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Wednesday, 28 February 2007
Page: 18


Mrs VALE (10:27 AM) —I appreciate the opportunity to speak on the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2007. This bill makes technical amendments to the legislation affected by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. Besides addressing technical issues, the bill takes into account concerns raised by reports from the Senate Standing Committee on Legal and Constitutional Affairs and the Senate Standing Committee for the Scrutiny of Bills.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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