for law enforcement. I am not aware of a prosecution for being unregistered in itself. Having said that, unregistered remitters who have been identified as being engaged in criminal activity have been prosecuted by law enforcement for some of their criminal activities. Now, I cannot tell you, based on that analysis, who would have been potentially liable for prosecution for being unregistered.
The registration regime only commenced in Australia in 2012, so it has been in place now for just a couple of years. In that time, two entities have had their registration cancelled, six entities have had their registration refused and 15 entities have add conditions imposed on their registration. We are currently considering the registration status of a further 17 remitters. Earlier this year, we imposed a fine of $225,000 on one of the network providers. It was on a company, Rio Financial Services, which is one of the world's top three remittance networks. One of the issues there was that some of their services had been provided through affiliates who had not been registered at the time. In June 2014, one of the leading corporate remittance providers in Australia, Customs House Currency Exchange (Australia) Pty Ltd, entered into an enforceable undertaking with AUSTRAC regarding some of their AML/CTF obligations. So that is the scope of the regulatory action that has been taken in recent times.
Senator O'SULLIVAN: So, if you have no knowledge of an enterprise being prosecuted for providing remittance services when they were not registered, does that mean there are none?
Mr Schmidt : I am not aware of a prosecution for that offence specifically but I believe there have been prosecutions of people who may have been providing unregistered remittance services for other criminal offences.
Senator O'SULLIVAN: Yes, I get that. But that would apply to me also; I could be equally as exposed as they were in terms of criminal activity. But my question is very, very specific. We have heard evidence today about a proliferation of remittance service providers who are not registered.
Unidentified speaker: Online.
Senator O'SULLIVAN: Well, partially online and others with front of shop is my memory of the evidence. If nobody has been prosecuted, then that suggests one of two things: either the evidence we have heard is not accurate and there is not a proliferation of unregistered providers, or whoever is responsible for enforcement or for prosecution of a breach is not doing their job. Is there a third option that I am missing?
Mr Schmidt : Yes, there is a slightly more complex answer to that. Let us break it down. If a remittance service provider is purely online and has no physical nexus with Australia, then they are not caught by the regulatory regime—and that is true of any internet service. If you are operating out of a country and the only point of contact with a customer in Australia is the fact that they go online, I have no physical capacity to engage with those ones. So there will be online remitters. The hope is that, in whatever country that online service has its physical operations, it is registered, but, for obvious reasons, jurisdictional limits apply when it comes to those things.
With unregistered remitters, it would not be true to say there is no regulatory engagement with them. You will have heard detailed information, I think, from some of the earlier witnesses about Taskforce Eligo, for example, where we are working with the Australian Crime Commission and others. AUSTRAC, as part of that work, has identified people who have been unregistered. One of the regulatory steps we take is to go out, speak to people and find out why they are not registered. Because people are coming from communities where there is a limited understanding of aspects of the regulatory regime, and that could be because of language, culture or whatever, they are not necessarily engaged in criminal activity. One of the aims of the regime is to get people to register.
Senator O'SULLIVAN: Do you know on how many occasions AUSTRAC has engaged with individuals who are not registered and you have had this exploratory discussion to find out why that is so?
Mr Schmidt : We would have to come back to you on that, I am sorry. I do not know off the top of my head.
Senator O'SULLIVAN: Okay. But, clearly, you have not referred any cases to the law enforcement agencies to prosecute as a result of these activities.
Mr Schmidt : Again, the answer is not quite as straightforward. Eligo is the context for a lot of this. If we become aware of where a person might be involved in unregistered remittance activity, we discuss it with our partner agencies because there may be other criminality there which they wish to investigate or monitor. Sometimes the answer we get from partner agencies—and I have no difficulty with this—is, 'Thank you for alerting us to the fact that this business might be taking place. Don't take any action for the time being.' They may or may not have been aware of it already or, if they are not, they may want to monitor that because they are exploring other criminal possibilities. So it is not a black-and-white answer.
Senator O'SULLIVAN: Let me just say this to you. After having heard previous witnesses and now having heard your answers—and thank you for them—I am none the wiser. I could not even tell you within 50 per cent accuracy whether we have a problem or we do not have a problem. Philosophically, the movement of money through enterprises that are not registered, not monitored, not audited and not the subject of investigation would be very, very high risk and would fit very neatly into our terms of reference, but I cannot seem to get a peg to hang my hat on.
