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Economics References Committee
Inquiry into foreign investment proposals

BROWN, Mr Bradley, National Manager, Intelligence Partnerships, Australian Transaction Reports and Analysis Centre

COLLETT, Mr Chris, Deputy Chief Executive Officer Intelligence, Australian Transaction Reports and Analysis Centre


ACTING CHAIR: I now call representatives from AUSTRAC. Thank you for appearing today. Information on procedural rules governing public hearings and officers of the Commonwealth has been provided to you. I would like to advise witnesses that answers to questions on notice need to be sent to the secretariat by Wednesday, 19 August 2020. I invite you to make a brief opening statement should you wish to do so.

Mr Collett : I will make a very brief comment and then we are very happy to assist the committee in any way we can. Just for the committee's awareness, and as some senators would already be aware, AUSTRAC is Australia's anti-money-laundering and counterterrorism financing regulator and the national financial intelligence unit. As a regulator, we regulate just over 15,000 businesses—from banks to financial services, gambling services, bullion traders and digital currency exchangers—when it comes to their compliance and obligations under the AML/CTF Act 2006.

To give the committee a sense of scale, in 2019-20 AUSTRAC received nearly 170 million reports from our reporting entities. That covered everything from international funds transfers to threshold transaction reports and suspicious matter reports. As the financial intelligence agency, AUSTRAC provides financial intelligence to our law enforcement and national security partners and to human services and revenue partners across the Commonwealth and states and territories. We also work closely with private sector partners through our public-private partnership, the Fintel Alliance.

In addition to providing financial intelligence to partner agencies, AUSTRAC provides direct access to our data holdings to a whole range of staff across partners, allowing them to directly utilise our data. To give the committee a sense of scale, in 2019-20 that resulted in approximately 1.9 million searches of our data holdings by our partners. When it comes to foreign investment, AUSTRAC provides financial intelligence to Treasury and the ATO to support informed decision-making. On that note, we are happy to assist the committee as we can.

ACTING CHAIR: Thank you very much, Mr Collett.

Senator WHISH-WILSON: I've got particular interest today in this area and I want to ask some questions around your interaction with financial intelligence and money laundering. You may be aware that the committee's been looking at a case study which made the media in November last year called Operation Gethen, which I understand AUSTRAC, the Federal Police and Home Affairs were involved in. I might start by asking a few questions on that.

It was reported that, in cooperation with the Chinese ministry of public security, Operation Gethen had sought to probe the actions of a pair of Chinese nationals alleged to have engaged in money laundering. This bust was very high-profile. Your boss, Peter Dutton, was in the media saying it's a significant matter of public interest when foreign criminals are competing in domestic real estate markets with Australians trying to buy their first homes. Kate Ferry from the Federal Police was quoted as saying:

Money laundering … impacts our whole community by eroding the level playing field for Australian homebuyers and small business owners.

I understand you can't give us too many specifics, but did that bust come from the work of your agency and others or was it given to us by the Chinese government?

Mr Collett : Thank you for the question, but I have to say that, as you noted, Operation Gethen was an Australian Federal Police operation; AUSTRAC wasn't directly involved in that operation. I understand that AUSTRAC data would have been utilised by the Federal Police as part of their investigations. As I noted in my opening remarks, the AFP, as well as other government partners, can directly access our holdings.

Senator WHISH-WILSON: Okay. We can ask the Federal Police about this after lunch. I am just going to ask how this came about. So, yes, the AFP could access your data and your networks, but you weren't involved in actually catching those guys. Is that your message today?

Mr Collett : That's correct.

Senator WHISH-WILSON: Are you aware of how they were caught?

Mr Collett : I have a broad awareness of the operation, but it's really a matter for the AFP to speak to given AUSTRAC was not directly involved.

Senator WHISH-WILSON: Okay. Could I just go to a little bit of history now and look at both an external review of Australia's anti-money-laundering and counterterrorism financing laws and then an internal review from the Department of Home Affairs from 2016. I will start with FATF, the global Financial Action Task Force. Australia was the first jurisdiction to receive what was called a fourth round evaluation in 2015; is that correct?

Mr Collett : One of the first. Australia was in the first group of about half a dozen countries that went through the FATF's current mutual evaluation process.

Senator WHISH-WILSON: Why was it the case that Australia was one of the first to receive that?

