Money-laundering bill finally back in Parliament despite fight by Law Council, property lobby

by | Nov 29, 2020 | Government

As Australia is a global pariah on climate change, it is a pariah for not cracking down on money laundering and financial crime that facilitates child exploitation and terrorism. But with the Greens’ amendment to the anti-money laundering/counter-terrorism financing bill to be debated this week, Labor, the Coalition and the cross-bench senators will have to decide: are they owned by the powerful property, accountancy and legal industries or not? Tasha May reports.

“That Australia has become a sink for the illicit wealth of some of the Pacific region’s worst kleptocrats should horrify all Australians.”

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

For more than a decade, Australia has refused to complete the second half of its anti-money laundering reform, despite repeated promises from government ministers that it was about to do so. The reforms are known in Australia as Tranche 2 of the AML/CTF regime — rules that would force lawyers, accountants,
real estate agents and other “gatekeepers” to join the global fight against serious and organised financial crime.

Australia thus joins the illustrious company of China, Mongolia, Madagascar, Mauritius and the United States in being the only six countries in the world that are not complying 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 around these professions.

Behind that $2 trillion in black money are real world consequences: internationally the laundering facilitates corruption, child exploitation, environmental crime and terrorism; while locally, money laundering is undermining Australian democracy. It is also contributing to rampant rising house prices.

“It’s a damning indictment on Australian democracy when these law changes have had bipartisan political support — but no action — for 14 years. To this day, in Australia a young family buying a house at auction could be bidding, unknowingly, against a buyer’s agent for a company controlled by a corrupt overseas politician or a drug syndicate. These people are much less price sensitive than an Aussie family. Yet the accountants, lawyers and real estate agents who structured those deals are able to turn a blind eye,” Lynch said.

Westpac’s pursuit of profit “placed children directly at risk of harm”

Where it all began

Greek mythology tells the fable of Sisyphus, condemned to roll a rock uphill only for it to tumble back down each time. Like Sisyphus, Canberra has been struggling with the rock that is its Anti-Money Laundering/Counter Terrorism Financing law.

The 2006 AML/CTF Act targeted illegal activity in the financial sector. The Explanatory Memorandum to that bill forecast a “second tranche” of legislation covering non-financial sectors including real estate agents, accountants and lawyers. The second tranche would compel real estate agents, lawyers and accountants to report suspicious transactions to AUSTRAC.

Yet that second tranche never followed despite multiple promises from ministers that it was just around the corner.

The 2019 Amendment Bill, which should have brought an end to this 14 year-long saga, again fails to deliver the second tranche laws, dropping the issue, like Sisyphus’ rock, right back to the bottom of the hill again.

Numerous warnings

This failure to act is all the more galling given the numerous warnings Australia has received over its failure to act, including from the OECD (Organisation for Economic Co-operation and Development) in 2017 and the International Monetary Fund in 2019.

And just as Mathias Cormann has come under fire for his hypocrisy in promising a green-led recovery if he gets the OECD top job when he and the Coalition government undermined every initiative to tackle climate change, so too will his hypocrisy that he was finance minister in a government that failed to act on money laundering despite warnings from the OECD.

The anti-money laundering rules were developed more than three decades ago by the Financial Action Task Force (FATF), and OECD taskforce. The Financial Action Taskforce conducted a review in 2015 and found major non-compliance, resulting in Australia being placed on an enhanced follow-up remediation program. The report repeatedly identified the “high” money laundering risk posed by real estate agents and lawyers.

The federal government also ignored the recommendations from a statutory review by the Attorney-General’s department in 2016 to impose those obligations on the other professional groups.

Lobbyland weighs in

With so many reasons to implement second tranche laws, why has this proven such a Sisyphean struggle for the government? New Zealand implemented the second tranche in 2018, as did the UK and Canada.

According to Lynch it all comes down to lobbying interests and a flawed view of economic growth.

“The Law Council has taken a stridently anti-tranche two position, despite many of its members being strongly in favour of reform to protect the industry’s reputation. Case after case, from Australia and around the world, we’ve seen the critical role that legal advice plays in modern money laundering. And behind the scenes, representatives from the property sector have also been lobbying. and have convinced the government that preventing money laundering will harm Australian house prices.”

