2022 will be the year of reckoning for Australia’s lax money laundering regulation
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For 15 years, Australia has been pushing back on implementing anti-money laundering regulations.
After the Global Financial Crisis (GFC) Australia managed to avoid being grey labelled by the Financial Action Task Force (FATF) despite doing the bare minimum. But, with the approach of Tranche II, that is all about to change and rightly so.
Australia is one of just three countries yet to implement or legislate for implementation on Tranche II. The other two countries are Haiti and Madagascar. It’s obvious to see that we are not in good company here.
As China and the US introduced measures for the supervision and administration of anti-money laundering this year, we continue to lag behind while billions of criminal dollars were funnelled through our; pokie machines, with Crown Sydney likely to be handed a large fine from AUSTRAC; banks, with Commbank A agreeing to a $700m fine in 2018, Westpac ordered to pay a $1.3b fine in 2020 and National Australia Bank (NBA) in ongoing discussion with AUSTRAC since 2017; and housing market, with Australia recording the fourth-fastest house price growth out of the world’s advanced economies over the past 20 years, according to a new report by the Organisation for Economic Co-operation and Development.
Tranche 1.5, which was essentially four amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) introduced by the Australian Government at the end of 2020, was regarded by some as a win. I have to disagree. In my opinion, its only delayed the necessary introduction of higher levels of regulation.
With Tranche 1.5, came the introduction of Safe Harbour; verification procedures for individual customers. Designed for individuals of medium or lower money laundering/terrorism financing risk, it had the right spirit. Unfortunately, but unsurprisingly, its loopholes make it too easy for criminals to abuse.
More importantly, Tranche 1.5 still only relates to the entities captured by Tranche I, including providers of financial, bullion, and gaming and gambling services. The changes fall short of covering a wider group of industries and gatekeeper professions that can be exploited by criminals to launder money, such as lawyers, accountants, and real estate agents.
To put it frankly, to neglect to tighten anti-money laundering regulation is to allow billions of dollars each year handled by said gatekeepers to potentially fund terrorism, the trafficking of humans, animals, and drugs, and child exploitation.
I’m disappointed that this is the way Australia treats financial crimes. It displays a blatant lack of care for citizens and the knock on effects in the lives of everyday Australians.
One of the most alarming is the inflated property price which is the dismal result of the boggling fact that billions of dollars are laundered through Australia’s property market alone. Overseas influence provokes a lot of criticism and complaints and yet there is nothing being done to stop foreign countries from illegally entering their funds and using Australia as a sort of black market bank.
Australians see headlines about big banks receiving billion dollar fines for breaches of the AML/CTF Act but many of them are unable to join the dots between a bank they may very well be a member of and an overseas drug cartel. This is because of all the “unknown” players – the aforementioned gatekeepers who facilitate money laundering.
These are the service providers – the entire industries – which still aren’t regulated but absolutely must be. It’s time for Australia to step up. It’s time for individual people, i.e. directors, and firms alike to be held accountable. It’s time for entire industries to be regulated, with sensibly thought through exceptions. It’s time for Tranche II.
The question is, how do we regulate without hurting people? Without hurting businesses?
We need to go back to basics. Existing legislation must be updated to make it clearer for businesses to understand what is regulated, how regulations are being enforced, and why these guidelines are important. We need to join the dots for people.
We need to implement Tranche II, as soon as possible. We need to stop delaying and finally take some impactful action against money laundering. That doesn’t mean there can’t be a grace period. A period to allow businesses and service providers to build compliance programs and implement the correct technology is fair and reasonable.
Finally, we need to revisit Safe Harbour and address the loopholes that exist.
Of course, there will be expenses for businesses when Tranche II comes. It’s important to remember that this is an addition of value to the business and to Australia, because if we continue sitting on our hands we are at risk of being put on FATF’s grey list, and we do not want that. The last thing Australia needs is another blow to its global credibility.
This year is the time for Australia to repair its global reputation and regain trust in our financial systems, due diligence, and due process. In 2022, we can elevate Australia to the position the nation held during the GFC; that of a country with solid financial institutions that were very hard to sway.
What are we waiting for?
Andrew Jackson is the Country Manager of First AML