Mr Collett : I'm not entirely certain of the order of FATF mutual evaluations. My speculation is that, given that this is a rolling process and the FATF itself is over 30 years, Australia as a founding member was in an earlier cohort and therefore it was Australia's turn to come round again. But, I must admit, I am just speculating. The way the FATF operates with mutual evaluations and the global network of regional bodies that sit beneath them is a rolling process of mutual accountability where the secretariats support assessors from different nations to conduct those mutual evaluations in due course.

Senator WHISH-WILSON: But we were put on what was called an enhanced follow-up remediation program; is that correct?

Mr Collett : The terminology sounds right. That is part of the follow-up process for the FATF.

Senator WHISH-WILSON: I understand that was over our failure to address laws to cover what we'll call gatekeepers. That was lawyers, accountants and real estate agents, basically. Is that your understanding?

Mr Collett : I couldn't, off the top of my head, go to the specifics as to why the FATF put Australia under enhanced follow-up. They have quite a range of mechanisms as to how countries are reviewed post a major mutual evaluation. I don't know the specifics, but certainly your comment about gatekeeper professions is correct. They are not covered by Australia's anti-money-laundering and counterterrorism financing regime.

Senator WHISH-WILSON: That's right, and it was pointed out that we were in breach of three recommendations on professional architecture around their reporting, commonly referred to as DNFBPs. I understand they were recommendations 22, 23 and 28 from the FATF. Was Australia noncompliant in reporting to you guys specifically from those gatekeeper professions?

Mr Collett : Sorry, Senator. I missed the second half of your question after you named the recommendations.

Senator WHISH-WILSON: I was just wondering why Australia is noncompliant in reporting from those gatekeeper professions.

Mr Collett : Ultimately it is a matter for government to determine the scope of Australia's money laundering and terrorism financing framework. As you'd be aware, the government has undertaken a progressive series of reforms to the AML/CTF Act. That's largely been driven by the 2016 statutory review of the AML/CTF Act, which I think you referred to in your earlier comments. There were reforms in 2017 that, amongst other things, brought the digital currency exchangers under the regime. There are reforms before parliament now on a range of aspects of the legislation. Any further consideration of reforms to the AML/CTF Act is a matter for government.

Senator WHISH-WILSON: I understand that, going to that review, in Australia we've only addressed 10 out of 84 previous areas that were looked at and that there's a lot more work that we need to do. As you say, that is underway. Are you referring to what's commonly called tranche 1.5 laws, the laws coming before parliament?

Mr Collett : Or phase 1.5—that was the legislation I was referring to that's currently before parliament, yes.

Senator WHISH-WILSON: Do you expect you'll get the phase 2 anti-money-laundering/CTF laws to remove those loopholes for gatekeepers? Is that something you're optimistic about?

Mr Collett : So, when you say phase 2, you're referring to the legislating of DNFBPs under the AML—

Senator WHISH-WILSON: Correct.

Mr Collett : As I said before, reforming legislation is a matter for government. These are issues that are being considered.

Senator WHISH-WILSON: Could I ask why it would be important to include the BPs? What is AUSTRAC's view on the importance of including them in reporting on money laundering?

Mr Collett : Sorry—I understand your question. There's a range of issues involved in that question, and it is a complex matter and one that different countries have grappled with in different ways. It's important, in my view, to consider an AML/CTF regime in the broader context of a country's law enforcement arrangements and, for that matter, economic arrangements. When it comes to DNFBPs and how they apply within the Australian context, from an intelligence point of view, any intelligence officer will always value more data, but that has to be weighed up against, for want of a better term, a cost-benefit issue. These matters involve regulatory burdens for sectors involved, and it's certainly important that any consideration that government may take is done in collaboration and consultation with industry and that it weighs up those competing issues and considers the broader context in which Australia is able to conduct its AML/CTF functions.

Senator WHISH-WILSON: Would you agree that 13 years of consultation is a long time, considering that's how long we've been looking at including those gatekeepers in these reporting requirements?

Mr Collett : Sorry—you're asking, 'is it a long time?'—

Senator WHISH-WILSON: Do you agree that 13 years of consultation is a long time already to include these gatekeepers in current anti-money-laundering/CTF laws?

Mr Collett : As I said before—

Senator WHISH-WILSON: Other countries [inaudible]—

Mr Collett : As I was saying before, the government has undertaken a series of progressive reforms to the act, and these matters need to be considered in their full context.

Senator WHISH-WILSON: But for 13 years they've been considered. I remember Senator Brandis saying in 2016 that it was a priority for the government, and we're still waiting [inaudible]. But I'm particularly interested in why they're important. The Australian Criminal Intelligence Commission's, the ACIC's, report in 2017 said: 'The most common professions exploited by organised crime include lawyers, accountants and real estate agents and brokers.' Do you agree with the statement in that report?

