Albanese Government urged to tighten AML laws before Australia risks its global financial reputation

Senator the Hon. Deborah O’Neill

PO Box 6100

Senate

Parliament House

Canberra ACT 2600

 

20 March 2023

 

Dear Senator Deborah O’Neill,

I write to you from First AML, an anti-money laundering regulation compliance company in support of any first measure at all put in place to tighten Anti Money Laundering and Counter Terrorism Financing (AML/CTF) regulations across the real estate, law, accounting and high-value goods industries (Gatekeeping Industries). This should also extend to trust and company service providers similar to what New Zealand have implemented.

We have been cautiously optimistic regarding suggestions of Conveyancing and Real Estate to be regulated under AML/CTF this year, as well as the call for submissions on a Beneficial Ownership Registry.

These would be essential initial steps to protecting Australians from the knock-on effects of organisational corruption on society, the economy and property market, and the nation’s reputation. However, even such positive moves cannot be the end game.

Following the proposed implementation of the Federal Independent Commission Against Corruption, the expansion of AML/CTF must come next.

It is crucial that all aforementioned industries adhere to straight forward AML/CTF and Know Your Customer (KYC) compliance to help in the fight against heinous organised crime and terrorist organisations, and boost safety for all Australians.

The importance here can’t be overstated given Australian industries’ very poor track record in compliance; major banks, casinos and gaming sectors have been hit with significant fines or are subject to enforceable undertaking.

Unfortunately, the latest figures show that our nation is fast becoming one of the money laundering capitals of the world. We have fallen far behind countries such as New Zealand – whose AML/CTF laws expanded to include these Gatekeeping Industries in 2018 – the United Kingdom, Canada, and even the United States in efforts to tighten AML/CTF measures.

Australia’s AML/CTF regime is based on the international standards developed by the FATF. Various pieces of legislation have been amended in order to achieve better alignment with the FATF recommendations. In 2006, the Australian government passed ‘Tranche I’ of legislation establishing a new AML/CTF regime covering the financial sector in order to meet Australia’s international obligations as a member of the FATF.

Australia promised to apply the AML/CTF Act to legal professionals by 2008. In July 2010 – while already well behind schedule – the government deferred discussion of the AML/CTF legislation until mid-2011 to allow time for recovery from the global financial crisis. However, it still has not carried out this promise. Today, the Gatekeeping Industries do not have comprehensive AML/CTF obligations.

Seven years ago, the 2015 Financial Action Task Force’s (FATF) Mutual Evaluation report on Australia’s AML regulations made 84 recommendations. These reports are designed to analyse the implementation and effectiveness of measures to combat AML/CTF risks. As of today, only roughly a quarter of the recommendations have been implemented, not including arguably the most critical – to regulate the Gatekeeping Industries, under AML/CTF.

With FATF having delayed its return to review Australia’s performance from 2023 to 2024/25, it will be close to an entire decade by the time we get an updated scorecard. In that time, billions and billions of dollars have been funnelled through the country, washing money potentially made from terrorism, the trafficking of humans, animals, and drugs, and child exploitation.

In recent news, we’ve seen headlines demonstrating both the scale and the prevalence of the problem. Last year, we saw two tonnes of methamphetamine with a street value of 1.6 billion dollars concealed in marble seized by Australian police at a Sydney port. Four days later, AUSTRAC launched an investigation into the country’s biggest gold and silver refiner, Perth Mint, on suspicion it breached AML/CTF financing laws.

And early in February, the Australian Federal Police dismantled an alleged Chinese-Australian money laundering organisation that moved an estimated $10 billion offshore while amassing a blue-chip Sydney property and land portfolio. This is all without mentioning the multiple major casinos across the country that have been found breaching anti-money laundering laws.

Consider how many Australians – how many people – have been hurt through the actions of criminals who are targeting the Australian system to launder illicit funds. Tighter laws are necessary to protect the people of this country.

In the 2019 Federal Election campaign, Labor made a promise to implement Tranche 2 of AML/CTF measures. It’s been rumoured that this implementation will take place this year, and it’s time for the government to openly commit to this important initiative.

The Senate inquiry that concluded in March 2022 soundly disproved arguments against Tranche 2 relating to ‘increased cost’ by proving that estimates were severely overinflated. Additionally, the inquiry highlighted the benefits that regulation technology (RegTech) could bring in terms of creating business efficiencies.

Despite the inquiry’s findings, nothing has changed. A bill was tabled to be addressed in September 2022, but Labor has not re-tabled it since coming back into government in May last year.

Unless we move very quickly on implementing Tranche 2, Australia could become grey-listed by FATF, which would have devastating effects on our nation’s global reputation and ability to trade. A comprehensive consultation process would help to ensure that Tranche 2 is implemented in a way that balances the need for effective anti-money laundering and counter-terrorism financing measures with the practical realities of the financial industry.

This commitment is critical to protecting innocent Australians who are battling high levels of inflation and increased interest rates – while billions of dirty dollars are being funnelled through Australia’s economy.

It is strongly in the interests of Australia to act now and amend the AML/CTF Act to cover the Gatekeeping Industries. If the government waits until pressure from FATF (such as deadlines for compliance and, if necessary, a finding of non-compliance) forces it to comply, this may tarnish Australia’s international reputation and adversely affect the legitimacy and effectiveness of its AML/CTF regime.

We see a petition to the Australian public as a potential future step in our campaign. We urge you to consider the potentially dire consequences of delaying any further steps to tighten AML/CTF regulations.

 

Yours Sincerely,

Milan Cooper

CEO, First AML

Milan Cooper, CEO of First AML
Milan Cooper, Chief Executive Officer and Co-founder at First AML