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Parliamentary Joint Committee on Law Enforcement
Financial related crime

BULLOCK, Mrs Michele, Assistant Governor (Currency), Reserve Bank of Australia

DRAYTON, Mr Keith, Deputy Head, Note Issue Department, Reserve Bank of Australia

CHAIR: I now welcome officers of the Reserve Bank of Australia. First, I would like to remind committee members and officers that the Senate has resolved that an officer of a department or agency of the Commonwealth or of a state shall not be asked to give opinions on matters of policy, and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy, and does not preclude questions asking for explanations of policies of factual questions about when and how policies were adopted.

I invite you to make an opening statement, if you wish, and then we will move to questions.

Mrs Bullock : I was not planning to make an opening statement. We put forward a submission which covered a number of issues, including bank notes on issue by denomination, and some information on counterfeiting, which is another type of financial crime. And we put a little bit in the submission on our work in damaged bank notes. So I am happy to take the submission as read, and to take questions from the committee.

CHAIR: Thank you, and thank you for the submission that you have provided. In the submission you speak about counterfeiting of bank notes. Our current series of bank notes were introduced back in—

Mrs Bullock : In the mid-nineties.

CHAIR: One of the specific tasks with those new notes was to try and reduce the incidence of counterfeiting. We had some evidence yesterday that there is still some going on, including in remote areas of Australia. I would be interested if you could elaborate on that for the committee. What evidence are you seeing on the ground? What is the prevalence of counterfeiting?

Mrs Bullock : I will start, and I might refer to Keith in a minute. First, I would like to let you know the Reserve Bank's role in counterfeiting. The Reserve Bank is responsible for the administrative aspects and analysis of counterfeiting information. Enforcement and investigation rest with the police, and we assist the police with collecting data on the counterfeits that come in. We analyse them to see if we can determine whether they are from the same source. That involves a lot of scientific examination of the counterfeits.

We determine where they come from. We try to provide the police with geographical information on where they might be coming from. Then, often, if there are some sorts of charges we can provide witness statements to the police, which just set out our understanding of why this is a counterfeit and how we can tell it is not a genuine bank note. That is our role in the process.

Information on counterfeits comes to us. That is how we monitor how many counterfeits are out in the community, and whereabouts they are showing up. The information that you saw in the newspapers yesterday is not anything reasonably new. The counterfeiting rate in Australia is very low by international standards; it is currently about 15 parts per million. That is our technical term which means that for every million bank notes in circulation there are about 15 counterfeits out there. So it is a very low rate.

In some other countries it gets up around 100 parts per million. In a very bad case in Canada, many years ago now, it was 300 parts per million. So this is a very low counterfeit rate compared with the rest of the world. We have observed over the past few years, though, that the counterfeit rate has been rising. Although it is still low it has been rising. In addition, we have noticed that there is a little bit more sophistication of the counterfeiting.

You mentioned that we introduced our new bank note series in the mid-nineties. We introduced it on polymer, which is plastic, basically. This was a very important security feature, because it is difficult to print counterfeit bank notes on plastic. It is a more difficult process. That has been borne out, because over the years most of the counterfeits we have seen have been paper counterfeits. People cut out a little window and stick some contact on it. So it is very crude counterfeiting, which should, in theory, be very easy to pick up.

Polymer—plastic—bank notes have been very secure. We have noticed in the last few years, though, that people are getting better. Technology is getting better. It is getting cheaper. People are able to print bank notes, now, more onto plastic substrates. We had an example three or four years ago, where we did have a counterfeiting attack in Australia, and it was on a plastic substrate. That was quite important. There was an incident in Mexico, a year or two ago—they also have polymer bank notes—where they had a lot of counterfeits being done very well on polymer.

So, although we are not being alarmist, and we do not think there is a big problem here, it is creeping up. That is really the reason why we are looking at increasing the security on our bank notes by putting in place a new series, which will just make it a step harder for counterfeiters to copy the bank notes.

CHAIR: What is your prime source of notification of counterfeits? Is it still through the banks—through their tellers—or is it through shops or supermarkets?

