Senator CAMPBELL (Parliamentary Secretary to the Treasurer)(4.25 p.m.) —I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard .

Leave granted.

The speeches read as follows—

FINANCIAL TRANSACTION REPORTS AMENDMENT BILL 1996

The principal object of these amendments is to give effect to several recommendations of Checking the Cash : A Report on the Effectiveness of the Financial Transaction Reports Act 1988 (FTR Act) by the Senate Standing Committee on Legal and Constitutional Affairs, 1993.

Honourable senators will recall that the principal act was part of the Commonwealth's package of legislation, developed following the Costigan Royal Commission into the Painters and Dockers Union, to combat organised crime.

It erects barriers in Australia's financial sector to discourage use of the sector by criminals and allows the provision of financial intelligence to law enforcement and revenue agencies.

It plays a major role as an intelligence tool, able to expose the illicit movement of money, particularly cash, and to facilitate the following of the money trail, both back to its source to identify the financiers and organisers of criminal enterprises, and outwards to locate the proceeds of crime, which may then be available for confiscation under the provisions of the Proceeds of Crime Act 1987, another component of the anti-organised-crime package.

AUSTRAC is the agency constituted under the FTR Act to receive, analyse and distribute to law enforcement and revenue agencies information received from the cash dealers covered by the legislation.

The recommendations of the Senate committee which were accepted by the Government and to which these amendments give effect are:

Recommendation 12—State and Territory revenue authorities to be allowed access to FTR information;

Recommendation 15—an expanded definition of `transaction' to include, for the purpose of the reporting of suspicious transactions, preliminary negotiations which do not proceed to a concluded transaction;

Recommendation 16—suspect transaction report information to be inadmissible in court proceedings;

Recommendation 18—to increase the reporting threshold for imported and exported currency and to define the point at which currency is considered to have been exported;

Recommendation 19—to require bullion sellers to identify customers.

The other main features of the bill are:

It establishes a regime of reporting of significant transactions by solicitors.

It consolidates AUSTRAC's existing powers of inspection, that is, powers to access and examine the records and record keeping systems of persons required to keep records under the act.

It updates the penalty provisions of the act in accordance with current drafting practices, and aligns the quantum and expression of penalties with those in other Commonwealth statutes.

It updates other specific provisions that contain superseded terminology or are otherwise in need of modernising; and, finally

It makes minor technical amendments to correct minor drafting errors.

As honourable senators will have noticed, many of the proposed amendments are of a legislative maintenance or house-keeping nature, of little effect other than to improve the useability or increase the clarity of the principal act.

I will speak in detail only about those proposed amendments which have a significant impact on the policy of the legislation.

First, let me mention the background to the proposal that State and Territory revenue authorities should have access to FTR information, leading to the proposed amendment of subsection 27(1) by Item 52 of Schedule 1.

The value of FTR information was brought home to States and Territories in the course of the National Crime Authority task force known as "Operation Quit", which involved the cooperation of the State and Territory revenue authorities.

That was a task force established in 1990 following a preliminary investigation into suspect transaction reports which ultimately uncovered massive tobacco licence fee fraud covering several jurisdictions.

The recoveries by the affected jurisdictions as a result of the task force were at least $10 million up to $20 million.

When the task force was wound up, the State and Territory revenue authorities ceased to have access to FTR information.

Understandably reluctant to give up a source of intelligence of such proven value in protecting the revenue, they made submissions to the Senate Standing Committee seeking regular access.

The committee was persuaded that their continued access was both reasonable and in the public interest.

Its only reservation was the concern that the privacy safeguards of the Privacy Act 1988, central to the Commonwealth legislation, would not apply to the State and Territory revenue authorities.

As honourable senators may know, there is no equivalent State or Territory privacy legislation which would apply.

The proposed amendment deals with the privacy concerns by requiring a revenue authority of a State or Territory to undertake that it will comply with the Information Privacy Principles set out in section 14 of the Privacy Act before the Director of AUSTRAC may authorise it to have access to FTR information.

That would appear to place the revenue agencies on a similar footing to Commonwealth agencies which are subject to the Privacy Act.

Failure to abide by the undertaking could result in loss of access to the FTR information.

