Parliamentary speeches

Anti-Money Laundering and Counter-Terrorism Financing and Other Legislation Amendment Bill 2019 - Second Reading

November 11, 2020

I rise to make a contribution to the debate on the Anti-Money Laundering and Counter-Terrorism Financing and Other Legislation Amendment Bill 2019 and set out the position of the opposition on this bill. It is significant legislation which amends a number of Commonwealth acts, including the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, the Australian Federal Police Act 1979, the Criminal Code Act 1995, the Inspector-General of Intelligence and Security Act 1986, the Proceeds of Crime Act 2002 and the Surveillance Devices Act 2004. This bill, which has taken some time to make its way into this place, would implement a second phase of reforms arising from recommendations of the report on the statutory review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and associated rules and regulations, which were tabled in the parliament on 29 April 2016. Again, this is consistent with a broader pattern under this government of there being some delay in dealing with very significant matters, and, of course, the matters this bill responds to are extremely significant. That said, I acknowledge and we acknowledge that this is a bill that is fundamentally designed to improve Australia's anti-money-laundering and counterterrorism financing laws, and this is an objective—and, indeed, a bill—which Labor supports. But we do call on the Morrison government to take anti-money-laundering and counterterrorism financing laws more seriously and to deal with these matters more expeditiously.

The basis for these changes rests in very large part in the work of the Financial Action Task Force which is an intergovernmental body established by the then G7 back in 1989 and of which Australia has been a member since 1990. From that time, the recommendations of the task force have set international benchmarks for measures that respond to money laundering and terrorist financing. These were revised in 2012. While these are not binding under international law, they are supported by very significant global institutions: the G20, the United Nations, the World Bank and the IMF. This is positive globalism—a very important cooperative framework which operates via a system of evaluations and the provision of incentives so that these recommendations can be given full effect to by a state party such as Australia. It was a mutual evaluation report of this nature in 2015 which identified deficiencies in Australia's anti-money-laundering and counterterrorism financing provisions. This bill will address some of the deficiencies identified in that report. However—and it is crucial that members note this—this bill does not address all of these deficiencies. Australia's anti-money-laundering and counterterrorism financing regulatory framework will remain non-compliant or only partly compliant with many of the recommendations made by the Financial Action Task Force in its 2015 mutual evaluation report.

There is more to be done. That is the responsibility not only of this government but of all members, and that is the contribution that Labor will be making in support of the provisions contained within the bill.

The bill contains a wide range of measures to address money laundering and terrorism financing risks. The aims are: to expand the circumstances in which reporting entities may rely on customer identification and verification procedures undertaken by a third party; to reform cross-border reporting requirements so that, in addition to travellers declaring $10,000 or more of physical currency, travellers will now also have to declare bearer negotiable instruments, such as travellers cheques, at the border where the combined amount of physical currency and bearer negotiable instruments is $10,000 or more; to strengthen protections on correspondent banking by prohibiting financial institutions from entering into a correspondent banking relationship with another financial institution that permits its accounts to be used by a shell bank and by requiring banks to conduct due diligence assessments before entering and during all correspondent banking relationships; to simplify secrecy provisions to make clearer the prohibitions on tipping off in order to permit reporting entities to share suspicious matter reports and related information with external auditors and foreign members of corporate and designated business groups; to provide a simplified and flexible framework for the use and disclosure of financial intelligence to better support combating money laundering, terrorism financing and other serious crimes; to create a single reporting requirement for the cross-border movement of monetary instruments; and to address barriers to the successful prosecution of money laundering offences by clarifying that the existence of one Commonwealth constitutional connector is sufficient to establish an instrument of crime offence and deeming money or property provided by undercover law enforcement as part of a controlled operation to be the proceeds of crime for the purpose of prosecution.

I note also that the bill would make it an offence for someone to falsely claim that they have received a police award. Obviously it's disappointing that there needs to be such a provision, but this is a provision that Labor strongly supports.

Of course, money laundering and terrorism financing are not just problems for Australia. They are global problems that require effective global engagement and cooperation. They threaten Australia's national security and the integrity of Australia's financial system. That's why Australia's anti-money-laundering and counterterrorism financing frameworks must continue to evolve to keep pace with evolving challenges. Otherwise, Australia will become a weak link in the global financial system and a soft touch for organised crime around the world seeking to launder its proceeds.

Unfortunately, since 2013 this government has repeatedly missed deadlines in its own anti-money-laundering and counterterrorism financing timetable. Such was the government's failure to implement reports according to its own schedule that the world's watchdog, the Financial Action Task Force, expressed serious concerns about the regulatory framework in this country. The Financial Action Task Force's 2015 mutual evaluation report made clear that Australia is an attractive destination for foreign proceeds of crime, particularly corruption related proceeds flowing into real estate. This is troubling to read, at the very least. It is even more troubling when we reflect that this was a report handed down in 2015—five years ago.

So, while Labor welcomes efforts by the government to belatedly strengthen our anti-money-laundering and counterterrorism financing laws, this latest legislation comes more than four years after the then Minister for Justice tabled the report on the statutory review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and associated rules and regulations, which first called for these changes in March 2016. Yet, much more than four years later, this legislation that is before the House right now fails to implement many of those 2016 recommendations.

The fact is that the Morrison government has dropped the ball on this critical national security issue. Other jurisdictions have moved ahead of Australia, with much stronger anti-money-laundering and counterterrorism financing protections. This means that there are growing risks to Australia—and they should concern every Australian—including this government's failures to fully implement either the Financial Action Task Force or the statutory review's recommendations. Accordingly, I will be moving a second reading amendment to this bill.