Mr Collett : I think you're referring to an AIC report from 2017—is that correct?

Senator WHISH-WILSON: ACIC—Australian Criminal Intelligence Commission.

Mr Collett : And what's the name of the report?

Senator WHISH-WILSON: I don't have the name in front of me, but I'll get it for you.

Mr Collett : Your comment sounds familiar.

Senator WHISH-WILSON: It was actually sought under FOI and it was made publicly available. I'll send it through to you. But do you agree, generally, that those professions that tend to set up the company structures that facilitate the kinds of transactions we've seen at Musselroe Bay, Operation Gethen, are exploited by organised crime and money-laundering?

Mr Collett : Certainly those professions can be exploited by serious and organised crime.

Senator WHISH-WILSON: And we've seen plenty of examples of that in the past. Have you noted that the UK, Hong Kong, Malaysia, Singapore, New Zealand and Canada have passed into common law reporting requirements for these gatekeeper professions?

Mr Collett : Yes, I am familiar—there's a range of different arrangements that countries have taken when it comes to these sorts of issues.

Senator WHISH-WILSON: I've seen the FATA estimate. Does AUSTRAC have an updated estimate of how much money is laundered by international criminal enterprises or kleptocrats through Australian real estate—commercial, residential or otherwise? Does AUSTRAC try to monitor that?

Mr Collett : They're certainly issues of interest to monitor. I don't have a specific number I can point to on that particular question.

Senator WHISH-WILSON: If you did, it'd be great if you could take that on notice. I understand that FATF were going through a process with Australia, but they've now [inaudible] review in place, so they've cancelled their mutual evaluation follow-up program with Australia. Is that your understanding?

Mr Collett : I think you're asking: has the FATF cancelled its follow-up?

Senator WHISH-WILSON: Yes.

Mr Collett : My understanding is that the FATF and, for that matter, its regional bodies, including the Asia/Pacific Group on Money Laundering in our part of the world, have postponed, for want of a better term. I don't believe it's cancelled per se. Clearly, all multilateral bodies are grappling with the challenges of the current COVID-19 pandemic. I would certainly expect that the FATF expects to continue with its broad mandate and functions. It's obviously very difficult. It met recently. Obviously, face-to-face meetings were not possible, but those meetings occurred via videoconferencing, and, from AUSTRAC's specific context as part of the global network of financial intelligence agencies, the Egmont Group, we met, again virtually, as best as one can, in global multilateral forums.

Senator WHISH-WILSON: Do you think it's a fair criticism labelled of Australia that we're tough on terrorists but easy on facilitators of money laundering? Do you think that's a fair criticism of Australia within the global context?

Mr Collett : No, I don't think that's a fair criticism at all. I think Australia has a very robust law enforcement mechanism that's built up of a whole range of capabilities across the Commonwealth, states and territories, and there is a very rigorous approach taken to serious and organised crime.

Senator WHISH-WILSON: I have some other questions, Chair, but maybe, if you want to, go to Senator Patrick and come back to me if there's any time.

Senator PATRICK: In your submission, you indicate that you support the Foreign Investment Review Board. I note that my understanding of exactly what AUSTRAC does is limited. For example, I know you receive advice about all transactions above $10,000. I'm just wondering—and you can give fictitious examples, if you like, to help—how you would help the Foreign Investment Review Board in the processing of an application. What sort of information might you provide to them? How might that be helpful? Indeed, perhaps post facto, post-acquisition, is there a role that you play in relation to that?

Mr Collett : To build on the comments that are in our portfolio submission, AUSTRAC responds to requests for information and intelligence, if you will, from the Treasury. In those requests, they'll provide us with information about the company or the individual involved, and then it's a matter of our intelligence analysts reviewing AUSTRAC's data holdings and other intelligence we may have access to and providing that advice to the Treasury.

Senator PATRICK: May that advice go to past conduct with these agencies or suspicious activity? I'm just trying to understand how you assist them.

Mr Collett : It really comes down to the material that is held within our data holdings, which is a result of the reporting that we receive from Australian reporting entities and other data and intelligence we may well have. I might ask Mr Brown, if he's able, to give you a fictitious example to build that up a bit.

