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Monday, 11 May 1987
Page: 2947


Mr JACOBI(9.07) —I rise to congratulate the Attorney-General (Mr Lionel Bowen) on this complex piece of legislation and the two complementary pieces of legislation. I wish to say at the outset that corruption and organised crime in a number of countries have forced governments to intervene in the confidentiality of relationships between the client and his banker, and disclosure of accounts is now required by law. Obviously, banking policies have economic effects, some of them so serious and negative for the individual as to be either criminal now or soon to be recognised as such. It is a sobering thought that with global operations of transnational companies and finance houses, governments can no longer control their economies by the policies of the national banks. Funds slushed from one side of the world to the other can make fortunes in marginal gains on exchange rates and cause devaluations that have impoverished millions on fixed incomes. How long will the majority permit a select minority such awful, self-perpetuating power to transfer wealth more devastatingly than any highwayman?

To counter that, it is necessary to have a co-ordinated approach between the various investigative and law enforcement bodies of the Commonwealth, and to minimise the potential for territorial preoccupations to prevail, thus reducing effectiveness. Because of a broad spectrum of techniques by various types of financial institutions they are able to transfer funds to or from foreign countries whose laws, customs and practices operate to place potentially incriminating financial and business records beyond the reach of law enforcement authorities. Such techniques include the use of courier services, electronic funds transfers and the processing of funds through layers of fictitious entries. In recent years increasing numbers of persons have mastered the details of modern technology, international finance, and foreign secrecy laws to create a select fraternity of money laundering professionals. As a result, organised crime today uses banks and other financial institutions as routinely as legitimate businesses use them.

The investigation and subsequent prosecution processes can be long, especially in the area of complex fiscal fraud. In the course of investigation, it frequently becomes apparent that the highly material information held by banks has in fact been destroyed in the meantime. This information takes the form of pay-in slips, cheques, telegraphic transfers and bank statements. Those are held by banks on average for four years, after which they are destroyed. However, as we all know, banks are required to maintain their own accounting records for periods of seven years, pursuant to section 267 of the Companies Code. In practice, it is common amongst banks to retain customer bank statements for the period required by statute and to destroy all other documentation. Cheques constitute prime evidence in any commercial investigation, and the ability of customers to recall and destroy paid cheques can and does assist in the concealment of all sorts of crime.

A number of solutions to the problems have been adverted to by Costigan, Stewart, investigators McCabe and Lafranchi and special prosecutors Gyles and Redlich. In relation to the period banks should be required to retain customer records, special prosecutor Redlich, and Stewart, considered that seven years was the minimum standard complementary to existing provisions of the Income Tax Assessment Act and the Companies Code. I understand that this legislation overcomes that problem.

The points that have best stood the passage of some years are as follows: First, beyond question there has been an urgent need for treaty arrangements to be concluded with other countries whereby evidence of transactions which form part of a course of criminal conduct can be gathered from those other countries for the purposes of proof in civil and criminal proceedings in Australia.

Secondly, it is plainly untenable for the Commonwealth to leave its Evidence Act unamended on the point of proof of these foreign transactions in its own civil and criminal proceedings. There can be no justification for having different rules applying to Commonwealth civil and criminal proceedings depending on the state in which those proceedings are brought. Thirdly, I have always contended that there should be laws that make it a criminal offence to open and use a bank account in a false name or a company and trading name that is not duly registered under the Companies Code or business names registration legislation. The most effective way of ensuring that this prohibition is observed in practice would be to have an ancillary or supporting provision that makes it an offence for any bank officer to be knowingly concerned in the opening of such accounts. We intend to block that gap.

As to the requirement that the private banks retain customer records for a period of seven years, I believe this whole issue needs to be rethought in the light of the growing development of the electronic funds transfer system. The way that the banking system has operated to date has been that all vouchers created by a customer on an account, no matter at which bank they are tendered, are ultimately returned to that customer's branch and stored on that customer's file. It was therefore a simple matter to execute a warrant and obtain all the vouchers relating to a suspect person's banking transactions. Incidentally, that is open to question. However, with EFT the vouchers will not be returned to the customer's branch but rather will be stored as they are submitted at the receiving bank, whether it be a branch of the customer's bank or some entirely different organisation that simply accepts the cheque. Plainly, from the banking point of view, this system will be far more efficient for the banks. It does, however, require a complete rethink of the evidentiary provisions relating to the proof of bank records. This is long overdue.

Obviously, it is plainly in the Commonwealth's interest to review its Evidence Act in the light of changes in the banking system. It is time we had a Commonwealth Evidence Act. I ask the Attorney-General to consider that it be made a matter of priority. The Act should be kept up to date with changes in the market-place rather than have a situation develop where change is brought about only after the system has ground to a complete halt. How often are we obliged to do that? Plainly, and no doubt correctly, the Government has decided that it is in the public interest-and, indeed, it is a necessity-that the Australian economy internationalise. Accordingly, much of the thinking in terms of tightening up requirements for the movement of money across Australian borders no longer accords with national priorities. At least this legislation addresses many of these issues.