Mrs Bullock : It comes through a number of sources. Often it comes through the banks, and from the bank note processors—the armoured car companies, who process a lot of bank notes. They turn them up and send them into us.

Some non-evidentiary ones come from the police. If they are not being held by the police for evidence in a case they will forward the counterfeits to us as well. When they come through the banks and the armoured car companies—they sometimes come from retailers, so they come through that route—we will examine them and make sure they are counterfeits. Sometimes people are a bit confused. Sometimes people think something is a counterfeit and it turns out it is not a counterfeit. That is our main source. Can you think of any other sources, Keith?

Mr Drayton : No. The important distinction is that all the counterfeits have to be submitted to the Australian Federal Police in the first instance. The AFP then pass them on to our examiners. Because of the way the legislative arrangements work everything has to be submitted to the AFP.

Mrs Bullock : That is a good point. They all come to us via the police, which is double handling in a sense. I think we mentioned in the submission that it is a little inefficient, because it takes the police's attention away from what they are best at, which is investigation and enforcement, and forces them to be in this administrative channel of channelling counterfeits to us.

Senator SINGH: Mrs Bullock, you said that there is a new series of banknotes that will have more security. Does that mean that all the existing banknotes will be withdrawn over time? We will not be able to tell, will we?

Mrs Bullock : You will notice the difference between the new series and the old series. They will look different. There are a number of things that will be the same. The people on the banknotes will be the same. The colour palette, if you like, will be the same. The sizes will be the same. But they will look different from the current ones because there will now be security features there. To the point of your question, yes, over time the old series will be withdrawn from circulation and when we put new banknotes into circulation it will be the new series. When we moved to our current series—you will remember we went from paper banknotes; some people may not remember paper banknotes—from paper banknotes to the plastic banknotes, we still get—

Senator SINGH: Collectors item, aren't they?

Mrs Bullock : We still get dribs and drabs. They are still legal tender. If someone presents us with a paper banknote we won't say to them, 'You can't get value for that.' We do not say that it is not valuable anymore, so people who happen to have paper banknotes at home can still take them to their bank or pass them onto the Reserve Bank and the Reserve Bank will give them new banknotes for that.

Senator SINGH: For equal value?

Mrs Bullock : Yes. They are not de-monetised in some sense. Gradually over time there will be a period, it might be a few years, where the two series will co-circulate, so sometimes you will get an old series and sometimes you will get a new one. Gradually, we will withdraw the old series, and the new series will take over.

Senator SINGH: In relation to counterfeiting, what about marked banknotes?

Mrs Bullock : How do you mean marked?

Senator SINGH: I am thinking from a criminal's point of view, if I can try. If they mark certain notes with some kind of little character.

Mrs Bullock : For the purpose of tracing it?

Senator SINGH: I guess, yes. Is that an issue?

Mrs Bullock : Not really. If banknotes have scribbles on them we would typically withdraw them from circulation. They are damaged, so we would take them out of circulation. I do not know if this is what you were thinking of, there are some technologies now where ATMs, if people try to rob an ATM and take the money, have dye bombs in them. If we come across dye bombed banknotes we do not give people money for them. We would involve the police, because there has obviously been some sort of illegal activity.

Senator SINGH: In your submission you talk about an RBA survey that was done by Meredith, Kenney and Hatzvi into where individuals store banknotes. I do not have a copy of the survey. Where do people store them? Is it still under the mattress?

Ms Bullock : The first thing is obvious but let me state it anyway: once the banknotes go out there, we do not actually know where they are circulating. We have no way of tracing them. This survey is something that we have done three times, every three years. It is actually done as a survey of payments generally, non-cash payments and cash payments. It is the only place that we can sort of get some information from the general public on what they do with their cash.