Item 16 of Schedule 1 amends section 3 by inserting subsection (7), adopting the committee's recommendation to make it clear that a `transaction' includes a proposal or negotiations for a transaction, in order to include negotiations terminated before completion.

`Transaction' is not defined in the principal act, and simply has its normal meaning.

In some situations suspicion may actually arise only from the fact that the person did not complete the transactions and that may occur upon learning of a requirement of the act.

There is a clear investigative advantage in permitting as wide a range as possible of suspicious activity to be brought within the ambit of the act.

Item 30 of Schedule 1 amends section 16 of the act to make it clear that certain material in relation to suspect transaction reports is not admissible in any legal proceeding other than prosecutions under sections 29 or 30 for offences involving a cash dealer giving false and misleading or incomplete information in relation to obligations under the act.

In the course of consultation in developing this proposal, its purpose has sometimes been misunderstood.

It is not possible for the defence of an accused person to be unfairly impaired by the proposal.

Indeed, it is likely that the type of material covered by the provision would normally be held inadmissible in any event, failing to pass the test of relevance or on grounds of public interest immunity.

Suspect transaction reports, the information contained in them, or information about whether such a report was prepared can never be evidence as to whether or not a person committed a particular offence or whether an investigation was properly carried out.

That material or information is purely intelligence, a possible trigger for an investigation to obtain admissible evidence to prove a particular offence.

However, from time to time attempts have been made by defence counsel to subpoena such material and the appropriate officer of a cash dealer, usually a bank teller.

Because of the nature of the material, the purpose of such a subpoena can only be a form of fishing expedition, perhaps to discredit the teller in some way, or to confuse the jury about the significance of the material.

Because such attempts have occurred, tellers are nervous about being subjected to hostile cross examination and, for several years, financial sector unions have sought protection for their members.

There is undoubtedly potential for any successful attempt to cross-examine a teller in an aggressive or humiliating way to permeate rapidly throughout the industry.

The effectiveness of the highly valued suspect transaction reports depends almost entirely on the willingness of front-line bank officers to observe the behaviour of clients and the nature of their transactions.

If a person's behaviour or transaction arouses suspicion that a taxation offence or a serious criminal offence may be involved, the teller files a report under section 16 of the FTR Act.

If tellers become intimidated it is likely that they will cease to form relevant suspicions and an invaluable source of criminal intelligence will dry up at its source.

However, I must emphasise that the admissibility of potentially relevant evidence that may be given by officers of financial institutions will not be affected.

Tellers, or any other officer if appropriate, may be called to give evidence, and be cross-examined on it, as to the identity of a defendant or the fact that a transaction occurred.

The final major amendment which I propose is contained in new section 15A of the principal act, Item 26 of Schedule 1 of the bill.

That is not an amendment which was recommended by the Senate committee.

The Government has decided that the Financial Transaction Reports Act should be amended to require solicitors to report to AUSTRAC all transactions with their clients of $10,000 or more in cash—that is, in currency.

They would also be required to include in the report particulars of the client's identity, as known to them.

Over a decade ago, in 1984, the Costigan Commission, the Royal Commission on the Activities of the Federated Ship Painters and Dockers Union, reported that some solicitors had let their trust accounts and perhaps their strong rooms be used as a means of parking and laundering illegally obtained funds.

The Commission noted that, and I quote its Report

"There is no doubt on a great deal of the evidence before me that certain solicitors have allowed their trust account, if not their strong rooms, to be employed as repositories for monies, the source of which, on any rational view, could only be illegal enterprises."

The Commission's Report goes on to say that "By depositing monies with such solicitors, some hope or expectation is held that law enforcement agencies will have difficulty in locating the funds and in seeking explanations for them."

More recently, in 1991, the National Crime Authority undertook a study into money laundering in Australia.

It found that solicitors had often played a part in money laundering operations by assisting in the purchase of property in a way that disguised the source of the funds or the identity of the owner, for instance the use of false names, or "nominee companies" and through trusts.

The NCA found that solicitors also assisted money launderers by placing cash proceeds in trust accounts, for instance before settlement of property purchases, or for sending overseas (by wire transfer) or for returning to the criminal in the form of a loan.

Another technique the NCA reported was used by solicitors was the arranging of false loans with other parties on behalf of criminals.

The loans were repaid with the proceeds of criminal activities.