Mr Brown : I would say that AUSTRAC's role, in some respects, is really looking at the character of the business and their previous engagement, if they have had any, with businesses within Australia. Obviously, when we're looking at foreign investment, we're looking at transaction activity that will involve a foreign jurisdiction with an Australian business or Australian businesses. AUSTRAC holds information of where people may have been engaged with Australian businesses previously, and that's the type of reporting that will sit within our advice back to Treasury for their consideration. Some of that is purely a fact—there will have been transactions. Some of them may already have investments in Australia. Therefore, what we're looking at, in some respects, is their ongoing bona fides and character and what they have been involved in. In terms of the question you asked about our ongoing engagement, it is probably limited in some respects, and we have been engaged with our colleagues at Treasury as to what role and what assistance we can have with the monitoring. I know it was discussed with the previous representatives who appeared before the committee about that sort of ongoing compliance, and we'll continue to engage with our Treasury colleagues as to what's possible in the future in relation to that.

Senator PATRICK: Thank you. In your submission, you talked about AUSTRAC receiving approximately 10 requests for information per annum. When you say '10 requests', is that 10 foreign acquisitions where they sought your advice? Is that what you mean by that?

Mr Brown : Yes, that's correct. And I can indicate that has increased more recently. Obviously, the threshold has been changed during the COVID period. Certainly, in the last period of January to June 2020, we have had 40 inquiries and 40 requests to provide assistance, so that's certainly a more recent increase in our support on particular matters, where we possibly can. I should say that in some of those it is actually a nil response. We may do a check and have nothing that we can provide from AUSTRAC in relation to that, just as other agencies also ask for advice from the Foreign Investment Review Board.

Senator PATRICK: Then it says that in some cases you're proactive in the supply of data to Treasury. Do you, by way of routine, get notified of all applications that are made? I'm just wondering how you would proactively identify information that might be of use to Treasury?

Mr Brown : I'm conscious of being careful of what I say, but, no, we certainly don't have visibility of every matter that is received for foreign investment. In terms of our proactive ability, AUSTRAC has worked with its partners over many years, the entire duration over which AUSTRAC's existed, to really build our profiling capability to understand what we may look at within transactions that are flowing into Australia and out of Australia and the other suspicious activity. We have monitors and alerts that cut across all of the transaction reporting that we receive on a daily basis. Some of those, at different points in time, may elevate a suspicion around an investment matter, to which we would consider whether it's appropriate for notification either to Treasury or, if it related to residential and real estate, to the Australian Taxation Office. Mr Collett identified earlier, in our introduction, their ability to also search. The ATO, for example, is one that does many, many searches of the AUSTRAC system that may relate to investment itself, particularly in—

Senator WHISH-WILSON: Could I ask a point of clarification on that, Senator Patrick?

Senator PATRICK: Yes.

Senator WHISH-WILSON: In relation to reporting that you may or may not pass on, how do you ascertain the beneficial ownership of company structures that are used to facilitate money laundering? How hard is that for you?

Mr Brown : I'm happy to take that question. We only have the ability to access the material that we have the ability to do. When you're looking at beneficial ownership of a foreign jurisdiction and a corporation overseas, the information that might be publicly available is the information that we would have available to ourselves to utilise, in terms of open source material. We have the ability and we have used the ability to engage with some of our international partners. We have relationships with 97 jurisdictions at present and we can request information in that respect. Obviously, beneficial ownership is one of those more challenging elements, more broadly, across investigations, whether it be of this nature or looking at serious and organised crimes.

ACTING CHAIR: Is China one of those 97 jurisdictions?

Mr Collett : Yes, it is.

Senator PATRICK: I was actually going to be more diplomatic and ask whether the top five countries that are engaged in foreign investment are included in those 97. Are the United States, the United Kingdom, South Korea all—

ACTING CHAIR: Belgium, I think.

Senator PATRICK: Yes, Belgium.

Mr Collett : We have arrangements with the financial intelligence units in all the countries you have just listed. In some cases they are through direct MOUs. In other cases they are managed through the global network of financial intelligence agencies—as I mentioned before, the Egmont Group—whose core function is to facilitate the exchange of financial intelligence and financial information between national FIUs.

Senator PATRICK: I want to go back to my line of questioning in relation to assisting the FIRB. You say you've got 10 requests but it's gone up to 40. I imagine a person sitting around drinking coffee in your office and every 15 days a request comes. How is that organised? Do you have resources allocated to that? Is there an FTE number associated with supporting the FIRB? Or is it just ad hoc?

Mr Collett : We have allocated resources within our intelligence division. The nature of the work that AUSTRAC does, as the financial intelligence unit, is such that it requires some areas of specialty. So we have particular teams that focus on different aspects. But some of those skills are transferable. So it's a matter of bringing together resources and adapting to the various demands not just of the Treasury but of a whole range of partner agencies that we work with and provide financial intelligence to.