One of the things the survey did this year that it has not done in previous years was ask people if they hold cash in places other than their wallet. We had to be a bit delicate here because we wanted to have a survey question that people would feel comfortable enough to answer but if we got too specific they might not answer the question. We did not specifically ask them: where do you store it? Do you store it under your mattress? We did not ask them that. But the interesting thing was that three-quarters of respondents to that survey, about 2,000 people—so it was a statistically significant sample—said that they store banknotes somewhere other than in their wallet. About 10 per cent to 12 per cent said they had more than $500 somewhere other than in their wallet. We did ask them why they would store it in places other than their wallet. The common answers were for emergencies and because they did not want to go to the ATM too much. It cost them to go to the ATM and it was inconvenient so they would take out a fair bit of money and then store it somewhere else to use it. We do know there are very legitimate reasons why people might be keeping this money in a safe spot.

A couple of other things, I think, are indicative of this, and, again, they are not determinative. The first thing was that in the Global Financial Crisis at the end of 2008, we did notice that there was a substantial outflow of banknotes. We did some estimates of that and it was suggested that maybe there was about $4 billion in banknotes that we normally would not see go out in the seasonal run-up to Christmas go out. There was a bit of a suggestion that people might have been taking a bit of extra money out of the bank just in case they needed it. I do not know why they needed it but it was indicative.

The second thing is that if you look at our payment statistics, every month there are about two million over-the-counter transactions at banks getting cash out. The average cash out over the counter at a bank is about 3½ thousand dollars. Again, we do not know what people do with it because, remember, cash has two purposes and they are both legitimate. The first is as a transaction medium for making transactions. The second is store of value. We do not know where people store it. We do not know typically how they use it during the day but we have lots of hints that it is used very heavily for transactions and that people do store it for a variety of reasons.

Senator SINGH: Our terms of reference No. 4 is about the large number of high-denomination banknotes in circulation in relation to money laundering. I think we are talking about the $100 banknote there. Do you work with the AFP on this issue?

Ms Bullock : No, we do not. What I would emphasise here is that we do not know explicitly where these 11 $100 bills are no more than any child in Australia. But we have to remember that there are very legitimate reasons why people might be holding these $100 bills. The other bills, the $50 bills—they are a transaction banknote. They are in the ATMs, they are being turned over. I am sure everyone here has $50 bills in their wallet. We use them very regularly. The $100 bills are out there somewhere. If you are wanting to store some bank notes it is the obvious bank note to use, because you have to store fewer of them. I have no insight into whether they might be used for legitimate purposes, but I do know that there are very legitimate purposes for which people might hold them. But we do not work with the police specifically on this, because we cannot trace them.

Senator SINGH: Presumably if there is going to be a new series of banknote come forward then, over time, those $100 banknotes will have to—

Ms Bullock : That is true, and when we issued the new series in—when did we issue the $100?

Mr Drayton : It was 1996.

Ms Bullock : Once we had issued that, we found that the old $100s came back quite quickly. People, I think, turned them over. They had been storing them, they thought, 'Here's an opportunity to turn those over and get the new banknote. It will be interesting to see, when we get into the process of issuing, what we observe with the $100s coming back. We do not actually see a lot of $100s. The way we process banknotes is: to make sure that there is a high-quality banknote in circulation, so that we can spot counterfeits more easily, the banks and the armoured car companies process banknotes, and the bad-quality ones—damaged banknotes—come back to the Reserve Bank and they get destroyed, and the rest get re-issued.

What we observe is that the banks do not see a lot of $100s coming back into processing. We certainly do not see a lot of $100s coming back for destruction. They are out there, but they are not coming back through the Reserve Bank in any way. It will be interesting to see what happens.

Senator SINGH: It is a point for another survey.

Ms Bullock : Maybe.

Mr WOOD: To follow up on the $100 banknote: it was actually a big deal a number of years ago with one of the committees, because we were getting the word that it was actually the organised crime figures holding onto the notes. You made a point with ATMs; ATMs do not normally circulate $100 notes? Is that what you said?

Ms Bullock : Not typically, and again you might be best asking some of the banks this. Our understanding is that there are some ATMs that stock $100 notes but most of them stock $50s and $20s, because people want transactional notes out of ATMs, typically. They want to be able to go to the local fete. I do not know if you have been to a local fete, but you get a screwed-up nose for presenting a $50. I cannot imagine what they would do if I presented them with a $100. People do not typically like $100s coming out of ATMs.