Honourable senators may also recall that evidence presented to the Senate Standing Committee on Legal and Constitutional Affairs in 1993 indicated that solicitors in some areas of Australia (in particular, suburban practices in Sydney, Melbourne, Brisbane and the Gold Coast) are handling significant amounts of cash on behalf of clients.

The present exclusion of solicitors from the reporting provisions of the FTR Act could represent a loophole capable of being exploited by criminals seeking to evade those provisions for the purpose of evading tax or laundering the proceeds of crime.

The purpose of the anti-organised crime legislation was to create an environment hostile to the successful commission of crime, especially those crimes, such as drug offences, which generate large quantities of cash that needs to be laundered and which are likely to be associated with organised criminal enterprises.

Any identified loophole which assists those seeking secretly to move or launder cash must be closed to maintain the integrity of the system.

I should make it quite clear that solicitors would not be subject to all the requirements which apply to cash dealers under the FTR Act.

They will not have to carry out the client identification requirements that apply to account opening; they will not be required to report suspect transactions, international funds transfer instructions, or to maintain the same record keeping systems as cash dealers.

Their obligations will be limited to reporting cash transactions of $10 000 or more, providing particulars of the client's identity as known to them and, if requested, providing access to records and record keeping systems to authorised AUSTRAC officers.

The obligations are not onerous.

Solicitors who never receive cash of $10 000 or more from a client will have no obligations.

There will be no impact on such a practice at all, apart from the requirement to submit records from time to time for the inspection of AUSTRAC officials performing their compliance monitoring functions.

Those monitoring powers are set out in proposed new section 27D in item 59 of Schedule 1.

Proposed section 27E lays down the conditions which apply to an authorised AUSTRAC officer, including the giving of written notice and confining the inspection to business hours.

The solicitor is obliged to comply with the notice.

Failure or refusal to comply with the notice, or to comply with the reporting requirements of section 15A, constitutes an offence which attracts a penalty of two years imprisonment (subsection 28(3)).

The remaining provisions of the bill improve the effectiveness of the principal act but do not introduce new policy or make any substantial changes.

The opportunity is taken to insert a new Part VIA in the act (Item 59 of Schedule 1) to consolidate the inspection powers of staff of AUSTRAC.

There is no substantive change to the powers.

The bill inserts a new Part IIIA (Item 49 of Schedule 1) dealing with bullion sellers.

The amendments require any person who is in the business of selling bullion to identify their customers, in the same way as a financial institution identifies its customers who open or operate accounts.

The amendments also rectify some technical problems with the definition of bullion dealers whereby some were able to escape the operation of the act, hence the alteration in concept from a bullion dealer to a bullion seller.

The remainder of the bill makes technical amendments to update the penalty and offence provisions, eradicate superseded terminology, and correct minor drafting errors.

They are fully described in the explanatory memorandum.

I commend the bill to the Senate.

TRANS-TASMAN MUTUAL RECOGNITION BILL 1996

The purpose of the Trans-Tasman Mutual Recognition Bill is to establish a scheme for the mutual recognition of regulatory standards for goods and occupations adopted in Australia and New Zealand. The principal aim of mutual recognition is to remove impediments to trans-Tasman trade in goods and the mobility of labour caused by regulatory differences among Australian jurisdictions and New Zealand.

The bill implements the trans-Tasman mutual recognition arrangement, which was signed by the prime minister, premiers and chief ministers at the meeting of the council of Australian governments held on 14 june 1996. The arrangement was subsequently signed by the prime minister of New Zealand on 9 july 1996.

The arrangement is consistent ,with the government's election commitment to reduce the regulatory burden and compliance costs faced by business and to establish a protocol for the reciprocal recognition of professionals' standing in order to promote the objectives of the closer economic relations trade agreement with New Zealand

The scheme is a fine example of what can be achieved cooperatively by the Australian federation. The states and territories were equal partners in the development of the trans-Tasman mutual recognition arrangement and the related Australian legislation has been drafted by new south wales

The government would like to acknowledge the positive contribution made by Australian heads of government in fostering and promoting this important development.

The proposed scheme is based on the framework of the—existing Australian Mutual Recognition Agreement, signed by Australian heads of government in May 1992. Legislation implementing the agreement has been proclaimed by the Commonwealth and all,states and territories. The Commonwealth legislation, the Mutual Recognition Act 1992, commenced in 1993.