Mr Schmidt : Perhaps I could give some more information which might put some boundaries around this issue. I have talked about the online sector—they are in a class of their own just because of the nature of their operations. If a remitter is unregistered, I would be surprised if they got access to formal banking services in Australia. So the question you have to ask yourself is: if they are dealing in large sums of money, how are they moving those funds? The spectrum of remittance services starts from very, very small operations—one of the traditional names for them is hawala, which is basically family or limited community offsets of money, with small amounts being made available. It is literally an offset arrangement, so a person in Australia acts as the collector for the community. Various people in the community give them small amounts of money that they want made available to a foreign country. That person has a relative or somebody else in that country. No money actually goes out of the country, but they do offsets and, once or twice a year, there might be a transaction which offsets those. If they are small amounts of money, the risk is not huge.
If they are large amounts of money and they are unregistered, a bank would be failing in its due diligence in respect of that customer if it was providing financial services and access to the bank systems to move large sums of money. We occasionally hear these comments about the scope and size of the industry out there which is unregistered. I am not seeing the evidence from feedback from the banks or others that there is this—I do not remember your exact words—large-scale unregistered range of remitters in operation.
CHAIR: The question that arises from that is that, given evidence yesterday in the Northern Territory, there are significant cases of significant amounts of money being transferred offshore from Indigenous communities through various schemes and contrivances that are not getting picked up by the banks. My question is: if their due diligence is what it should be—not only the banks but also remittance services—why are those things not getting picked up?
Mr Schmidt : I am at a bit of a disadvantage, obviously, because I have not heard the evidence. Were they saying that those funds were going through people who were providing remittance services to the Aboriginal community? What was the service?
CHAIR: Something like Western Union and also a bank. In one example, they used the term 'money mule'—it was a trusted person within the community who was basically collecting all the money, a significant amount of money, in their bank account and then that pool of money was subsequently transferred offshore, using either a bank or a remittance service.
Mr Schmidt : On Western Union first, Western Union is one of the biggest providers of remittance services in Australia. It operates through outlets and affiliates who have to be registered with us and obligations fall on Western Union to make sure that people who are operating as Western Union agents or affiliates are registered. I am unaware of Western Union operating through unregistered affiliates. I would be surprised, but I am more than happy to look into that.
CHAIR: I am not saying that the affiliate was unregistered; what I am saying is that there are significant amounts of money being moved out of those communities without there seeming to be the checks and balances that you have alluded to.
Mr Schmidt : If there are large amounts of cash moving through a remitter and through a bank, there are a number of reports we would receive and would expect to receive. If we are not receiving them, that is a different issue. Cash of $10,000 or more is required to be reported to AUSTRAC. International funds transfer instructions of any amount of money going out of Australia would be reported. With the banks, it is done automatically. They just do a download of their data to us, so I would be surprised if we are missing those. If it is a remitter itself, we would have to have a look and see whether they are reporting accurately or not, but there are already existing reporting obligations.
Also, one of the other obligations that they have is to report suspicious matters to us. If they form the view that the financial transaction could be related to a criminal offence, tax avoidance or things of that nature, they are also required to report that to us. With any regulatory regime, there will obviously be occasions where people do not comply with requirements on an individual basis, but, on the scenario you have painted, either through Western Union or through the banks, at least some of those transactions I would be expecting to receive now.
The money mule is a very different example. That can manifest itself in a number of ways. I am not saying this is or is not happening, but a person could collect large amounts of cash and physically try and get that cash out of Australia, avoiding Australian authorities in doing it. There are reporting requirements, again, at the border for people carrying out large sums of cash of $10,000 or more. People may be finding ways around that. Again, I am not sure, but there are reporting obligations in place.
CHAIR: As we have seen in the last few weeks, Customs and Border Protection did detain somebody who, from memory, had $30,000 in cash on them.
Mr Schmidt : And that does happen, yes.
CHAIR: You make the point in your submission that some 84 million financial transactions were reported to you in the 2012-13 year. Without going into the detail or the process, how do you identify transactions which are suspicious or otherwise?
Mr Schmidt : Breaking up the transactions, we will put suspicious matter reports aside because they are ones where the reporting entity has itself identified why it thinks there might be something untoward. When it comes to the cash transactions or the international funds transfer instructions, we have very sophisticated IT systems. Obviously, it is physically impossible for an organisation, no matter how big it is, to look at those transactions individually. In fact, we have had money to completely revamp that analytical capacity, and the new system will be rolling out later this year. It has the capacity to spot patterns of behaviour. We can put alerts in the system for names or countries or combinations of factors. We can do analysis of previous transactions to see what the patterns are. If those patterns are repeated in the data that is coming through, alerts will come up to do that.