Mr WOOD: The other question I have is: because you are saying there are obviously hoarders out there, whether they are mums and dads, criminals or whatever, do you have a percentage of $100 notes that keep going out to make up for the ones that have been hoarded, or do you have a standard figure each year?

Ms Bullock : What we do know is that the number of $100 banknotes in circulation is rising more quickly—and $50s as well—by about six per cent a year, the number on issue. Whereas the lower denomination banknotes rise by between two and four per cent a year. So the higher denominations, the ones that might be being used to store a value, are in fact rising more quickly over time. I should add that this is not unique to Australia. It has actually been observed in a number of countries overseas that the higher-denomination banknotes are rising more quickly than the lower-denomination notes.

I mentioned earlier that during the global financial crisis there was an uplift in demand for high-denomination banknotes. I think we thought that that would start to fall away, and the growth rate did level off for a while but it has picked up again and now it is increasing by roughly six per cent a year, which is roughly in line with nominal GDP.

Mr WOOD: Thank you.

CHAIR: Have you done any surveys to try to ascertain why that is?

Ms Bullock : No, the information we were talking about earlier, where we asked people in that survey about 'where are you keeping your money', was sort of an attempt to get a bit of a feel for that. Again, it is only a survey. Unlike non-cash payments instruments, where you can actually do a census, you can measure every transaction that goes through the system if you want to, because the banks have all the data. With cash transactions, clearly you cannot do that. We have no way to do that, so the best we have are these surveys. As I said, this was in fact an attempt to just tease out from people whether they think of it as a store of value, and I think the answer is clearly, yes, they do.

Senator O'SULLIVAN: On that point: with the survey, did you get an age profile?

Mrs Bullock : Yes, we did. What you typically observe is that older age groups tend to hold more cash, they use it more frequently and they are more inclined to keep stocks of it.

Senator O'SULLIVAN: That would not be a surprise result. Geographically: when you got into regional and rural areas, did you detect that there was a higher retention per respondent than people living in urban environments who might have a bit more ready access to ATMS?

Mrs Bullock : There might have been a bit of a hint of that, particularly because one of the reasons people do store a bit more is when they do not have ready access to an ATM. In remote areas, where perhaps access to ATMs is a bit more costly and they are less frequent, people tend to take out a bit more and hold onto it rather than have to do multiple trips.

Senator O'SULLIVAN: I imagine the survey would not help you make a determination of this retained wealth as to the three reasonably obvious reasons. One would be the powdered milk tin down under the chicken coop versus people who are dealing in a cash society for the purposes of avoiding taxation—so cash payments for a handyman and the like versus clear money laundering—where it is out of circulation because it cannot be in circulation. Did you get a sense of any breakdown there?

Mrs Bullock : No, not really. In the paper, there was a little bit of a breakdown by profession and there were some suggestions that some professions in the services area might have made more use of cash than some other areas, but it was not a very strong result. The main thing that was coming out of it was that everyone was using less cash. People were tending to use—

Senator O'SULLIVAN: Clearly, the answer to that question would be of great interest to the committee, given its terms of reference.

Mrs Bullock : Yes, it would.

Senator O'SULLIVAN: All of these facts are interesting but our terms of reference go to financial related crime.

Mrs Bullock : I think it is also worth remembering that the amount of bank notes outstanding, currency outstanding, is about $60 billion. If you look at that in comparison to, say, deposits—such as termed deposit transactions accounts and so on—that is about $1.3 trillion in the banking system. I absolutely take your point, but I guess the point I am making is that it is actually relatively small. One of the things that is an issue with money laundering, at least in my mind, is that, if there are illegitimate purposes going on, how do they take that cash and put it back through the legitimate system?

Senator O'SULLIVAN: Let us assume—and here is a question for you—that a percentage of it never makes it. I do not mean physically the same note but this constant. What could be the multiplier effect? What are the implications for that for things like GST, taxation et cetera?

