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Tuesday, 17 February 1987
Page: 42

(Question No. 4483)

Mr Jacobi asked the Attorney-General, upon notice, on 22 August 1986:

(1) Further to his answer to my question No. 2132 (Hansard, 11 February 1986, page 43), can he state the turnover volume in the deregulated foreign exchange market for the 6 months ending December 1984 as compared with the 6 months ending December 1983 in the regulated market.

(2) Is it a fact that under current procedures it requires little ingenuity to bypass the requirement that a tax clearance certificate be obtained before money is transferred to a tax haven; if so, what action will be taken to close this loophole.

(3) Will he give urgent consideration to establishing an inquiry into the extent of money laundering, particularly in overseas financial transactions, and to structuring appropriate monetary procedures to combat the role played by Australian financial institutions in assisting organised crime through illicit money laundering and in facilitating large scale tax avoidance.

(4) Will he ensure that this particularly complex issue is not referred to an inter-departmental committee.

Mr Lionel Bowen —The answer to the honourable member's question is as follows:

(1) As indicated in the Reserve Bank of Australia Bulletin for December 1984/January 1985, the daily turnover of Australian dollars in the deliverable foreign exchange market averaged $2,894 million for the six months ending December 1984 and $883 million for the six months ending December 1983. It should be noted, however, that the increased turnover in 1984 reflects a number of factors including the removal of most exchange controls in association with the floating of the $A in December 1983 and the authorisation of non-bank foreign exchange dealers from June 1984. This latter move has contributed to greater depth and competitive efficiency in the foreign exchange market.

(2) Under Australia's current foreign exchange arrangements persons wishing to buy or sell foreign currency in Australia must do so through a dealer authorised by the Reserve Bank. Under the terms of their authorities dealers are in turn obliged, before making foreign currency available to their customers for purposes of effecting a specified range of transactions, to either: receive a tax clearance certificate where the transaction is to be directed to a designated (tax haven) country; or, in the case of transactions directed to other countries, require the customer to complete a declaration form where the amount of the transaction exceeds $A50,000 or the foreign currency equivalent. These forms are then remitted to the Taxation Office by the dealer. It is an offence under the Banking (Foreign Exchange) Regulations to make a false statement in the declaration form.

The purchase by residents of Australia of foreign currency outside Australia and the placement by Australian residents of any amount of currency to the credit, in Australia, of non-residents is also subject to the tax screening requirements detailed above.

Moreover, where funds in excess of $5,000 are transferred from Australia other than through an authorised dealer (by, for example, the direct remittance of a bank or personal cheque) the institution in Australia ultimately required to give value to the instrument is obliged to report the transaction to the Taxation Office. Exchange controls also prohibit, without the Reserve Bank's authority, the sending of Australian currency notes and coins abroad and limit to $5,000 per person the amount of Australian notes and coins that may be taken from Australia in any journey.

As the honourable member will note, the above arrangements are quite comprehensive. The Government has no documentary evidence to support any claims of widespread avoidance of these requirements. I would also emphasise that the information which becomes available to the Taxation Office under these arrangements forms but one part of information which is available to it in detecting tax avoidance in Australia.

(3) & (4) It is not proposed to establish an inquiry into money laundering at this stage. However, on 28 September 1986 the Government announced its intention to introduce legislation dealing with the proceeds of crime. That legislation will also create money laundering offences and impose a number of obligations on financial institutions in connection with the verification of the identity of persons seeking to open an account and the retention of banking records. It is expected that the legislation will be introduced shortly. The Government is also examining the practicability of introducing requirements that financial institutions report certain cash transactions, including remittances of funds overseas.