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Tuesday, 5 December 2017
Page: 12723


Mr HILL (Bruce) (17:01): The Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017 is a sad and accurate reflection of the Turnbull government. It is weak, it is insufficient, it is largely ineffectual and it is too little too late. I want to set out my strongly-held personal view at the outset. Let's be very clear: Australia's global anti-money-laundering rules are appallingly, embarrassingly weak. We all—Liberal, Labor and everyone else in this parliament—need to lift our game. It's gone on for too long. Allegations that the Commonwealth Bank breached these laws on almost 54,000 occasions are bad enough. That raises serious concerns about the weakness of the current laws and shows how badly exposed Australia in fact is to highly sophisticated organised money-laundering syndicates that operate globally.

But the reality is far worse and the problems are much wider than the banking sector. Most Australians, I believe, would be shocked to know that Australia's laws don't even cover key sectors of the economy. The so-called gatekeepers—real estate agents, accountants and lawyers—are not covered at all. In fact, by global standards, we are now way behind good practice. Transparency International published their assessment of Australia in March this year. Australia failed in all 10 priority areas. We were ranked worst in the Anglosphere. The global regulator of money laundering, the Financial Action Task Force, published their most recent evaluation in 2015. It's shocking reading. Australian homes are a safe haven for dodgy money, with particular concerns about Chinese funds. Australia's regime is not compliant with six key international standards, and, embarrassingly, Australia was placed on a watchlist, given our ongoing failure to comply with terrorism financing and money-laundering reforms.

The government talks a big game on national security and crime. We heard it today in question time: tough on crime, tough on national security. But it's hot air, because in this area they're way behind what's needed and need to lift their game and do so quickly. Serious risks exist. This is not trivial stuff. This is not people stealing five bucks from a bank. It is terrorism financing, and it is facilitating serious criminals.

This bill is manifestly insufficient. It implements the first set of recommendations from a 2016 statutory review. At first glance you might think this is reasonable progress—first tranche, off we go!—but it's not. These issues have been hanging around unfixed for over a decade, and this bill does, at best, I would estimate, about five per cent of what is needed. It is 11 years since the Howard government introduced what they said was the first tranche of the legislation, back in 2006, and since then it has not been fixed. We have had our period in government, and I will talk about that later on. This is the fifth year that these guys have been in government. This is not good enough. We don't need more reviews; we need the government to lift their game and introduce comprehensive amendments to the legislation, which is currently riddled with loopholes and gaps and is too weak for the threats that we face.

As I said, the bill is fiddling around the edges and the biggest gap is still the lack of coverage for real estate agents, lawyers and accountants, which this bill doesn't even touch on. The most urgent issue—and I'll make some remarks on this—in my view, is real estate agents and it's less complex, in fact, than the others. Why do I say it is most urgent? International experience in the USA suggests this is a major area for money laundering and potentially counterterrorism financing. For over 10 years we have been warned that we have a similar problem in Australia and we've done nothing. The difference is the US are now at least doing something tangible about it. In August this year, the US government extended a pilot program to crack down on dodgy real estate deals after 30 per cent of high-end real estate deals checked out under the US Treasury program involved people targeted for potential money laundering and suspicious activity. The program was expanded to cover luxury real estate deals in the big US markets to stop real estate money laundering by overseas buyers. It's a scary warning of what may be going on in Australia, completely unseen. We have seen an enormous flow of funds and alarm bells have been rung by our regulator and academics for years.

The FIRB data is the best available of what's going on. It does slightly overstate things because it is based on approvals, not completions, but it is, as I said, the best available. To give you a sense of the scale, in 2015-16 $122 billion of foreign direct investment stock was approved in the real estate sector. That included about $50 billion of commercial and about $72 billion of residential. China was the top source country, with $31.9 billion in residential. Other top source countries included the USA, Singapore, the UAE, Canada and Hong Kong. AUSTRAC's 2015 strategic analysis brief, Moneylaundering through real estate, recognised that this was a well-established money-laundering method in Australia. I'm not making this stuff up. This has been sitting there. It's from the regulator to the government and they haven't acted. They also said that, compared to other methods, this could be:

… relatively uncomplicated, requiring little planning or expertise. Large sums of illicit funds can be concealed and integrated into the legitimate economy through real estate.

