Australian senators push for inquiry into money laundering laws

The Australian Labor Party will lead an alliance of the Greens and several independent cross-benchers in demanding a parliamentary inquiry into the long-stalled reforms to the country’s anti-money laundering regime. Labor Senator Deborah O’Neill is set to call a vote on Wednesday for a broad-ranging inquiry into the “adequacy and efficacy” of Australia’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) framework.

If the vote is successful, the proposal will be referred to the Senate Standing Committee on Legal and Constitutional Affairs with a deadline of December 2, 2021; Labor chairs the committee.

The surprise announcement comes on the back of strong lobbying from Greens Senator Nick McKim to set a hard deadline for the passage of the 15-year-old “Tranche 2” AML/CTF reforms. Insiders said the proposal was likely to pass the Senate, provided it maintains the support of One Nation senators.

Broad remit

Senator O’Neill said the terms of inquiry were drafted broadly enough to examine “what Australia needs to do so we are no longer one of the world’s money-laundering weak links.”

The inquiry would look at the effectiveness of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 to prevent money laundering outside the banking sector. The primary targets of inquiry will be the designated non-financial businesses and professions (DNFBPs).

The Senate would consider the attractiveness of Australia as a destination for proceeds of foreign crime and corruption, including evidence of such proceeds in the Australian real estate sector. The inquiry would also assess Australia’s compliance with the Financial Action Task Force (FATF) recommendations ahead of the fifth-round mutual evaluation, which is scheduled for 2024/25.

Dr Daniel Mulino MP, federal member for Fraser, said that since 2013, the Coalition Government had repeatedly missed the deadlines in its own AML/CTF reform timetable.

“Strengthening Australia’s AML/CTF laws and implementing Tranche 2 legislation has apparently been this government’s policy since it was elected, but we’ve seen no action. While other countries have strengthened their AML/CTF defences, the government’s inaction has left the door open for illicit capital to flood into Australia.”

– Dr Daniel Mulino MP, federal member for Fraser

The Senate inquiry would scrutinise AUSTRAC’s regulatory operations and ensure that AUSTRAC has the capability to work with the 100,000 additional businesses that would come within the regime under the Tranche 2 reforms.

“Given that the inquiry’s terms of reference are completely aligned with the government’s own stated AML/CTF policies, there’s no reason for the government not to support it,” Mulino said. “If the government’s serious about this crucial national security issue — and if it’s committed to ensuring that Australia doesn’t become an even softer touch for organised criminals and terrorism financiers — it must support this inquiry.”

Rex Patrick, independent senator for South Australia, said: “This is in area that concerns me and needs to be examined in detail and I will be supporting the move for an inquiry.”

“Fit for purpose”

Neil Jeans, a financial crime consultant at Initialism in Melbourne, said the terms of the inquiry were comprehensive and would look at whether Australia’s AML/CTF regime is fit for purpose.

“With the next full FATF mutual evaluation on Australia’s AML/CTF regime due in 2024/25, this is a timely inquiry to understand if Australia is meeting its international obligations and commitments,” Jeans said.

“The 2016 statutory review identified significant opportunities to improve Australia’s AML/CTF regime. With this inquiry, there is now a real chance these will not be missed opportunities.”

The AML/CTF framework is only ever as good as its weakest link, Jeans said. During decades of experience with the UK’s Metropolitan Police and the National Crime Agency, Jeans worked on numerous cases where criminals laundered funds through professional service providers. Lawyers, accountants and real estate agents were common targets in Australia due to the lack of regulatory obligations and financial crime expertise in those sectors, he said.

“To protect our economy, it is now more important than ever that Australia is not or seen to be the weakest link. The failure to extend AML/CTF to lawyers, accountants and real estate professions undermines Australia meeting its international commitments,” he said.

Minimal impact

Counter-money laundering officials said DNFBPs have nothing to fear from being brought into Australia’s AML/CTF regime, based on the international experience. Similar laws have been passed in comparable jurisdictions including New Zealand, the UK, Singapore and Hong Kong.

“If lawyers, accountants and real estate professionals are brought into the AML/CTF regime, this will be primarily limited to customer-related financial activity. The experience in New Zealand, which introduced AML/CTF for DNFBPs in 2018, shows that the benefits far outweigh the costs,” Jeans said.

Paddy Oliver, managing director at AML Experts, said failing to move would have greater costs for businesses by impairing Australia’s international standing and reputation as a clean economy.

“As a founding member of FATF, and a country which considers itself a good global citizen, it is an anomaly that Australia finds itself an outlier when it comes to meeting all of the FAFT Recommendations. While there might be the political and law enforcement will to supress money laundering in Australia, there is certainly not the political will to give law enforcement all the necessary tools to finish the job. Be it extending the AML/CTF Act to lawyers, accountants, and real estate agents to unexplained wealth orders to a register of beneficial ownership successive governments have shied away at the first sign of industry resistance,” Oliver said.

Iron-fisted takedown

Oliver said the inquiry could “only be a positive, in shining a light on the current problems around fighting the scourge of financial crime in Australia.”

Money laundering has again hit the headlines in Australia following the revelations from the Operation Ironside encrypted communications takedown. Last week the Australian Federal Police (AFP) blew the lid on a three-year operation to intercept communications through the ANOM encrypted chat platform used by organised criminals. Operation Ironside has led to the arrest of more than 220 accused members of mafia groups, outlaw motorcycle gangs and other organised criminals over serious drug and weapons offences.

“In a three-year covert operation, the AFP and FBI were successfully able to access an encrypted communications app, ANOM, and run it without the knowledge of the criminal underworld enabling law enforcement to read encrypted communications between criminals in real time,” said Prime Minister Scott Morrison.

The case highlighted the need to “give law enforcement agencies the legislation, tools and resourcing needed to target these types of crimes and dangerous criminals who peddle in human misery”, he said.

Jeans said the long-overdue Tranche 2 legislation was a critical tool to assist in this fight.

“The PM’s statements last week that his government provides all the legislative tools necessary to fight serious and organised crime makes me hopeful that this inquiry will receive cross-party support,” Jeans said.

Nathan Lynch is an experienced writer, public speaker, manager and technology enthusiast in the field of financial regulation and risk management. At Thomson Reuters, Nathan leads a team of experts who provide breaking news, deep analysis and practical guidance to risk practitioners in the global financial services sector.
Nathan manages Thomson Reuters’ award-winning Regulatory Intelligence team across the Asia-Pacific region, tracking developments in financial services law, regulation, financial crime and risk management.
Nathan has been involved in building innovative, tech-based businesses in the financial services “regtech” sector — including Complinet Australia and the Thomson Reuters Risk business.

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