The Law Council of Australia states that “the legal profession is already extensively regulated … Any additional regulation of Australian legal practitioners is unnecessary.”

Lynch believes the Council’s stance is counter-productive and that the anti-money laundering regime, if extended to lawyers, accountants and real estate agents, would equip them with the tools they need, as well as the legal cover, to report suspicious activity to AUSTRAC.

Lynch also highlights that lawyers in the UK are subject to the new regime.

He says that without the second tranche, Australia “looks really bad on the international stage” because the real estate market has become a “magnet for dirty money to come into Australia”.

The Property Council of Australia said in a statement that it was “broadly supportive of the bill” – that is, the bill in its current form, which does not include the second tranche legislation.

When asked what steps the Council thought necessary to improve housing affordability, it raised “the supply of land for development, greater use of in-fill or medium density development to meet demand in larger cities, as well as the range of taxes…” There was no mention of anti-money laundering laws.

Greens senator Nick McKim has moved an amendment to the bill asking the minister to introduce by July 1, 2021, a bill to tackle the risk of money laundering and terrorism financing by professions including lawyers, accountants and real estate agents. The bill is due to be debated in the Senate this week.

The failure to implement the second tranche laws has acted as a “signal to kleptocrats and dictators of the world, if they want a safe place to store their money, Australia is open to business,” says Senator McKim.

Australia on watch-list as China billions pour into property

ABOUT THE AUTHOR

Tasha May

Tasha May

Natasha graduated with an undergraduate degree in English literature from the University of Cambridge in June 2019 and is currently studying a Master of Journalism at the University of Technology Sydney. Natasha’s Twitter handle is @tasha_tilly

6 Comments

  1. Avatar

    “Labor, the Coalition and the cross-bench senators will have to decide: are they owned by the powerful property, accountancy and legal industries or not?”

    Great article Tasha, and IMHO no need for a debate or wrestle with their conscience, all are totally owned by these industries, flagrantly so, when we understand that most of these Parliamentarians and their associated counterparts benefit further from their own ‘personal’ investments thru negative gearing, many with multiple property portfolio’s.

    This article merely shows their shallowness, greed and self-interest, also formerly called conflict of interest, in more ways than one. The lack of action screeches complicities and further tarnishes their image, whatever is left of it, and indeed, Tony Abbott did say ‘Australia is open for business’ in 2013, did he not? Talk about signalling in plain sight.

    More’s the pity that they seem incapable of taking a leaf out the book of James Wolfwnsohn https://thenewdaily.com.au/news/national/2020/11/29/michael-pascoe-james-wolfensohn/?

  2. Avatar

    Where do we put the moderately competent offspring of the rich?

    When donors ask that a particular consultant be used, Then they are paid and handsomely. Some of it goes back to the party and some to the polly.

    Fair’s fair, mate?

    Laundering money for domestic and international criminals is a gigantic industry. Take it on and lose, every time. Corruption is firmly established.

    Building companies need cash to pay off books labour. Suppliers of cash need clean sources of capital, such as a pay off from a profitibale building investment. Job done!

  3. Avatar

    corruption increasingly seems to be the main game of this Liberal Government

    since the latest bad news stories about the results of Morrison’s actions – he’s gone into isolation

    hoping the bad smell will dissipate while he’s ‘away’ – but when he comes out again, the damage will still be there …

  4. Avatar

    Pity Tasha spoils the integrity of her article by casting Australia as a pariah yet not mentioning China on climate change such lazy journalism is not appropriate

    • Avatar

      ???? is that before or after China’s plan for net emissions by 2060 ?
      my guess us that they will make it by 2050 because they dont like overruns

    • Avatar

      John, the article I read cast both Australia and China as pariahs in failing to implement AML legislation, along with 4 other countries.
      I didn’t think Tasha was writing about climate change; but were she to list climate change pariahs, I know which nation would be ‘going for gold.

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