And the international regulator's 2015 report specifically identified China as one of the countries from which laundering through Australian real estate was suspected to take place. To be clear, the Chinese authorities cooperate with us extensively in cracking down on money laundering where it's identified. There's no question about that. The problem remains that our systems to pick up dodgy transactions are appallingly weak.

Of course, it is not just Chinese criminal money that's a worry. Media reports over years abound of stolen funds from Papua New Guinea's coffers being laundered in Australia—more than $200 million in 2014, including through real estate. There was a shocking Sydney Morning Herald article in 2015 outlining how Malaysian officials bid up the price of an apartment block by $4 million over the value and then had kickbacks and dodgy invoices. Yet, today, the fact remains that Australian properties can still be bought and sold willy-nilly without any due diligence on the parties. Firstly, there are no requirements for real estate agents or related professionals involved in real estate deals to submit suspicious transaction reports, even if they suspect illegal activity. Secondly, there are no requirements to disclose the identity of individuals or beneficial owners behind foreign companies purchasing property in our country. Thirdly, there are no effective controls then of the practice of criminals buying and selling properties in quick succession to confuse the audit trail. I'm not making that up, either. Successive AUSTRAC reports from 2007 onwards have highlighted exactly that practice—you buy something, you sell it, you buy it, you sell it, you buy it, you sell it and, before you know it, the audit trail has no idea who originally owned it. Also, it links with other illegal activities such as drugs.

There was a report on the SBS in recent times where the CEO of Chinese international property investments website juwai.com said that 70 per cent of their clients pay in cash. This poses clear risks given that money sent through a financial institution like a bank would be assessed and reportable under the counterterrorism or anti-money-laundering legislation. AUSTRAC's brief included two specific examples of the proceeds of corruption in China being traced to real estate assets in Australia. I have some small exposure to the integrity issues around the investment side of things through my previous work in the Public Service managing business and investment migration. Checks are done quite carefully and thoughtfully on people seeking visas here and, yet, you can just move money in and out in this way because it's simply not captured by the regime in the real estate sector.

It's important that we can identify and stop suspect and corrupt transactions, not only to comply with our international obligations but also, importantly, because of the inflationary impact on property prices in Australia from funds that are not being properly and commercially invested. To their credit, the Attorney-General's Department acknowledged this in its recent discussion paper, on page 6:

Australia is likely to be an attractive destination for the investment of foreign proceeds of crime in real estate … [This] allows criminals to conceal and enjoy the profits from their crimes, but also can lead to the artificial inflation of property prices, as the criminal may be willing to pay more than the fair market value to secure a safe investment which minimises the chance of detection.

Residents in my electorate are extremely concerned about the impact of foreign investment on residential property values—for example, in Glen Waverley, which is a hotspot of concern within Melbourne. And I continue to get reports, almost every week and certainly every month, of dodgy transactions that are not properly regulated or caught, and the government has to act. A discussion paper with no commitment to implementation and no time line is simply not good enough.

The second point I'd make is in regard to disrupting terrorist networks. Extending the regime to cover the gatekeepers is also critically important to ensure that we can stop terrorists and their support networks. The December 2016 report published by the Australian Strategic Policy Institute was titled Detect, disrupt and deny: optimising Australia's counterterrorism financing system. It includes two case studies of concluded terrorism financing convictions in Australia in relation to al-Qaeda and the Tamil Tigers. Importantly—and this is important—the No. 1 recommendation for improving Australia's counterterrorism regime is: what do you think it was, Member for Brand?

Ms Madeleine King interjecting

Mr HILL: Well, let me tell you: it was to regulate the gatekeeper professions—lawyers, conveyancers, accountants, high-value goods dealers, real estate agents, and trust and company services providers—under this legislation, to reduce the potential for misuse of those professions by terrorism financiers—

Ms Madeleine King interjecting

Mr HILL: It's catchy, I know—and ensure that Australia's anti-money-laundering regime and counterterrorism financing regime is consistent with global standards. Money is the lifeblood of terrorist organisations. Who knew? It's necessary for obtaining weapons, mounting attacks, sustaining members and facilitating recruitment and propaganda. Detecting, disrupting, and denying terrorist financing is a powerful means of countering the terrorist threats posed to international peace and security.