The practical benefits of the Australian mutual recognition scheme have included:

Greater choice for consumers;

Reduced compliance costs for manufacturers;

Economies of scale in production leading to lower product costs;

Greater cooperation between regulatory authorities and the accelerated development of national standards where appropriate;

Greater discipline on individual jurisdictions contemplating the introduction of new standards and regulations; and

Increased movement of service providers and freedom for service providers to practise in jurisdictions in which they are not resident.

At the time of signing the domestic Australian mutual recognition agreement, Australian heads of government agreed to review in due course with New Zealand the potential benefits of participation by New Zealand in a scheme implementing mutual recognition principles.

Australian and New Zealand ministers subsequently agreed that the framework for mutual recognition reflected in the Australian Mutual Recognition Act 1992 should be the basis for a scheme implementing mutual recognition principles in New Zealand and Australian jurisdictions, with necessary changes to reflect the trans-Tasman nature of the scheme.

The trans-Tasman mutual recognition arrangement was finalised after the release of a discussion paper in April 1995 by the Council of Australian Governments and the government of New Zealand. Input was sought from industry, standards setting bodies and the professions, and approximately 142 written submissions were received. The comments received during the consultation process have been taken into account in deciding upon the final lists of exemptions and exclusions from the scheme.

Principles

The trans-Tasman mutual recognition arrangement is a non treaty instrument which requests and empowers the Commonwealth to pass an act to give effect to two simple principles of mutual recognition.

The first is that a person registered to practise an occupation in Australia can seek automatic registration to practise an equivalent occupation in New Zealand and vice versa.

A person will only need to give notice, including evidence of home registration, to the relevant registration authority in the other jurisdiction to be entitled immediately to commence practice in an equivalent occupation in that jurisdiction.

However, I stress that a person will only be entitled to practise an equivalent occupation. Equivalence means that the activities carried out by practitioners registered in each country must be substantially the same. This will be the case in most instances. However, if significant differences do exist between occupations, a registration authority may impose conditions on a person's registration in order to achieve equivalence.

In essence, the scheme creates a situation similar to the regime in Australia for drivers' licenses, whereby individuals do not have to re-sit a driving test when they move from one state to another. It will apply to all registered occupations in Australia and New Zealand with the exception of medical practitioners.

The second principle is that a good that can be legally sold in a participating Australian jurisdiction can be sold in New Zealand and vice versa, as long as it meets the regulatory requirements for sale in the jurisdiction in which it was manufactured or first imported.

This means that goods which can be sold lawfully in one jurisdiction may be sold freely in another, even though the goods may not comply with all the details of regulatory standards in the second jurisdiction. Under mutual recognition, producers in Australia will have to ensure that their products comply with the laws only in the place of production. If they do so, they will then be free to distribute and sell their products in New Zealand without being subjected to further testing or assessment of their product.

Implementation mechanism

The Commonwealth bill forms part of a larger legislative scheme that involves the enactment of bills by the states, the Commonwealth and New Zealand. The larger legislative scheme has an Australian component and a New Zealand component.

The trans-Tasman mutual recognition bill 1996 of New Zealand is concerned with the New Zealand component of the legislative scheme. That bill was introduced into the parliament of New Zealand on 18 July 1996. However, passage has been delayed by the New Zealand election.

In drafting the New Zealand bill every effort has been made to closely reflect the Australian legislation, whilst also recognising New Zealand's different legislative conventions. This approach is intended to minimise the potential for disputes to arise from differences in the interpretation of the legislation.

The mechanism for implementing the Australian component of the scheme is similar to that used to implement the Australian mutual recognition scheme. To come into effect, the scheme requires at least one state to enact legislation referring the enactment of a mutual recognition act to the Commonwealth Parliament.

New South Wales has agreed to do so, and the Trans-Tasman Mutual Recognition (New South Wales) Bill 1996, was proclaimed on 4 December 1996. The New South Wales bill refers to the Commonwealth parliament, using the mechanism provided by Section 51 (XXXVII) of the Commonwealth Constitution, the power to enact an act in the terms, or substantially in the terms, set out in the schedule to that bill.

