Smugglers’ nest: the Godot-awful wait for Australia to close money-laundering loopholes

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The flood of black money into Australia proceeds apace, pushing up property prices, as the government dithers on its international pledge to enact money-laundering laws. Callum Foote and Michael West report.    

If you reckon they are dithering in Canberra over a federal corruption commission (promised three years ago), get a load of this:

Senator Nick McKim: Thanks, Mr Pezzullo (Secretary, Home Affairs). Just to be clear: 15 years after Tranche 2 (of money-laundering laws) was first promised, and five years after the statutory review of the act recommended that Tranche 2 be implemented, the government has now recommissioned a cost-benefit assessment that has already been done once. Is that what you’re telling the committee?

Mike Pezzullo : It was done at a point in time with certain parameters and working assumptions. Yes, we’re redoing that work, or I should say we’re having that work redone.

“Parameters” … “assumptions” … “work redone”; waffle, waffle.

We got this super-waffle from a spokesperson five long years ago when asked about the then nine-year delay in introducing Anti-Money Laundering/Counter Terror Financing laws:

A cost/benefit analysis of extending AML/CTF regulation to certain non-financial business (lawyers, conveyancers, accountants, real estate agents, trust and company service providers and high-value dealers) is well progressed and will be completed by July this year.

The outcome of the cost-benefit analysis will inform the government’s decision on the regulation of tranche two entities under the AML/CTF Act.

Outcome? Zero. 

What have we got here, the Iliad and the Odyssey of cost-benefit analyses? No, it’s just covering up for inaction, prevarication. There may be no cost-benefit analyses at all. We have surely never seen one nor heard of somebody who has.

Governments of both stripes have been hemming and hawing for 15 years over the introduction of money-laundering laws, laws which would stem the flood of black market money into Australia’s property market; laws which would finally drag this nation into line with global standards on AML-CTF (that’s the regulatory vernacular for Anti-Money Laundering and Counter Terrorism Financing).

Yet thanks to lobbying and political donations, thanks to the government’s complete failure to stand up to powerful vested interests – lawyers, accountants and property developers – we are still waiting for Tranche II, laws supposed to be enacted by 2008. 

The parallels with Samuel Beckett’s play Waiting for Godot ring loud.

Why is this important? Greg Medcraft, former chairman of the corporate regulator ASIC, once let slip that Australia was a “paradise” for white-collar crime. He was promptly shut up by his political overlord Mathias Cormann for carelessly telling the truth. 

In practice, when the original AML law came in, it compelled casinos, gold dealers and banks to disclose the identity of the counter-party to any transaction of $10,000 or more.

Accountants (read the Big 4 consultancy firms), law firms and real estate vendors however still don’t have to report to the watchdog agency AUSTRAC (the Australian Transaction Reports and Analysis Centre). They can launder money with impunity.

So it is that big licks of illicit capital flow to Australia from China and elsewhere (China does not allow its citizens to take more than $US50,000 so anything over that is not legal) which forces up metro property prices.

We put some questions to the minister responsible again last week. The portfolio is juggled a lot. It used to be the attorney-general’s caper. Now it’s buried in Home Affairs where Karen Andrews has taken the reins from Peter Dutton.

Andrews didn’t even bother to return calls or emails. Even her PR people couldn’t be bothered. AUSTRAC, the agency for which they are responsible, did better.

AUSTRAC was mogged into the Department of Home Affairs following the creation of the new super-portfolio in December 2017, having previously been part of the Attorney-General’s Department. 

The “Tranche 2” reforms have languished there ever since under Dutton and now Andrews.

Meanwhile AUSTRAC has been nudged into a secondary role in official meetings with the Paris-based international standard setter FATF (Financial Action Task Force) at the very time Australia is being called to account for its decade-old policy failures in not passing Tranche 2.

Nicole Rose, chief executive of AUSTRAC, told us:

I believe that the government is addressing it in a tranche-by-tranche way and that they are concentrating on Phase 1.5 [legislation], which has gone through the parliament just recently. I’m not aware that costings have started or any work has been done on Tranche 2.

That lays uncertainty around the view put by Pezzulo.

Australia’s 15-year failure to pass Tranche 2 was expected to be discussed at February’s 2021 FATF Plenary conference. When it was part of the Attorney-General’s Department, AUSTRAC would lead all engagements with FATF, Egmont and other regional bodies such as the Asia-Pacific Group on Money Laundering (APG).

Nathan Lynch, a financial crime intelligence expert at Thomson Reuters, says financial crime is a “global catastrophe”, with some $2 trillion a year being laundered, of which only 1% is detected and seized.

Australia therefore joins the illustrious company of China, Mongolia, Madagascar, Mauritius and the United States in being the only six countries that do not comply with global rules on Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF); non-compliant, that is, with all three of the Financial Action Task Force’s (FATF) obligations.

Meanwhile, an entire generation of young Australians is locked out of the property market, except those of course with wealthy parents able to shoehorn them into their first home.





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