So, this is not trivial stuff. The government needs to commit unequivocally to fixing this within the next few months. And the signs are not great. Worryingly, the Minister for Justice—he of the sparkling personality, one of the government's two secret weapons that they deploy to us in question time, to bore us to death; he's neck and neck for the gold medal with the Minister for Urban Infrastructure in the 'Boring Olympics'—stated in July:

We do have very robust arrangements in Australia, including for property …

Seriously: 'robust'! Robust, Member for Dawson. I'd hate to see what he thinks are lax arrangements, then, if he considers our arrangements to be 'robust'. The real estate lobby are hostile or lukewarm—quelle surprise!—about the need to even do anything. The REIA are sort of a bit cleverer: they kind of don't oppose it, but they seek a light-touch approach. Okay. The REIA Queensland, from the member for Dawson's neck of the woods, of course opposes this outright and says that these serious risks should just be dealt with by continuing professional development and awareness training—send them a memo; send them a fax. Give me a break. 'Trust me; I'm a real estate agent.'

I'm gravely concerned that the government will continue to go slow or quietly cave. The status quo cannot be allowed to prevail. The minister must come in here when summing up this debate and state unequivocally that the government will extend the regime to real estate agents in a meaningful way within six months. Enough is enough. The Attorney-General should stop measuring the curtains at Australia House in London and get this fixed before he leaves. The cost-benefit regulatory analysis was to be completed by mid-June 2017. I haven't heard anything about that. Anything short of a time-bound commitment is weasel words and should be called out by all members, the media and the public. And I say this to my party, because we have been in government and not dealt with this: we need to stand firm and be very clear, unambiguously, that if the government fails to act then we in government will—no weasel words. Time doesn't permit a detailed account and comments in relation to the need to extend the regime to accountants and lawyers. Suffice it to say that that case is also strong and coverage is well overdue.

Once we've dealt with real estate agents, accountants should be the next cab off the rank, and there are pretty well-thought-out models around. Submissions to the statutory review from the various professional bodies—I got a bit nerdy and read some of them—including the CPA, proposed a two- to three-year transition period with some broadly sensible caveats. I acknowledge also the particular issues in relation to the legal profession—it is more complex—and think the Law Council of Australia's submission does provide a way forward. Whilst the Law Council strongly opposes, in principle, the extension of the regime to lawyers—'trust us, we're lawyers'—it goes on to signal a sensible way forward if it is so extended, which is always the bit you have to read. There are things like excluding legally privileged information—fair enough—and making arrangements for barristers so they don't drown that profession in red tape and can rely on the arrangements put in place by law firms.

In closing, enough is enough. This has gone on for too long. The laws were introduced in 2006. They were the first of an anticipated two tranches of legislation to bring Australia into line with international best practice. Eleven years ago, it was expected the second phase would follow soon after, but 11 years on we're still waiting. At the tail end of the Howard government—most of that government was its tail end—in 2007, they flagged that consultation would progress on the form of the second tranche. There was even draft legislation—it's kind of out there—10 or 11 years ago. The Rudd government continued work and did have industry roundtables but put the reforms on hold for a few years, given the impact of the GFC on business, which made sense at the time. But that time has passed and there is no excuse, no reasonable explanation, for the ongoing delay.

This government started their review in 2013—that's four years ago. You're in your fifth year, government, and all we have is another review, another half-done first tranche, which doesn't even pick up on all that it was supposed to. I will use my last half a minute to point out that this bill pretends to implement the first tranche but mysteriously misses many recommendations, with no explanation. Recommendation 4.8, about digital currency wallets, is just not there, along with recommendations 14.1 and 14.2 about secrecy and access amendments, and at least five others. It remains entirely unclear whether a decision has been taken to not proceed with those reforms or whether they're in the never-never. In conclusion, I take this matter seriously and I think the government should do, too.