Mrs Bullock : Again, we do not have any handle on what those amounts might be. My point is that obviously you would love some information on that and I am sure the taxation office would too, but we do not have that information.

Senator O'SULLIVAN: Effectively, a $100 note could do three conniptions in the one day and deny the Commonwealth $100 worth of income tax, if it were at corporate rate.

Mrs Bullock : Yes. Again, velocity is another thing which we do not know a lot about.

Senator O'SULLIVAN: And the next day again and again.

Mrs Bullock : That is correct. It stays out there most likely.

Senator O'SULLIVAN: So, potentially, it is a massive issue theoretically. It follows the question as to whether there are any plans to try and estimate this. I know it is a difficult question. You are not going to get it through surveys, obviously. No-one is going to tick the box that they are a drug dealer or whatever.

Mrs Bullock : Probably not.

Senator O'SULLIVAN: I do understand that. Are there any plans at all, Mrs Bullock?

Mrs Bullock : No, we do not have any plans to follow up. As I say, these surveys are actually reasonably expensive and costly surveys anyway, even though they are quite small, and we do not have any plans, from the bank's perspective, to follow up on where these dollar bills happen to be.

Senator SINGH: I was just going to follow on from that, because surely there is an opportunity—following on from what Senator O'Sullivan was saying—if you are going to have these new banknotes come in with the new security in them. Surely that is an opportunity for this turnover to occur. All of these $100 banknotes out there in the ether, where we do not know where they are, whether they are being used for money laundering or what other purpose, if they become illegitimate cash because the new legitimate cash will be these banknotes with the security in them—which I understand you are mainly doing for anti-counterfeiting purposes—the added opportunity could be that these notes come to the fore.

Mrs Bullock : As I said, they will still be legal tender. You will still be able to use them. There will not be any sense in which people will think, 'If I don't get rid of them, I'm not going to be able to use them.' So it is not going to draw them out in that sense.

Senator SINGH: So it is not going to be like when we went from the paper to the polymer—because there came a point where you could not take the paper notes to the shop anymore.

Mrs Bullock : Yes. That is right. Ultimately that might end up being the case, but that is many, many years down the track. They will still be able to be used for many years to come, the old series. The other thing, I guess, is, if they are going to come back, they are going to have to come back through the banking system somehow. We are not an investigative agency. It is not our role to figure out where these banknotes are coming from and determine whether they are coming from a legitimate source. If they are going to come back through the banking system, and there are doubts, then there are reporting obligations to AUSTRAC—which I think AUSTRAC have talked about. The police might be interested in some of that. But that is not our role. As I said, we are not an investigative agency in that sense.

Senator SINGH: Have you considered putting a time frame on individuals having to trade in or swap over from the old to the new?

Mrs Bullock : We typically have not done that, because that is a fairly big call, to say: if you are not back in by a certain date, your money is worthless.

CHAIR: It is legal tender.

Senator SINGH: I experienced it in London with the pound. I think it was the 50-pound note. I had a very old 50-pound note and it was not accepted in the shop and I had to take it to Barclays Bank—

Mrs Bullock : That is right.

Senator SINGH: and they told me there was a time frame I was able to do this by. I was lucky I was within the time frame.

Mrs Bullock : I am not sure of the details of that and I do not know whether that was something set by the Bank of England or that was something set by the retailers themselves. I do not know the answer to that question.

Senator O'SULLIVAN: Just following on the same trend: we have determined that, of those surveyed, age brackets identified those who were more likely to retain. But the value of the retention, did you get any determination of that group—what their share of quantum was?

Mrs Bullock : The trouble was that, once you got down to some of those categories, you started getting quite small samples, so I would not like to put too much emphasis on those actual numbers. I would actually have to go back and check the detail of how far we went down that tree—age group, how much they stored. But, as I said, the general conclusion was that, the older they got, the more inclined they were to have more stored.

Senator O'SULLIVAN: From it—we have touched on this, and I think I know the answer—you did not get a sense of how they turned that money over and whether they stored it for an entire duration and did not put it into operation?