Let me make a number of constructive observations and recommendations that I hope the Attorney-General will take on board. Indeed, I have studied the Redlich 1983-84 report, and it reinforces for me the ineffectiveness of having a tax regime that is substantially based on income tax. Nowadays, because of the internationalisation of the banking systems, it is easy for even moderately small businessmen simply to transfer their income out of countries where there are high income taxes. There can be no hope nowadays of the income tax collectors ever being able equitably to enforce a regime that is practically wholly based on income tax. Indeed, the trend in Australia caused by the overemphasis on income tax has been for the Australian Taxation Office to become a vast bureaucratic detective agency rather than an efficient tax collector. In addition, the reliance on income tax has resulted in a massive waste of national resources committed to commissions of inquiry, prosecutions, investigations and so on that have been required to shore up the current tax regime. After all, any accountant or businessman worth his salt can now, within a day or two, move funds around the world in a manner which it would take years for income tax investigators to try to unravel. In such an equation the income tax investigator can never win. The society that relies entirely on income taxes is inevitably cheated. The answer must lie in having some measure of consumption and/or turnover taxes attaching to individual transactions within an economy.

There has been a lot of talk about tax evasion and the black economy. My attention was drawn to an excellent article that appeared in the Bulletin last April entitled `Kiwi black economy pales at consumption tax onslaught'. The article states:

Douglas last July estimated some $NZ2.7 billion in a full year from the goods and services tax (GST). Now independent research groups are talking about $NZ1 billion more than that. What is certain is that 275,000 companies have registered for goods and services tax, which is 95,000 more than the department predicted.

Therefore, based on income tax returns, the New Zealand taxation authorities estimated a maximum number of 180,000 companies to be trading in New Zealand. They were out by some 53 per cent. Does anyone doubt that the situation in Australia would be similar? Of course, now that those 95,000 extra companies have come to light by virtue of the goods and services tax, income taxes can be collected from them and those involved with them. It is a measure that needs to be examined in depth in this country.

In December 1983, the Australian dollar was floated and most of the exchange rate controls were abolished. In June 1984, the Treasurer (Mr Keating) announced that 40 non-bank financial institutions were to be granted authority to trade in foreign exchange. However, these controls have now been significantly lifted. There remains the necessity to get a tax clearance certificate if the application is to transfer money to a tax haven. It does not require much ingenuity to bypass that requirement.

It has been demonstrated overseas, and it is starting to be demonstrated in this country, that the taxation weapon, coupled with confiscation of assets type legislation, is a very powerful weapon in the fight against criminal activity. Unless some steps are taken to correlate the information held by banks, other financial institutions and the Taxation Office in relation to movements of money in and out of this country there will be no accurate overall understanding of the extent of the problem. In these circumstances there is an urgent need to set up an inquiry so that this knowledge can be obtained. I have put this on the Notice Paper repeatedly. Under no circumstances should we go through the same process as we have done, that is, through an interdepartmental committee of inquiry. It should not be part of the Taxation Office; its purpose should be to discover the extent of money laundering involved in overseas transactions. I just want to repeat that I have always supported the Costigan approach on this particular aspect of combating organised crime. I quote from Costigan:

It should be constrained by the same kind of secrecy provisions-

that is, an outside inquiry-

as operate under section 16. It should be required to report to the Government as to the extent of its findings in as short a time as is consistent with the efficiency of its investigation. It should have:

(a) a liaison officer in each Corporate Affairs Commission with one person on staff whose task would be to maintain contact with such officer;

(b) an officer seconded from the Taxation Office;

(c) two persons with expertise in the foreign exchange field; one should be from the Reserve Bank and one with extensive experience in the private sector;

(d) an officer from Customs.

It may recommend the setting up of appropriate monitoring procedures which, without interfering with the deregulation of the foreign exchange market, would make it less useful to those who wish to use that market for illegitimate purposes.

That is long overdue. Such an organisation should be constantly watching these areas and should not merely be set up to report and then be disbanded.

I conclude with a few simple observations. Australia is not an island. It is a trading nation operating in the international market and needing the tools provided by the international community to do so. Like other countries, it finds that those tools are on occasions abused, and their abuse is difficult to reference solely to national laws and jurisdictions. Too frequently we are far too out of date before we come to grips with problems. International co-operation is growing and essential. A decision as to the extent and nature of such co-operation should be taken on a proper factual basis. I urge the Government to take the steps of the kind suggested by these facts. In addition, whatever may be the Opposition's view, I believe that the overwhelming majority of Australian people support the requirement for a high integrity identity card system, that is, the Australia Card.


Mr Slipper —No way!


Mr JACOBI —The majority of the Australian people in poll after poll have shown that. Laws of evidence have to be modernised to take account of modern information handling techniques, be they computer disks or microfiches. Again, I ask the Attorney to make it a matter of priority that we bring in a Commonwealth evidence Act as soon as possible. There should also be a requirement that all outflows of cash must be reported at the point of departure, a breach of which would result in the forfeiture of the cash. This is not an exchange control but merely information collection. There should perhaps also be a lowering of the limit to $1,000.

Finally, something that I think we will place on the statute book in subsequent legislation, and something for which I have asked the Attorney time after time, is the very constructive measure in statutes in the United States of America which grants bank officers immunity where they detect crooked transactions.

I compliment the Attorney-General. This piece of legislation, the two complementary pieces of legislation and the one that I hope will be brought in by the Government represent a very comprehensive approach. They are what has been needed for a long time. It has been well understood by the Attorney that we need a multifaceted approach if we are to combat this particular aspect of crime. It is with pleasure that I support these measures and, incidentally, the complementary piece of legislation to be introduced into the House.