Senator PATRICK: So you have a team that has a particular capability and you might receive a request from 10 organisations, one of which might be the FIRB—is it something like that?

Mr Collett : To some degree. It may also be around the nature of the work involved. If you like, I could brief you on our structure, although that may be something the committee doesn't have time for.

Senator PATRICK: Maybe offline—you could provide something on notice.

Mr Collett : I would be more than happy to brief you on our structure and give you a sense of how we resource the varying functions to partners not just in the Commonwealth but to the states and territories as well.

Senator PATRICK: Part of that question goes to the fact that you have gone from 10 to 40. You are moving into compliance systems—or at least talking to the FIRB about how it might assist in that domain. The committee has heard that there was an increase in FIRB-compliance resources. I'm just wondering how you will respond to that or are responding to that.

Mr Collett : Resourcing is always a challenge. That being said, these sorts of functions go to the core business of what AUSTRAC exists to do for government and for the community more broadly. The sorts of skill sets required are, to some degree, transferable across a range of financial intelligence areas and, therefore, we need to manage the priorities of the agency as they adapt and change.

Senator PATRICK: In terms of the 10 or 40 responses that you've made, is it all good or has there been a mix—are you successful in identifying things that ought to be of concern to FIRB?

Mr Collett : I think it varies. As Mr Brown said before, on some occasions the answer may simply be that we have nothing to offer here; on other occasions, there may be some information. Bear in mind that, within the context of the Treasury's functions and the FIRB, we are providing one piece of the pie. It's the role of the Treasury to then stitch that together, with inputs and intelligence they receive from a range of government partners, as to what that may mean.

Senator PATRICK: Do you ever have resources that are seconded into the FIRB or, at least, meetings?

Mr Collett : Certainly we have meetings. Mr Brown has briefed the FIRB on AUSTRAC and its functions. The nature of our work, by and large doesn't require—or wouldn't benefit from—a physical collocation. That's not true in other areas of AUSTRAC's work; I do have staff who are embedded in different areas. We work with quite a number of Commonwealth and national task forces on a whole range of law enforcement and national security matters. In this particular area of work, it's a matter of close cooperation and, in our case, the provision of financial intelligence to Treasury, as the lead partner, to take forward.

Senator PATRICK: In your experience to date in assisting the FIRB, is there any area of capability you wish you had that would assist? When requests have come in, have you looked and said, 'If we'd had this, we could have been much more effective'?

Mr Collett : There is nothing in particular that springs to mind. As I said before, because in this sort of work financial intelligence is one piece of a larger pie, there is not a particular gap that I can point to from AUSTRAC's perspective.

Senator PATRICK: Even legislation-wise, where there's a feathering of information?

Mr Collett : No. AUSTRAC's functions are defined by the AML/CTF Act. There are, appropriately, very strict controls over how AUSTRAC information is managed, used and disseminated, and there is a range of powers centred in our CEO, but all of those work quite effectively in this space. The Treasury is the designated agency for the purposes of our legislation, and the ATO is as well. Not only that, but, as Mr Brown said earlier, they're one of the largest partner agencies that comes to the direct use of our data. And that is a quintessential function; we need to be able to support our partners to access our data directly and do direct searches, freeing up AUSTRAC's resources to then look at higher order financial intelligence analysis and so on.

Mr Brown : To add to that, I think it's not necessarily a capability gap that we need. Fundamentally, when we look at foreign investment we're also looking at, in the largest part, legitimate engagement with Australia in terms of commercial activities. It's always like finding the proverbial needle in the haystack, in that, within the trillions of dollars of financial transactions of value that we actually collect and see, we may be looking at a slither of one piece of activity that may indicate there's something suspicious about one investor within the myriad of investment that occurs. So I think it's not that you need capability; it's more about understanding that environment. So we're really looking at international corporations and international businesses and there's only so far that we can go to understand those business operations without an incredible amount of investigation and effort to understand it. That's perhaps more the challenge when we're looking at some of this. We'll have a certain level of information that we have available to us, but there is a broader expanse of information that might be held elsewhere around the world that we may not have access to.

Senator PATRICK: Thank you.

CHAIR: Senator Whish-Wilson.

Senator WHISH-WILSON: I have three questions. I will just follow-up on the last question I asked around beneficial owners of companies. Operation Gethen is a classic example. When you've got this corporate veil and money being laundered through that and real estate is being purchased, who technically would have access to the individuals behind such an operation?

