On 14 November 2019, the Senate referred the provisions of the Anti-Money Laundering and Counter-Terrorism Financing and Other Legislation Amendment Bill 2019 (the bill) to the Legal and Constitutional Affairs Legislation Committee (the committee) for inquiry and report by 7 February 2020. On 5 February 2020, the Senate extended the reporting date to 10 March 2020.
The Senate referred the bill to the committee following a recommendation from the Selection of Bills Committee. The report of the Selection of Bills Committee presented multiple reasons for referral, including to ensure the Parliament had regard to the views of industry and key stakeholders and to allow a full examination of money laundering and terrorism financing risks that are not 'currently captured' by legislation.
Conduct of the inquiry
Details of the inquiry were advertised on the committee's webpage. The committee called for submissions to be received by 13 December 2019 and also wrote to a range of organisations inviting them to make a submission. The committee received 13 submissions which are listed at Appendix 1. All submissions are available on the committee's webpage.
The committee did not conduct any public hearings.
The committee thanks all submitters for their contribution to the inquiry.
Structure of the report
This report consists of two chapters:
This chapter provides information about the conduct of the inquiry, outlines the purpose and provisions of the bill and reports on the findings of the Senate Scrutiny of Bills Committee and the Parliamentary Joint Committee on Human Rights in relation to the bill.
Chapter 2 examines the key issues raised in evidence and provides the committee's view and recommendation.
Background and purpose of the bill
The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the AML/CTF Act), together with the Financial Transaction Reports Act 1988 (the FTR Act), provides the basis for regulation of certain businesses (reporting entities) by the Australian Transaction Reports and Analysis Centre (AUSTRAC). AUSTRAC is Australia's financial intelligence unit and anti-money laundering and counter-terrorism financing (AML/CTF) regulator.
The regulatory framework established under the AML/CTF Act and FTR Act provides for the collection of information from the private sector and from inbound and outbound travellers about the movement of money and other assets. AUSTRAC shares this information and associated intelligence with government agencies, and AUSTRAC's international counterparts, in an effort to combat money laundering, terrorism financing and other serious crimes.
The Australian government is taking a phased approach to reforming the AML/CTF regime. In 2017 the government addressed 17 recommendations (and addressed three recommendations partially) from the Report on the Statutory Review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and associated rules and regulations (the Statutory Review Report). The 2017 reforms amended the AML/CTF Act to regulate digital currency exchange providers and expand the supervisory and enforcement options available to AUSTRAC.
The committee undertook an inquiry into the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017 and presented its report in October 2017. The committee made two recommendations, including that the bill be passed.
The bill subject to this inquiry is the second phase of the government's reforms. When introducing the bill, the Hon Darren Chester MP, Minister of Veterans and Defence Personnel, emphasised the government's strong commitment to combating transnational, serious and organised crime and noted:
The bill is the next phase of the government's reforms to bolster our anti-money-laundering and counter-terrorism financing, or AML/CTF, regime, to prevent criminals from enjoying the profits of their illegal activities, and to stop funds falling into the hands of terrorists. This regime is centred on hardening the financial sector against these threats.
The bill will also improve Australia's compliance with the international standards for combating money laundering and terrorism financing set by the Financial Action Task Force.
The Department of Home Affairs and AUSTRAC explained the bill aims to address the following recommendations in the Statutory Review Report:
simplifying and streamlining the corresponding banking obligations in the AML/CTF regime (R 10.3(a));
prohibiting financial institutions from forming correspondent banking relationships involving shell banks (R 10.3(c));
expanding the exemptions to the prohibition on 'tipping-off' (R 14.1);
consolidating the reporting requirements for currency and bearer negotiable instruments into a single 'monetary instruments' reporting scheme (R 12.1); and
increasing civil penalties for non-compliance with the cross-border movement reporting obligations (R 12.5).
In addition, the bill includes reforms relevant to the following recommendations made by the Financial Action Task Force (FATF) in its mutual evaluation report (MER) on Australia's AML/CTF regime in 2015:
FATF Recommendation 10 (customer due diligence);
FATF Recommendation 17 (reliance on third parties);
FATF Recommendation 13 (correspondent banking);
FATF Recommendation 18 (internal controls and foreign branches and
FATF Recommendation 32 (cash couriers);
Overview of the bill
The bill would amend the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act), the Australian Federal Police Act 1979 (AFP Act), the Criminal Code Act 1995 (Criminal Code), the Inspector-General of Intelligence and Security Act 1986, the Proceeds of Crime Act 2002, and the Surveillance Devices Act 2004.
The bill would implement a range of measures to strengthen Australia's capabilities to address money laundering and terrorism financing risks, and generate regulatory efficiencies, including amendments to:
expand the circumstances in which reporting entities may rely on customer identification and verification procedures undertaken by a third party;
explicitly prohibit reporting entities from providing a designated service if customer identification procedures cannot be performed;
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
requiring banks to conduct due diligence assessments before entering, and during, all correspondent banking relationships;
expand exceptions to the prohibition on tipping off to permit reporting entities to share suspicious matter reports (SMRs) and related information with external auditors, and foreign members of corporate and designated business groups;
provide a simplified and flexible framework for the use and disclosure of financial intelligence to better support combatting money laundering, terrorism financing and other serious crimes;
create a single reporting requirement for the cross-border movement of monetary instruments;
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 purposes of prosecution.
The bill would expand the rule-making powers of the Chief Executive Officer of AUSTRAC across a number of areas.
The bill would also amend the AFP Act to make it an offence for a person to dishonestly represent that a police award has been conferred on them. This measure would ensure that police awards attract similar protections to service decorations awarded to members of the Australian Defence Force under subsection 80B(1) of the Defence Act 1903.
Consideration by other parliamentary committees
The Senate Standing Committee for the Scrutiny of Bills and the Parliamentary Joint Committee on Human Rights both commented on the bill as summarised below.
Senate Scrutiny of Bills Committee
The Scrutiny of Bills Committee (scrutiny committee) raised scrutiny concerns in relation to the offence-specific defences that would be created by the bill, with particular reference to the fact that these offence-specific defences reverse the evidential burden of proof.
While noting that the defendant bears an evidential burden (a mere burden to provide some modicum of evidence in support of their position without needing to reach a standard such as 'on the balance of probabilities' or 'beyond reasonable doubt'), rather than a legal burden, the committee emphasised its expectation that any reversal of the evidential burden of proof needs to be justified. The scrutiny committee argued that its consideration of the appropriateness of each provision is assisted 'if it explicitly addresses relevant principles as set out in the Guide to Framing Commonwealth Offences'. The committee sought advice from the minister as to why it is proposed to use offence-specific defences in this instance.
After considering the advice from the minister, which detailed how the offence-specific defence provisions proposed in the bill address the relevant principles in the Guide to Framing Commonwealth Offences and included an undertaking to table an addendum to the bill's explanatory memorandum, the scrutiny committee welcomed the minister's response and made no further comment on the matter.
Parliamentary Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights (the PJCHR) raised human rights concerns in relation to the right to a fair trial. These concerns related to proposed new section 400.10A of the Criminal Code which provides that money or property provided by a law enforcement participant, or a civilian participant acting under their direction, during a controlled operation, does not need to be proved to be the proceeds of crime in any prosecution for dealing with the proceeds of crime.
The PJCHR sought additional information from the minister in order to assist it to make an assessment about the compatibility of the proposed measure with the right to a fair trial. At the time of preparing this draft report, the response was not available.