I move:

That all words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading, the House:

(1) notes that Australia has still not implemented all of the recommendations from the 2016 report on the statutory review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and associated rules and regulations;

(2) further notes that other international jurisdictions are already moving ahead of Australia with stronger anti-money laundering and counter-terrorism financing protections; and

(3) calls on the Government to ensure Australia is not regarded a soft-touch for money launderers or terrorism financiers".

I now want to talk about the consideration of the Senate Legal and Constitutional Affairs Legislation Committee in respect of this bill. Labor was successful in referring the bill to that committee on 14 November 2019—again showing the lack of haste the government has shown in dealing with the important measures that are the subject of this bill. Labor senators, in their consideration, demonstrated a concern that much of the important detail appears to remain in the explanatory memorandum to the bill and is not reflected in the terms of the legislation itself. I share these concerns. Of course these are not concerns that are confined to this piece of legislation; this government has a habit of leaving important terms in subordinate legislation or not sufficiently prescribing terms that should be in substantive legislation.

With regard to some of the most significant details referred to in the explanatory memorandum, Labor senators noted:

Proposed Section 37A allows for a reporting entity to enter into a written agreement with 'another person' but does not appear to stipulate that this person is either a reporting entity or otherwise subject to appropriate AML/CTF regulation and supervision. This stipulation exists only in the Explanatory Memorandum and we submit should ideally be reflected in the legislation—

The substantive legislation, that is. They go on:

Proposed Section 37A allows for two entities to enter into a CDD Arrangement that allows for a second entity to rely on the customer identification procedure undertaken by the first entity. Proposed Subsection 37A(2)(d) requires that the second entity obtain information from the first entity regarding the identity of the customer but does not impose any requirements or restrictions as to the currency of that information. If the intention is to impose such a restriction, such as a timeframe for how old that information can be, we submit that this should be reflected in the legislation.

That is a very reasonable request, given the subject matter of this legislation.

As for concerns raised by industry, both the Australian Financial Markets Association and the Financial Services Council have raised concerns that there are some definitional deficiencies in the current bill which need to be addressed. The Financial Markets Association said:

Firstly, given that the proposed Rule will relate to opening an account, we request that the term "opening an account" be specifically defined in the AML/CTF Act to ensure consistency of approach across reporting entities. There is some ambiguity as to when an account is actually opened, such that a designated service is provided.

The Financial Services Council stated in their submission:

We note that the amended section 32 under the Bill does not materially change the current obligations to carry out an Applicable Customer Identification Procedure (ACIP) prior to the provision of a designated service. However, it is suggested that the term "opening an account" needs to be specifically defined in the AML/CTF Act to ensure consistency of approach by all reporting entities. Also, in this regard, the FSC notes that AUSTRAC intends to issue Rules under section 33 to stipulate special circumstances where a designated service can be provided prior to ACIP being completed. Similarly, it is suggested that such Rule changes need to be made carefully to ensure consistency of approach overall, including with Section 32.

Labor senators noted these outstanding definitional deficiencies 'could undermine Australia's anti-money laundering and counter terrorism financing laws in the future'. Labor senators also noted that the Senate Standing Committee for the Scrutiny of Bills had reviewed the legislation and requested the minister's advice as to why it is proposed to use offence-specific defences which reverse the evidential burden of proof in this instance. While the scrutiny committee accepted the minister's explanation, the minister also undertook to table an addendum to the bill's explanatory memorandum to include further information about the use of offence-specific defences in response to these comments. As I understand it now—exactly a year after that time—the Minister for Home Affairs is yet to table this addendum, again demonstrating a lack of attention to detail and to the seriousness of the matters this bill, which has bipartisan support, is intended to address.

In concluding my remarks, I want to touch on recent money-laundering scandals involving Crown and Westpac. In November last year, AUSTRAC launched Federal Court action accusing Westpac of breaching AML-CTF laws more than 23 million times, including by allowing a dozen customers to transfer money to the Philippines in a way that is consistent with child exploitation. The current system meant that there was no action taken against Westpac until it had breached the anti-money-laundering and counterterrorism financing laws 23 million times. I repeat: 23 million times. How can that be adequate? How can it be adequate that we have taken so long to substantively respond to this? Westpac later admitted that it took the bank six years to identify as a risk the client known as 'customer 1', who made 625 transactions worth $136,000 in a manner consistent with guidance on transactions that could indicate child exploitation. It's disgusting and unacceptable. I'm sure all members and senators would agree.

With respect to Crown casino, the chairperson, Helen Coonan, submitted that the casino had facilitated laundering. The ongoing NSW Independent Liquor and Gaming Authority inquiry into Crown casino has revealed shocking noncompliance with money-laundering laws by Australian casinos and junket operators. Yet AUSTRAC, the regulator, gave these casino and junket operations its tick of approval only three years ago. Since then tens of billions of dollars have poured into Australia through such channels.

It is deeply worrying that we have needed a New South Wales government licencing authority to bring systemic breaches of money-laundering laws to light, given the profound responsibility of the Morrison government to protect all Australians from money launderers and the funders of terrorism. It demonstrates that the protections and oversight in this area need to be beefed up and enhanced, and this needs to be done expeditiously with due attention to detail—things that have not been in evidence.

Labor is supporting the passage of this bill through the House of Representatives. I proposed, on behalf of the opposition, in the second reading amendment, some suggestions to improve the bill because Labor understands the importance of strong, robust, anti-money-laundering and counterterrorism laws. We are concerned that the Morrison government has been too slow to act in this area—and too slow to act on the advice of the intergovernmental body which has done such important work—and that this could have contributed to some of the shocking and unacceptable revelations of money laundering, including at Westpac and Crown. Above all, we do not want Australia to become a soft touch for money launderers and those involved in terrorism financing.