We have partner agency arrangements with every law enforcement agency in Australia, all the revenue authorities, all of the Australian intelligence community, social services and a number of others who can have access to our data. Under the new system, there will be a greater capacity for them to tailor their access to the data for alerts matters which are of particular interest to them. It is an IT based solution, but we have very skilled operators at the same time. They are one of the great assets we have. They are a small group of people who are very able at looking at the data. At the end of the day, the computer will spit out something on a screen and it requires someone to look at that at some point and form a judgement. We have people to do that, as do law enforcement for their own particular perspectives.
Mr WOOD: I am reading a media release from 17 July. The heading was: 'AUSTRAC cancels registration of remittance provider'. The company was KMT Sydney. Peter made comments on that. Could you give the committee a bit more information about that? It mentions money-laundering, terrorism and people smuggling. Is it standard to mention the three in your media releases or are they doing all three?
Mr Clark : Thank you for the question. The entity that you are talking about was the subject of regulatory action by AUSTRAC as a result of not having the necessary systems and controls in place to mitigate their risks against those particular vulnerabilities. It was not suggested—and certainly the press release that we put out did not suggest this—that they were involved necessarily in those activities. Regulatory action was taken because they did not have systems and controls in place to mitigate their risks to deal with those particular issues.
Mr WOOD: John, you mentioned the Nigerian scams et cetera. Is there a common method that they use to get money out of the country? Do they use Western Union or do they find a friendly provider? What they do?
Mr Schmidt : They will use whichever avenues are available.
Mr WOOD: Does it first land in an Australian account or does it go directly overseas, or doesn't it matter?
Mr Visser : Most people are approached through romance scams or whatever—through the internet—and then they are enticed to send money directly to the perpetrators in one way or another. Generally, it will go through a remittance service like Western Union—something that is unsuspicious to a victim. That is a victim-to-the-perpetrator direct transfer—taking money out of their account and transferring it offshore.
Mr WOOD: Do you find that, when it comes to mums and dads, or maybe in that case single people trying to find love or whatever, there a No. 1 scam? Is it the Nigerian ones with which we are losing most of the money or is it the bank scams or tax?
Mr Visser : These things used to be perpetrated by letters. With the onset of the internet, they can get to more people more quickly and will obviously get a huge number of victims. We do pick up those movements of funds through the system. Our CEO was talking to that. We work very closely with our law enforcement partner agencies. In fact, the state police are very proactive in using our data to identify victims. Without going into detail about what the tell-tale signs are, those authorities do have online access to our systems and are able to identify people that are victims.
Mr WOOD: I have one final question, which you may wish to take in camera. When it comes to terrorism, at the moment we are seeing a great increase in money going to Syria and Iraq.
Mr Schmidt : If we are going to talk about that, perhaps it would not be appropriate to do so in public.
Mr WOOD: That is what I am saying, so we can take that in camera.
CHAIR: Can we leave that until the end?
Mr WOOD: Sure.
Mr MATHESON: Chair, I still have a bit of a bee in my bonnet, like Senator O'Sullivan, in relation to registered remitters. I am intrigued by what you said. If you find an unregistered remitter, you go and knock on their door and say, 'Why aren't you registered?' What else would you do? With registered remitters I know there is a client issue. You have shut one down and taken their licence off them, as explained. What action would you take against an unregistered one, if you found one, other than knocking on the door—which you said you would do—and saying, 'Why aren't you registered?' in relation to their records and money transfers? If you are unregistered you do not have to be as compliant as a registered remitter. You could move $1,000 a week every week forever; I do not think it would be noticed. Two years would be $100,000, and $2,000 a week is generally the basic pay for the average punter in Australia these days. What would the next step be other than knocking on the door and saying, 'Why aren't you registered?'
Mr Schmidt : If they are using the banking system and operating as a remitter, I would be surprised if the banks would let them do that, because banks would be in breach of their customer due diligence requirements in letting a person who is an unregistered remitter operate. With the new scheme, the register is on a public website. We encourage reporting entities that deal with the remittance sector to go to that website. It shows people who have been removed and it shows if conditions have been placed on somebody and it gives some basic details about them.