Mr Collett : When you say the 'individuals'—I'm not sure I understand the question.

Senator WHISH-WILSON: Yes. The individuals—who actually sets up these corporate structures? Who would actually have access to the information about the characters behind these kinds of investments?

Mr Collett : I think I understand your question. Speaking broadly, rather than about the particular operation you mentioned, given the context—

Senator WHISH-WILSON: As an example.

Mr Collett : Yes. But, in the context of this committee's interest, those actors would in most cases be overseas and they would be establishing company structures within whatever country they're operating in, or purporting to operate in, and that would vary quite considerably depending on the location.

Senator WHISH-WILSON: Okay. But who would be establishing those structures for them, in Australia?

Mr Brown : Normally, behind a corporate structure, it's either trust and company service providers or legal practitioners would establish a business structure, or accountancy firms et cetera, and that would go with other jurisdictions in the world. And the level of understanding behind the actual beneficial ownership is also very much dependent on what each jurisdiction may hold in terms of publicly facing records or their own corporate registries. Just as the Australian Securities and Investments Commission has a corporate registry here in Australia, other jurisdictions hold similar corporate registries, whether public facing or with the ability for an agency—and I reflect here in some respects on mutual legal assistance type requests, where a request could be made to actually obtain that sort of information.

Senator WHISH-WILSON: Most likely, just using the Musselroe Bay, it's going to be lawyers and accountants that will have various levels of information about who's behind those corporate structures. It was reported in the Herald Sun [inaudible] public record that a Melbourne based accountant—

Mr Collett : Sorry, Senator, we lost you again.

Senator WHISH-WILSON: It was reported quite broadly that a Melbourne based accountant, Tom Kotsimbos, was behind setting up the Musselroe Bay structure and a number of other I think they used the word 'shady' operations. If there is someone who is on your radar because they've been involved in a number of things before, do you have some kind of watching brief that allows you to be proactive in following what they're doing, or is it just a matter of pot luck as to whether a flag would be raised when they set up these kinds of company structures?

Mr Collett : Are you talking generally about AUSTRAC's functions and operations?

Senator WHISH-WILSON: Correct, but this is a specific example of an accountant that's already been named on the public record that was behind that particular money laundering bust. There have also been a number of media reports about a Melbourne based lawyer, who is dead, who was killed in a gangland slaying, named David Robertson who was behind a number of dodgy stuff set up as well. How proactive are you when you've identified someone as being a potential risk?

Mr Collett : I think I understand the question. Without talking to those specifics, there are a series of arrangements and functions that AUSTRAC has, but in some ways more important are the partnerships that we are members of—the task forces and multiagency operations—that focus on a range of threats and targets to the Australian community across a whole range of crime types.

Senator WHISH-WILSON: If someone has become a repeat offender, is it AUSTRAC's job to be active in terms of watching what they're doing? Do you do any surveillance work at all?

Mr Collett : AUSTRAC is not an investigative agency. That would be an AFP role, and there are other agencies that have investigative functions. Ours is a financial intelligence role. I guess the equivalent of your question is whether we would have a financial intelligence interest.

Senator WHISH-WILSON: Correct, and you would pass that on. Great. I'll ask the AFP a little bit more about that later. Lastly, in relation to Gethen and Musselroe Bay, I understand individuals that are connected to the sale of that land and ongoing investigations are also behind new development proposals in my home state of Tasmania. Have you received any correspondence at AUSTRAC—and you'll probably need to take this on notice—from the East Coast Alliance, ECA, raising a number of concerns about proposals in Tasmania also being involved with money laundering?

Mr Collett : I'm certainly not familiar. As you said, we'll need to take that on notice. I should also note for the committee's benefit that we wouldn't normally comment publicly on current operation matters.

Senator WHISH-WILSON: I wouldn't want you to comment on any operational matters. My query was: if someone sends you information, what do you typically do with that? Do you assess it yourself? Do you pass it on to the AFP? What kind of decision-making process would be involved?

Mr Collett : I understand the general question. It really depends on the topic at hand. Your question's a valid one. AUSTRAC does receive referrals or information from time to time of that sort of scenario. It very much depends on the context. It may well be relevant to AUSTRAC as the financial intelligence unit to undertake a level of financial intelligence analysis. If that's the case, we produce intelligence for our partners. That would then, in a law enforcement context, typically be for the Federal Police or a relevant state police agency depending on the circumstances. And there may well be other contexts—say, in a national security domain—where we would be doing a similar function. Equally, we may receive a referral that simply is not relevant to AUSTRAC and we would refer that on or advise the individual in question where appropriately they should direct their inquiry.

