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Thursday, 12 May 2011
Page: 3798


Mr BRENDAN O'CONNOR (GortonMinister for Privacy and Freedom of Information, Minister for Home Affairs and Minister for Justice) (10:18): I move:

That this bill be now read a second time.

The Gillard government recognise that organised crime is a significant national security threat, and a growing challenge, that costs the Australian community up to $15 billion a year. We are determined to protect the Australian community and businesses from the pernicious social and economic impacts of organised crime.

The government's Organised Crime Strategic Framework ensures that Commonwealth intelligence, policy, regulatory and law enforcement agencies are working together to prevent, disrupt, investigate and prosecute organised crime. Organised crime response plans targeting the key organised crime risks; the Criminal Intelligence Fusion Centre and a new Criminal Assets Confiscation Taskforce are key elements of the government's plan to combat organised crime.

And the common basis of these elements is tracking money flows, the life-blood of organised crime.

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is Australia's specialist financial intelligence unit. It provides information about potentially criminal activity to law enforcement agencies, which put it together with other intelligence to detect people smuggling, drug importations, black market weapons trade, and other serious and violent crime. This financial intelligence has a broad public benefit, and is funded from our taxes.

In addition, AUSTRAC is Australia's anti-money laundering and counter terrorism financing regulator. AUSTRAC's regulatory activities mitigate the risk of money laundering, terrorism financing and other organised crime.

Businesses regulated by AUSTRAC facilitate financial flows that provide opportunities for others to disguise the true origin or eventual use of funds. Regulation under the Anti-Money Laundering and Counter-terrorism Financing Act 2006 (AML/CTF Act), however, reduces the risk that business will be exploited for money laundering or terrorism financing purposes. Businesses that operate internationally also benefit from operating in a jurisdiction that meets international standards for combating money laundering and terrorism financing. It is appropriate that industry meet the costs of the regulatory systems that ensure the integrity of their operating environment.

Businesses that profit from services that are vulnerable to abuse for money laundering and terrorism financing have created the need for regulation by AUSTRAC.

Since 2002, the Cost Recovery Guidelines have recognised as a matter of principle that entities that have created the need for government regulation should bear the cost of that regulation.

In the 2010-11 budget the government announced that from the 2011-12 financial year, AUSTRAC would recover the costs of its regulatory activities from the businesses regulated under the AML/CTF Act. Cost recovery has not previously been applied to AUSTRAC as, up until AML/CTF Act commenced in 2006, AUSTRAC's regulatory functions were limited, and the AML/CTF Act did not fully become operational until March 2010.

This bill, together with the Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery (Collection) Bill 2011 and the Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery (Consequential Amendments) Bill 2011, gives effect to that measure. There has been extensive consultation with industry about how best to recover the costs of AUSTRAC's regulatory activities. Throughout this consultation process, the government has listened to the concerns of industry and substantial changes have been made to the proposed model to address these concerns.

In accordance with the Cost Recovery Guidelines AUSTRAC will be able to recover its supervisory budget.

The supervisory budget consists of four parts:

The business-as-usual cost of AUSTRAC's regulatory activities (including support services and costs associated with capital projects necessary to support regulation).

Support for small business to achieve better compliance outcomes. Some small businesses captured by the AML/CTF Act have faced challenges in implementing compliant AML/CTF programs. This component will include the development of simplified guidance materials and the development of AUSTRAC's website to enhance its usability for small business.

An amount to meet the legal costs associated with enforcement activities undertaken by AUSTRAC.

The establishment and ongoing costs associated with implementing and administering cost recovery.

AUSTRAC has no power to use the levy to determine its supervisory budget. AUSTRAC's supervisory budget will be determined as part of the usual budget process. For example, the efficiency dividend applies equally to AUSTRAC's intelligence and supervisory budgets.

The 2011-12 budget papers estimate the amount to be collected over the next four years at less than $30 million each year.

The total amount to be collected under the levy cannot be greater than the cost of AUSTRAC's regulatory activity. The amounts to be levied will be set in advance of the date at which the number of regulated entities enrolled with AUSTRAC is determined for levy purposes, accordingly there is a chance that AUSTRAC will overcollect or undercollect the levy. In the event of an over, or under, recovery of costs, a compensating adjustment will be made to the levy to be imposed in the subsequent year. The bill provides for this eventuality by setting a statutory upper limit for the amount that can be collected, which is marginally higher than the AUSTRAC supervisory budget, namely $33 million per annum, indexed.

The bill provides for the minister to determine the amount payable by each business each year. This will be set out in a ministerial determination, which is a disallowable instrument.

Under the bill, a reporting entity's liability to pay the levy in any particular year will be determined on the 'census day'. The census day in the 2011-12 financial year is the day determined by the AUSTRAC CEO. In future years, the census day will be 1 July or such other day determined by the AUSTRAC CEO.

The AUSTRAC levy is proposed to be a single annual charge comprising three components: a base component, a component for large entities and a component for transaction reporting activities.

The base component, to be paid by most businesses regulated by AUSTRAC, relates to the costs incurred by AUSTRAC in regulating all businesses. These expenses are incurred uniformly for all businesses, and the base component will be uniform.

The large entity component, to be paid by businesses with higher earnings, relates to the additional costs incurred by AUSTRAC in regulating larger businesses. The large entity component will be higher, the higher the business's earnings.

The transaction reporting component, to be paid by businesses depending on the volume and value of their reportable transactions—that is, threshold transaction reports and international funds transfer instructions. This relates to the additional costs incurred by AUSTRAC in regulating businesses which lodge large numbers of transaction reports, and/or transaction reports relating to large amounts of money.

The determination may specify a zero levy for an entity or class of entities. Remittance affiliates created by the Combating the Financing of People Smuggling and Other Measures Bill 2011 will be such a class of entities. This will include remittance affiliates like newsagents and post-office agents.

Sole proprietors and partnerships with employees or businesses employing less than five people will also be exempt from the base component of the levy. These businesses will not be invoiced if the levy amount calculated for that business in the financial year is less than $100, indexed.

Businesses that are not required to have or comply with an anti-money-laundering and counterterrorism financing program under part 7 of the AML/CTF Act will not be subject to a levy. The AUSTRAC CEO has indicated his intention to exempt small gaming machine venues from part 7 of the AML/CTF Act. This would mean that these businesses would not be subject to the levy.

A review of the calculation methodology is planned after five years, or earlier if there are material changes to the AUSTRAC operating environment. AUSTRAC will monitor the cost recovery approach on an ongoing basis.

The government appreciates the way in which businesses work collaboratively with AUSTRAC through our regulatory system to make it ever harder for organised crime and terrorists to move money around undetected.

This bill will ensure that AUSTRAC continues to provide a regulatory environment that maintains community confidence in financial flows, and minimises the risk to business of exploitation for money laundering or terrorism financing. I commend the bill to the House.

Debate adjourned.