Mr MATHESON: I understand that, but if I am acting in this way and I set up a business structure, I am not going to go to the bank and say, 'I am a remitter.' I am just going to have a bank account there.
Senator O'SULLIVAN: I thought Mr Matheson's question was in response to your evidence that your agency has on occasions gone out and sat with people who may have been performing remittance services through ignorance. I think you said that it could be language barriers, not understanding the regulatory environment and so on. What did you do with them? Did you just determine that they were poor ignorant migrant peasants who were engaged in activity that was otherwise illegal and it did not result in a prosecution? That is where my earlier question was going, and Mr Matheson followed through on it.
Mr MATHESON: Yes, it is that next step. You know they are unregistered, that they are acting as a remitter and that they have an office front or they have advertised. What is the process after that? What sort of focus do we have on unregistered remitters? If there is no focus, how do we pick them up? How do we deal with it?
Mr Schmidt : Again, there is a spectrum here. I have worked in many regulatory regimes over the years in New South Wales. I worked in Fair Trading, which had licensing regimes for the home-building sector, real estate agents et cetera. There are always some people at the margins who try and operate outside the system. There is no regulatory regime in the world which will identify them. You have given a few examples and I will just work my way through some of that. You were giving the example of a person sending out $1,000 or $2,000 a week through a bank account. Unless there is a reason why that person is having regular deposits of $2,000 on top of their salary and wages or whatever, that may be enough for the bank to pick it up. Is it suspicious behaviour for a person who is, say, on welfare, when ongoing significant amounts of cash are going through an account? If they are operating on a very, very small scale and they are only dealing within their community, they may not come to our attention.
It is impossible for any regulator to 100 per cent cover the field. There have been cases where we go out and talk about them; it is a question of registration. We will have to check on this, but I would assume that part of that might be that people stopped providing those services. If there were significant amounts of money involved—and I don't genuinely believe that is happening now, in the current environment and the way it operates, with the banks checking on registration for large sums of money going through bank accounts. But if we just assume, hypothetically, that that was happening, then that would be a trigger for us, certainly, to refer it to law enforcement to have a look and see what is going on there as well. So there can be law enforcement engagement with these people, there can be our engagement with them, or they can cease doing it. There will always be some—it is just the nature of the world—who we will not necessarily spot.
As I said at the beginning, with the amount of registrations we have got since the new regime was introduced, and with the gradual increase which continues, we are not seeing—from our partner agencies, from our own intelligence, or from the banking sector or other sectors who report to us—an indication that there is a proliferation of unregistered remitters. And I am the first to say, there will always be somebody who will try and work outside the regulatory regime. But to say there is a proliferation—I am not seeing that.
Senator O'SULLIVAN: Can I use an example as a segue to that: I recently had an inquiry where a government agency admitted that in the course of a year, they had 44,000 complaints in a particular category—and they prosecuted three of them. And, as hard as I tried, I could not determine whether their prosecution rate cleaned up the problem; whether three complaints were 100 per cent of the valid cases.
I have listened very carefully and I am none the wiser. I am wondering if there is some sort of question we can ask you to answer on notice, so that you can go away and take all the time in the world to deal with this—because where there are 8,000 registered people, I am going to bet you London to a brick that there are 1,000 or 1,500 who are operating outside of the regulatory temperament. That is just how it is. I am 58 years of age, sadly, I have been around a while—
Mr Schmidt : We are the same age!
Senator O'SULLIVAN: Yes, there you go! So I would be surprised if it there was not some number, Mr Schmidt; I don't know what it is. Sometimes, the fact that prosecutions are not occurring is the result of people being focused on more important things, or a resource issue, or one of a whole range of things. The bee is going to stay in my bonnet on this, because of the terms of reference of this inquiry. We keep coming back to them.
We could skip over this, and make all the recommendations in the world, and leave one good, solid, active, black hole—and we would have achieved nothing out of this inquiry. So could you take a question on notice: I don't know; perhaps I will just put a question mark and you can fill in the blank backwards! Would you help us just to have a bo-peep, to see whether this is an issue or not. I don't know whether you have research capacities within your organisation; whether you have people who can turn their heads towards the sun here for a month or two, and have look at it and give us some advice. But we are in your hands, essentially, on the question.