The additional powers of the Commonwealth will be limited. The states and territories are not granting extensive new powers to the Commonwealth to regulate goods and occupations. Rather, the Commonwealth is being empowered, to the extent to which I such powers are not otherwise included in its legislative powers, to pass a single piece of legislation that will prevail over inconsistent state and territory legislation. Amendments to the Commonwealth act will require the unanimous agreement of participating Australian jurisdictions.

The Commonwealth act will provide a comprehensive scheme for mutual recognition which will operate independently of other state laws and therefore will not require modification of those laws to enable its implementation. This is achieved through section 109 of the Commonwealth constitution, which provides that a Commonwealth act prevails over a state act to the extent of any inconsistency.

The legislation will apply to all states that refer power to enact the Commonwealth act or request enactment of it, or adopt the Commonwealth act afterwards under Section 51 (XXXVII) of the Commonwealth Constitution.

Operation of the scheme

The focus of mutual recognition is on the regulation of goods at the point of sale and on entry by registered persons . Into equivalent occupations in another participating jurisdiction. Mutual recognition will not affect the ability of jurisdictions to regulate the operation of businesses or the conduct of persons registered in an occupation. It is also important to note that laws that regulate the manner in which goods are sold, such as laws restricting the sale of certain goods to minors, or the manner in which sellers conduct their businesses, are explicitly exempted from mutual recognition.

Moreover, the scheme will not affect laws relating to quarantine, endangered species, firearms and other prohibited or offensive weapons, fireworks, indecent material, ozone protection, agricultural and veterinary chemicals, and gaming machines. Nor will the scheme affect Australia's or New Zealand's international obligations, intellectual property laws, customs laws, taxation laws or tariffs.

The scheme incorporates a temporary exemption mechanism giving participating jurisdictions the right to ban unilaterally, for a total of 12 months, the sale of goods in their jurisdiction in the interests of protecting the health and safety of persons or preventing, minimising or regulating environmental pollution. Before the temporary exemption expires, the ministerial council responsible for the affected good is required to determine whether a particular standard should apply to the good, and if so, the appropriate standard. A ministerial council determination can include whether to prohibit the sale of the good in question, and requires the endorsement of heads of government.

The scheme will also set in train so-called cooperation programs in a number of industry sectors. These will relate to therapeutic goods; hazardous substances, industrial chemicals and dangerous goods; road vehicles; electromagnetic compatibility and radiocommunications equipment; and gas appliance standards. Regulatory authorities in these areas will consider whether existing regulatory differences would be best addressed by either applying the mutual recognition principle to the affected goods, permanently exempting the goods from the operation of the scheme, or introducing harmonised standards for such goods.

For occupations, the legislation is expressed to apply to individuals and occupations carried on by them. Registered practitioners wishing to practise in another jurisdiction will be able to notify the local registration authority of their intention to seek registration in an equivalent occupation there and provide the required evidence. The local registration authority then has one month to process the application and to make a decision on whether or not to grant registration.

Pending registration, the practitioner is entitled, once the notice is made and all necessary information provided, to commence practise immediately in that occupation, subject to the payment of fees and compliance with various indemnity or insurance requirements in relation to that occupation.

To avoid costly and lengthy appeals processes in the courts, the Commonwealth Administrative Appeals Tribunal will hear appeals against decisions of Australian registration authorities, and a newly-created New Zealand tribunal will hear appeals against decisions of New Zealand registration authorities. The tribunals are required to cooperate to the maximum extent possible so as to ensure consistency in their determinations.

Conclusion

The trans-Tasman mutual recognition scheme builds on the mutually beneficial economic and trade framework which has developed under the Australia-New Zealand closer economic relations trade agreement, and is a logical extension of that agreement. It is also expected that the scheme will contribute to the development of the asia pacific region by providing a possible model of cooperation with other economies in respect of product standards, including those in the South Pacific and APEC.

The scheme reflects the high degree of confidence which exists between Australia and New Zealand in respect to each other's regulations, regulatory systems and decision-making processes. It is expected to remove regulatory barriers to the movement of goods and service providers across the Tasman, and to enhance the international competitiveness of Australian and New Zealand enterprises by encouraging innovation and reducing compliance costs.

I commend the bill to the Senate.

Debate (on motion by Senator Conroy) adjourned.

Ordered that the bills be listed on the Notice Paper as separate orders of the day.