Mrs Bullock : No, we did not. It was a survey about a point in time.

Senator O'SULLIVAN: Have you explored inserting almost like a digital signature into a banknote, for whatever purpose—tracking its life, authentication as a piece of tender?

Mrs Bullock : Let me take one step back: on every banknote there is a serial number, and there are also machine-readable features, so that when it goes through a processing machine at a bank or at a car company, they can actually use these features to say, 'Well, this is a genuine banknote, and this is not'. It does not allow them to trace. It does not allow them to say, 'this banknote was here yesterday, and it will be there tomorrow'—

Senator O'SULLIVAN: So there is no stored data.

Mrs Bullock : There is no stored data. And we don't read the serial numbers either, so we don't bring them back in. But again, it does not allow you to do anything except possibly say, 'well, we recognise this banknote went out in 2010, and we have found the same serial number has come back to us in 2014'. It does not allow you in any way to trace where it is going.

Senator O'SULLIVAN: All right. Then let me ask a sub-question: can you answer the same question with a typical dollar value—that is, of you now go to the other world, where our transactions are done with credit cards, can you tell the activity of a unit of one dollar, in the course of its normal life, in terms of how many times it has transacted—how many times is it used in transactions?

Mrs Bullock : The velocity of currency; I don't know what the velocity currently is, of M3. There are some simple calculations you can do, which basically say the number of transactions over the money supply, which is deposits and cash and so on. I don't happen to know off the top of my head what that is.

Senator O'SULLIVAN: So would we not then be able to track that back—that cash retained; in the survey material—and assume that it would be at the higher end of that? So if I have a dollar that is not in the system, am I more likely to use it for those disposable activities of buying beer, cigarettes, or whatever it happens to be?

Mrs Bullock : You could make some assumptions like that. One thing we do know from the surveys is that the cash transactions that we see from the surveys tend to be small in value—I think around about 80 per cent of transactions are under $20 of cash. So you will start to see that; what you won't see, of course, is if people are storing it, and not using it in transactions. You just won't see it in those sorts of surveys, because what you see in those surveys is the transactional work that the currency does.

Senator O'SULLIVAN: Thank you.

Mr MATHESON: I have a question in relation to your comments about circulation—that every person has got 11 $100 notes stored somewhere. Your new note is really going to be of interest for the security issue, isn't it? It is like a counterfeit issue. There will still be people who have large amounts of money stored in other places—like criminal elements; I think there was a high-profile case around 18 months ago where $2 million in $100 notes was found in the roof of a house, it was all vacuum sealed, and the person who had it in their house did not know how it got there. You are still going to have circulation problems, aren't you? A good crim is going to exchange it for the new currency, no matter what—even if it is in small amounts. And any time you bank $10,000, it is reported anyway, so it is not going to go into a bank account. You are still going to have that circulation problem. You are really looking just at the security of the notes.

Mrs Bullock : Yes. And again, I think it will depend on how people choose to deal with that, and whether they want to find a way of turning over their holdings—and some people will. Or, as it is still legal tender, people might just choose to continue to store that particular currency.

CHAIR: In your submission, you touch on a proposed reform to the Crimes (Currency) Act 1981. You make the comment that you recommended some changes that were outlined in a submission you made to the Attorney-General's Department in 2009. What has happened with those recommendations, or that submission? Has there been any further discussion since then?

Mr Drayton : We have had a number of discussions with the Attorney-General's Department, Treasury, and the AFP over the years since we put that submission in. But I think, generally, other priorities have taken precedence, so there have not been any changes go through. Our main objective there was to try to relieve the AFP of some of the administrative burden that it currently has. In 2009 we put in some arrangements where we could do a lot of the administrative work for the AFP that it was previously doing. So, as Mrs Bullock said, we do a lot of the data collection and data analysis, whereas previously the AFP was doing that collection.

But we still have this situation where under the legislation all the counterfeits have to go the AFP, which essentially means that the AFP has to act as a post box collector and emptier. The counterfeits go to a post box and the AFP has to empty it and deliver it to us, which detracts them from their investigative obligations.