Senator WHISH-WILSON: Could you take that on notice? They've raised 11 issues of concern based on the AUSTRAC 2015 document, Strategic analysis brief: money laundering through real estate. They've raised a number of issues in relation to that report and have asked you to investigate. If you could follow that up with me and let me know if you've seen it or what you've done with it and if there's any follow-up action required, that would be great. No details, just whether you've received it.

Mr Collett : Thank you, Senator.

ACTING CHAIR: I have a number of lines of questioning. You said 97 jurisdictions are in a relationship with Australia in terms of financial intelligence units. On notice could you provide the committee with a chart and a heat map of interactions with those jurisdictions between 2015 and 2020?

Mr Collett : I'll just qualify your question slightly. We have bilateral memorandums of understanding with I think 97 financial intelligence units. The global network I think has 164 member FI units. I take it that your question is more about who do we deal with and at what regularity?

ACTING CHAIR: Exactly. [Inaudible] scale of interaction, thank you very much.

Mr Collett : I'll take that on notice.

ACTING CHAIR: Have you had anything to do with the foreign investment reforms document that was advanced by the government in June 2020?

Mr Collett : I'm aware of the document.

ACTING CHAIR: Has AUSTRAC been engaged in the development of this document and any proposed legislation?

Mr Collett : Not to my knowledge directly. Certainly our portfolio policy department may well have been. Whether parts of AUSTRAC are, I don't know.

ACTING CHAIR: This goes to one of my questions. As the most senior person said to the committee, 'I'm very concerned that parts of the government are not talking to other parts of the government and that this huge gap is where dangerous investment for the country and investment of a kind that's not actually creating great jobs and growing our national wealth is actually happening, because agencies aren't talking to one another.' I have to say that I was concerned when AUSTRAC announced, only two weeks after there was capital raising by Westpac, that Westpac was responsible for 23 million breaches of the AML legislation that you oversee. I wonder what architecture exists for proper, careful sharing of information between the different agencies. I'm concerned that AUSTRAC don't seem to be engaged in the government's current process of developing foreign investment reform.

I want to ask specifically about the Chow Tai Fook purchase of Alinta Energy. On the public record I asked questions about Mr Henry Cheng, who is the owner of Chow Tai Fook, and his relationship with Mr Ho. Treasury were unable to answer questions about why Mr Cheng's relationship with Mr Ho was unknown to them. Mr Ho, who is part of the Macau gambling family, has been banned from participating in business in Australia, particularly with regard to purchases of other like-kind investments, but Mr Cheng, who is connected to Mr Ho, was able to buy one of Australia's major energy assets, Alinta Energy, and to this day remains in breach of the conditions that were set four years ago. How does that happen? How can it be that AUSTRAC is so out of the loop with all of this going on?

Mr Collett : I'm not sure I follow the flow of your question in that there were a number of parts to your comments. First I would say that, in my view, there are very robust mechanisms within Commonwealth government agencies to work together and exchange information. Putting aside whether I'm personally involved in that particular policy document, there is from an operational perspective with AUSTRAC very regular engagement with our colleagues in Treasury on the particularly topic of interest of this committee. More broadly, AUSTRAC works very closely with agencies in our own portfolio across government and states and territories in a whole range of areas. I'm not sure if that was part of your interest. On the specifics of your question, you're asking about a particular foreign investment decision and what AUSTRAC's view on that is?

ACTING CHAIR: Yes. You continue to say that there are robust connections across government, yet Treasury not knowing about Mr Cheng and Mr Ho is another example of agencies not actually talking to one another. This morning, the China Policy Centre raised concerns about a lack of literacy about Chinese state-owned government practices and their integration with private companies who could be of interest to you. My concern is: are the systems really that robust if these gaps in knowledge are becoming apparent to us just in the course of this one inquiry? Is AUSTRAC sufficiently connected with the other agencies to provide confidence to the Australian people that the benefits of foreign investment actually outweigh the potential costs and risks?

Mr Collett : Certainly in my view AUSTRAC is absolutely connected to our partner agencies. Could you repeat the last part of your question?

ACTING CHAIR: I have concerns about the lack of connectivity and the lack of literacy about how China is operating its businesses, along with different agencies not talking to one another. We've had one day of public hearings that I've been a part of previously, and we were able to find this gap. I'm concerned that foreign investment needs to be in Australia's interest. It needs to create jobs. It shouldn't be putting people at risk. It shouldn't be exploiting the country with no advantage, with our government not knowing what's going on and no-one talking to one other sufficiently to provide protection.

