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Tuesday, 21 June 2011
Page: 3369


Senator BRANDIS (QueenslandDeputy Leader of the Opposition in the Senate) (12:32): AUSTRAC oversees the compliance of Australian businesses defined as 'reporting entities' under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and the Financial Transaction Reports Act 1988. The legislation requires reporting entities to implement programs for identifying and monitoring customers and for managing the risks of money laundering and terrorism financing; report suspicious matters, threshold transactions and international funds transfer instructions; and submit an annual compliance report.

In its intelligence role, AUSTRAC provides financial information to state, territory and Australian law enforcement, security and revenue agencies and certain international counterpart agencies. The Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy Bill 2011 seeks to: (1) give effect to the 2010-11 budget announcement that AUSTRAC would recover the costs of its supervisory activities from 1 July 2011; (2) allow the minister for justice to determine by legislative instrument the amount of levy payable by a leviable entity in any given financial year; (3) provide for the collection of the levy imposed by the levy bill and related administrative matters, such as issuing notice of assessments and late payment penalties; (4) provide the AUSTRAC CEO with the power to waive part or whole of the levy or late payment penalty; and (5) amend the Anti-Money Laundering/Counter-Terrorism Financing Act to make it mandatory for reporting entities to enrol with AUSTRAC within 28 days of providing or commencing to provide a designated service.

The Senate Legal and Constitutional Affairs Committee conducted and inquiry into the bills and reported yesterday. I note that my colleague Senator Guy Barnett, the ranking Liberal senator on the committee, is in the chamber, and I expect that he will have a word to say on this matter in a moment. Liberal senators, under the able leadership of Senator Guy Barnett, noted the concerns raised by the Scrutiny of Bills Committee in its Alert Digest No. 5 of 2011. In that digest, the scrutiny committee drew attention to the potential for AUSTRAC to overcollect its regulatory costs. The coalition considers that this situation should be closely monitored. Liberal senators take the view that the current safeguard that has been proposed by the government of reviewing the calculation methodology after five years is inadequate because a five-year review period is too long—at least in the initial stages of the new scheme.

Liberal senators note that the first year in which the levy will be collected is the 2011-12 financial year. Given that the bills are therefore due to commence on 1 July 2011, the Liberal senators were concerned to ensure that adequate consultation and education has preceded the measure. This is what concerns the coalition: the rushed process and lack of proper consultation behind the introduction of these bills, particularly where there is additional red tape and expense for business as a result of them. That is a matter for which we hold the government responsible.

The committee heard concerns that the levy will place Australia and its financial institutions at a substantial competitive disadvantage. Citigroup's submission to the committee complained:

The levy will have unintended consequences in relation to Australia's ability to compete in the Asia-Pacific region given the additional significant costs that the levy will impose on Australian financial institutions. We recommend that the composition of the levy be re-assessed to ensure a more equitable distribution reflective of the designated services that AUSTRAC monitors and supervises.

The government's rationale for basing the large entity component of the levy on the earnings of the entity or group is that AUSTRAC incurs greater expenses in regulating larger entities because larger entities have more customers and usually provide more complex products. However, this calculation does not take into account the extent to which a leviable entity's earnings are related to the provision of designated service.

Under the formula prescribed by the bills, an entity with high earnings may incur a large entity component even though the entity only provides a small volume of designated services. There therefore exists the potential that the levy may have a disproportionate effect on those large entities which only provide designated services as an incidental part of their business. The Australian Bankers' Association Director, Tony Burke, said the government's clear objective was to recover costs rather than to provide any benefit to those subject to the regulation. He said:

As the paper currently stands, the potential cost of compliance would be high.

Charge-backs to internal groups and agencies would add significant overheads in tracking costs and reconciling payments.

The Institute of Chartered Accountants Executive General Manager, Lee White, told the Australian newspaper on 17 January this year that members already incurred signifi­cant costs in supporting AUSTRAC's regulatory aims and it was unreasonable to ask them to bear more. He said:

Our members provide legitimate services to clients who overwhelmingly are law-abiding individuals and businesses.

If these legitimate services are exploited by criminals, it is these wrong-doers who create the need for regulation and who should contribute to the costs through the confiscated proceeds of their crimes.

These concerns are, in the coalition's view, legitimate, and accordingly we will closely monitor the effects of the legislation. To alleviate our concerns and to facilitate parlia­mentary oversight of the effects, including the possible unintended conse­quences to which I have adverted, I can foreshadow that the coalition will be moving amendments in the committee stage of the bill. The amend­ments will provide for a review of the operation of the legislation and the levy calculation methodology after two years operation of the regime, particularly having regard to the regulatory and fiscal burden on small business, and a moratorium on late payment penalties for the first six months of the regime's operation to allow for an appropriate transition and for small busin­esses to be properly informed of their obligations.

These two amendments reflect recommendations made by the Liberal senators on the Legal and Constitutional Affairs Legislation Committee inquiry. The Liberal senators who participated in that inquiry recognised the importance of ensuring that AUSTRAC can continue 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. The coalition acknow­ledges the importance of introducing a supervisory levy to enable AUSTRAC to recover the costs of its supervisory activities. For that reason—subject to the reservations that I have expressed, which will find form in our amendments—we support the bill.

Whether the bills will achieve their aims without imposing an unnecessarily heavy regulatory and fiscal burden remains an open question. The opposition's amendments will assist the parliament in making the necessary assessment when the new regime has had two years of operation against which to assess its workability. Subject to those reservations, the coalition supports the bills.