Then, there are other processes we have to go through at the end of the examination process. After our examiners have examined the counterfeits and provided statements or collected the data for non-evidentiary stuff, they provide statements to the courts for the evidentiary counterfeits. The AFP have to go before a magistrate to get the counterfeits condemned. For the ones that are non-evidentiary, that again ties up AFP resources. Once we have collected the data it is pretty simple for our counterfeit examiners to determine they are no longer needed, and they could make the assessment to get them destroyed, or take them before the magistrate themselves rather than having the AFP do it.

CHAIR: Do you have any legal powers in that regard?

Mrs Bullock : No, we do not. This is the point I think, and the reason we have been pushing it—not only us but the AFP. It is driven by a desire from the AFP to get out from under the burden of the admin so that they can focus on enforcement and investigation. We will help them where we can. The legislation interposes them in the middle. They would rather be out of it, but, unfortunately, because of priorities at the Attorney-General's Department it just has not managed to go anywhere. We think, and the AFP think, it would be a really good step in dealing with counterfeit issues if we could make this a much cleaner and more efficient process.

CHAIR: What are the risks of things falling through the gaps in that process?

Mrs Bullock : There are two things. There is a risk that things fall through the gaps, because, as Mr Drayton said, there is a double-handling process. The other problem is that sometimes counterfeiting can occur quite quickly, so any delay in getting information about counterfeiting can actually put you a little bit on the back foot. So to the extent that everything has to go through the AFP it means that we do not get it until a little while down the track. They might think, 'We'll package a whole bunch together and deliver it in two weeks time.' Actually, it is more critical that we get stuff in a really timely fashion so that we can let them know quickly that there is an issue arising, whereas they do not necessarily know that. So I would say that it is not just the gaps but there is a timeliness issue.

CHAIR: But wouldn't the AFP have a very active interest in counterfeiting issues more generally, because it is a criminal activity that, from my understanding of the legislation, comes under the AFP's ambit anyway? From that perspective, to me it makes sense that it does go through the AFP. Maybe we need to have a look at their processes to make sure that is more timely rather than taking that—

Mr Drayton : I think the important thing is that they would not be receiving information. In fact they would probably be getting the information much quicker. At the moment they have to empty the post box and give it to our examiners. Then our examiners collect the data and give them the information. For example, you mentioned that there is a bit of a counterfeiting situation at the moment, but yesterday the AFP did not empty to post box. We do not know, and the AFP does not know, how many counterfeits are sitting in that post box, until they go to empty it today.

Senator O'SULLIVAN: Isn't this as simple as one phone call from the Reserve governor to the commissioner of the Australian Federal Police? Is there any legislative condition—

Mrs Bullock : The legislation does require that things are handled in this way. In fact, to comply with the legislation the AFP has had to post an officer to sit in the Reserve Bank's building. What I am trying to say here is that there are some efficiencies that could be gained here. We are not saying that the AFP should be taken out of the picture. What we are saying is that they are best at investigating and enforcing, and anything that takes their focus away from that—administrative, data entry and that sort of thing—is not good. It is better if we work as a team with them. We take on the administration and we take on all of the boring bits and we feed them the information in a timely fashion, which they can then investigate.

Senator O'SULLIVAN: Coming back to my question, why isn't this a phone call from the head of the Reserve Bank to the head of the AFP saying, 'Listen, I have a set of new protocols or procedures here that we should both consider that will lift the efficiency and give you big efficiency benefits at the AFP'?

Mrs Bullock : We have done that at a very senior level, and that is what we have now. After that process we now have a system where we have sort of got around the legislation but the legislation itself still imposes some obligations that a phone call will not fix. You have to comply with the law.

Senator O'SULLIVAN: Okay. So it is this committee's job to look at this specific issue and make a recommendation?

Mrs Bullock : Yes.

CHAIR: Thank you for your evidence. A copy of the Hansard transcript will be made available in due course for you to check and come back to us with any corrections. If we have any more questions we will contact you.