Mr Collett : When it comes with literacy with regard to China, I certainly agree it's important that government agencies have a sophisticated and developed understanding of other countries that we're engaging with, whether that's China or any other. Certainly from AUSTRAC's perspective, that is important. To go to China as the example you mentioned, we have an MOU on both the intelligence and the regulatory sides with our Chinese counterparts. We have an officer based within the Australian mission in China, working with Chinese and Australian government agencies. So it is a very important area of work for AUSTRAC.

ACTING CHAIR: Have you seen the excellent submission by the Uniting Church? People often debate what the role of religious entities in a modern, pluralistic Australia is, but I think the Uniting Church submission is a fantastic example of people who care about our community wanting to participate in public debate. They've put forward some very detailed questions about money laundering and particular cases that involved money laundering. Have you seen that submission?

Mr Collett : I am aware of the submission. I'm certainly aware of Dr Zirnsak, who is usually the lead for the Uniting Church on these issues.

ACTING CHAIR: He cites research that found Australian corporate service providers rank highly globally in terms of being willing to establish untraceable shell companies even when there is a risk of such companies being used for illicit purposes, which goes to the line of questioning from Senator Whish-Wilson. What do you have to say to that and how can you confirm for me that you're doing a sufficient job to keep Australians and their interests safe?

Mr Collett : Firstly, I don't have that submission in front of me and I'm not familiar with the specific report that you're referring to. What's your question about with regard to AUSTRAC and what AUSTRAC is doing?

ACTING CHAIR: Can you guarantee that your actual structure is sufficiently robust to protect Australians from exploitation by foreign entities?

Mr Collett : The AUSTRAC structure?


Mr Collett : AUSTRAC's functions are very clearly articulated, and I would absolutely say they're well positioned to make the contribution that we're responsible for to this space.

Mr Brown : To add there: I think we're also one agency within the broader group of agencies that are involved in the nature of this work and the matters which may be being considered. One thing we do not want to do, as Mr Collett explained before, is to do with approximately 6,000 law enforcement officials across Australia that have access to AUSTRAC's intelligence holdings. We do not want to have multiple agencies doing searches on the same entity in relation to some of these. There will certainly be times when another agency is better placed and may have different levels of holdings and information, which will mean that not every agency is requested to provide information. Certainly in the examples that you raised it's very possible that Treasury have determined that the best place to go to ask the question is not AUSTRAC, and it goes to a different agency, which has a broader level of understanding, whether it be criminal matters, criminal investigations or criminal connections, over and above the financial transactions that AUSTRAC may hold, given that those agencies also have access to those financial transactions and can add value to those matters.

I think that's how we really complement the broader engagement across the law enforcement agencies, including the Australian Federal Police and the Australian Criminal Intelligence Commission, in terms of our understanding of the criminal environment and the potential risks and exposure which we are faced with by serious and organised criminal syndicates and individuals.

Senator WHISH-WILSON: Could I reframe Senator O'Neill's question? In terms of collecting financial intelligence, the reporting requirements under the AMLCTF laws apply except for this gaping hole, this exemption we have for lawyers, accountants and real estate agents. How can you guarantee that Australians aren't competing against dodgy foreign money when they go to buy a house if you don't have those agencies reporting?


Mr Brown : I think Mr Collett explained before in terms of the legislation. One thing that needs to be understood in terms of the foreign investment elements is that the transaction and financial flow will not occur overseas with the real estate agency or the legal firm directly. It will all go through the financial system and the traditional banking system. Hence, there is within AUSTRAC's financial holdings that we receive a record of international funds transfer instructions where they will flow in and out of Australia. There is a point where we may have visibility of the transaction. In terms of the nature that underpins that, that is a different question in terms of the investigation that is unpacked behind it.

Senator WHISH-WILSON: But you accept that banks and Australia's financial institutions—by the way, congratulations on some of your recent legal wins in relation to these matters of money laundering through banks—themselves are some of the biggest critics of these loopholes for accountants, lawyers and real estate agents? They understand the risks and they often feel that risk is transferred onto them.

Mr Collett : Yes, we're certainly aware of the views of—I think the focus of your question was on the big banks. We work very closely.

ACTING CHAIR: I indicate that I will have some more detailed questions on notice. We've run out of time. Thank you for your evidence today.

Proceedings suspended from 12:37 to 13:03