Mr Schmidt : Senator, what I will do then, to try and assist—and obviously I want to try and assist with this question—is this: I will go back to the organisation and see what information I can find about examples which have come to our attention of unregistered remittance service provisions, say in the last 12 months; how that implication arose—whether it was from law enforcement or from other sources; what action we have taken; and any other information which I can find which might flesh out the way those matters have been handled. Would that answer your question?
Senator O'SULLIVAN: That would be much appreciated. It is all we can ask of you for the moment. I accept that your answers are genuine; I am just confounded that it seems to be an area that we do not know a lot about. Can I follow with another question, Chair?
CHAIR: Yes, and then we will move to the in camera session.
Senator O'SULLIVAN: If we go across to page 129 of your submission, am I to read that—
Mr Schmidt : Sorry Senator; the submission was somewhat shorter!
Senator O'SULLIVAN: Sorry; on page 28 of your submission. There is a table there.
Mr Schmidt : Yes.
Senator O'SULLIVAN: Let us go to 2013-14, where there are a number of figures in that column. Am I to assume that the top column, 'infringement notices', reflects that over the five years from 2008 through to 2014 there has been one infringement notice issued by your organisation for some breach of section 184?
Mr Schmidt : Senator, that power only came to AUSTRAC in the 2012 year.
Senator O'SULLIVAN: Okay. What other numbers in this legend are enforcement actions? That is, AUSTRAC has detected, something has been naughty, and it has commenced the equivalent of a prosecution or it has been recommended to the Crown to prosecute, or whatever the form is.
Mr Schmidt : We have not done prosecutions but these are enforcement actions. Can I perhaps give some more information. When I say 'noncompliance' it could be that the systems are not in place, or we do not believe they are adequately addressing the identification of customers, or the reporting system or the data that we are getting from them does not accurately fill in the field so that we can use it for the analysis we have to do. A couple of things can flow from that. This is what happens with larger institutions. One of the greatest assets the larger institutions have is their reputation. They do not want to be seen to be noncompliant with a regulatory regime such as ours. Organisations in Australia have spent tens of millions of dollars in modifying their systems to comply with this regime—which has not been in place that long, let's be honest about it.
Senator O'SULLIVAN: You could have answered my question already; I am conscious of time. You are not trying to catch crooks at street level.
Mr Schmidt : We are not a law enforcement agency.
Senator O'SULLIVAN: You are dealing with whether the banks breach, or a financial institution—
Mr Schmidt : Yes.
Senator O'SULLIVAN: Okay. If we look at page 16 of your submission—I promise this is my last question. With all of the investment we have, and I imagine it is in the form between the financial agencies, the government agencies and the law enforcement agencies, that we spend hundreds and hundreds and hundreds of millions of dollars annually in this space. If you go to the dot point under 'real estate' it says:
This has been published by John Walker—
it was estimated that $651 million worth of laundered funds were invested in real estate annually here in Australia.
What would be the quantum value of prosecutions that resulted from that activity alone? It is only one of dozens of activities.
Mr Schmidt : You would have to ask the law enforcement agencies.
Senator O'SULLIVAN: You do not monitor that—the success of this whole networking thing we have got happening? You don't go, 'We're winning this war; we've knocked that real estate stuff down from $651 million that year to $400 million, to $200 million, to where it is now gone'?
Mr Schmidt : It is a timely question, because Australia is currently under evaluation by FATF—the international standard setting body I referred to. In fact, they had people out here just a month or so ago. Countries have a mutual evaluation done every so many years and we are up to our next one. One of the things they are finding globally is access to statistics. I genuinely believe we have a very effective system in Australia. Our cooperation with our partner agencies is one of the best in the world, and some of the international representatives on this evaluation team said they were astounded by the degree of cooperation. Trying to unpack the end statistics to track through, say, a report that came into AUSTRAC about money laundering led to a particular prosecution is a very difficult thing. We have a federal system with different laws, with different ways laws are expressed, different law enforcement agencies. Sometimes you can have 16 potential offences that the Federal Police might be able to bring against a person but it is more efficient to go against two. One of them might be a money-laundering offence which they do not proceed because they have got another criminal offence to get them. I have no doubt that we are seeing results. If you asked me to put a quantum on that, I cannot dissect that. One of the things we are going to have to do as a country going forward—and I am sure this will come out of that report's recommendation—is that countries, not only us but other countries, have to try to get in place better reporting systems across the board to try to quantify the outcomes of those actions.
Senator O'SULLIVAN: Thank you. I appreciate your answer.
Proceedings suspended from 15:34 to 15 : 41