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Wednesday, 1 November 2006
Page: 1

Mr RUDDOCK (Attorney-General) —I move:

That this bill be now read a second time.

The Anti-Money Laundering and Counter-Terrorism Financing Bill 2006 and the Anti-Money Laundering and Counter-Terrorism Financing (Transitional Provisions and Consequential Amendments) Bill 2006, the consequential bill, are the first part of a legislative package that will reform Australia’s anti-money laundering and counter-terrorism financing, AMLCTF, system. The primary purpose of the legislative package is to ensure Australia has a financial sector that is hostile to criminal activity and terrorism.

The reforms will bring Australia into line with international standards set by the Financial Action Task Force’s, or FATF’s, 40 recommendations and nine special recommendations on terrorism financing. The FATF recommendations provide an enhanced and comprehensive framework of measures for combating money laundering and terrorism financing.

Business has supported the development of this legislative package as it will ensure that Australia’s financial sector remains robust and internationally competitive. The international financial services sector must take into account adequacy of AMLCTF compliance when dealing with foreign counterparts and jurisdictions. Australian business faces reputational risk and financial loss if Australia fails to observe international standards.

As a significant contributor to the development and implementation of AMLCTF systems in our region, Australia needs to take the lead in meeting international best practice.

The current legislative package implements the first tranche of AMLCTF reforms covering the financial sector, gambling sector and bullion dealers as well as lawyers and accountants, but only to the extent that they provide services in direct competition with the financial sector. The second tranche will cover real estate agents, jewellers, lawyers and accountants. Work on the second tranche reforms will commence after implementation of the first tranche has been started. The second tranche legislation will be tailored to meet the particular needs of the small business sectors to which it will apply.

The Anti-Money Laundering and Counter-Terrorism Financing Bill will impose a number of obligations on businesses called reporting entities under the legislation, including customer due diligence, reporting, record-keeping and developing and maintaining an AMLCTF program. The banking sector will also be obliged to conduct due diligence on its correspondent banking relationships and ensure appropriate identifying information is included in international electronic transfers of funds.

Under the legislative package, the Australian Transaction Reports Analysis Centre, AUSTRAC, which will have a range of new regulatory functions, will receive an additional $139 million over four years. Further to its enhanced role as a financial intelligence unit, AUSTRAC will now have a significantly expanded role as the national AMLCTF regulator with supervisory, monitoring and enforcement functions over a diverse range of industry sectors. AUSTRAC will also have a major role in education, awareness raising and providing guidance on AMLCTF compliance for businesses.

The government is committed to ensuring that Australians understand their new obligations under the legislation and has provided $13.1 million for a public education and awareness program.

Consistent with the government’s commitment to reducing regulatory burdens on business, the legislative package implements a risk-based approach to regulation. Reporting entities will manage operational risks through AMLCTF programs developed in accordance with operational rules. AUSTRAC will monitor compliance with these programs and will assess the reasonableness of the entity’s risk management.

The risk-based regulatory approach recognises that reporting entities have the experience and knowledge needed to assess and mitigate risk. It will also help mitigate compliance costs by providing industry with the tools to concentrate their resources on areas where money laundering and terrorism financing risk is higher. Industry has endorsed the risk-based approach. Australia’s risked-based approach is similar to that taken in the United States and the United Kingdom.

The Anti-Money Laundering and Counter-Terrorism Financing Bill will be implemented in stages, with the most complex and costly obligations to be implemented 24 months after royal assent. This will allow industry time to develop necessary systems in the most cost efficient way. There will also be a period of 12 months after each stage is implemented during which AUSTRAC will focus on education, with punitive action only being taken if a business is making no reasonable attempt to move towards compliance.

The Anti-Money Laundering and Counter-Terrorism Financing Bill extends the current regulatory regime imposed by the Financial Transaction Reports Act 1988. This act was developed at a time when most financial transactions were conducted face to face and over the counter at branches of financial institutions. The Financial Transactions Reports Act regime needs to be upgraded to combat the substantial changes to money laundering and terrorism financing risks associated with the increase in cashless, non face-to-face electronic transactions and global development in value transfer technology.

Most of the provisions of the Financial Transactions Reports Act will eventually be superseded by the Anti-Money Laundering and Counter-Terrorism Financing Bill; however, those provisions which apply to cash dealers who are not reporting entities under the bill will continue to apply.

The new regime will impact on privacy but the impact is a proportionate response to the problems caused by money laundering and terrorism financing in the current climate of heightened organised criminal and terrorist activity. The legislative package includes provisions to ensure that the privacy of legitimate customers is not unnecessarily affected by the legislation. The government is confident that the legislative package strikes the right balance between privacy interests and the needs of law enforcement agencies for targeted information about possible criminal activity.

The government recognises that AMLCTF compliance may impact on small business. The first tranche of AMLCTF reforms will, however, affect only a small number of small businesses which will receive additional guidance and assistance from the government through AUSTRAC and the Office of the Privacy Commissioner. Initial funding of $1.8 million over four years has been provided to the Office of the Privacy Commissioner for this purpose.

Finally, I am pleased to say that the legislative package is the product of extensive consultation between the government, business and the community. In that regard, I would like to commend my ministerial colleague the Minister for Justice and Customs for the very extensive work that he has undertaken. Since December 2003 we have all been working together to develop a regulatory regime that is robust but ensures the impact on business is minimised. The government is now confident that the legislative package achieves a balance between the government’s law enforcement obligations and industry’s day-to-day operational reality. The government will continue to work closely with affected sectors in ongoing refinement of this new regulatory regime to ensure that the impact on legitimate business activity is minimised. I commend the bill to the House.

Debate (on motion by Mr Crean) adjourned.