Recent arrests have highlighted how criminals are using every means possible to launder money through Australia, with billions of dollars being layered through financial and real estate markets.
In the fight against money laundering the Australian Federal Police (AFP) has built Taskforce Avarus to tackle the growing problem. With backing from AUSTRAC, as well as the Australian Criminal Intelligence Commission and Australian Border Force, this is a formidable show of investment, but is it enough?
Some might say that if the Australian Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF Act) was extended to include the property and legal market there would be less opportunity for criminals to use these sectors to launder money. However, despite continued recommendations from the Financial Action Task Force (FATF), Australia has resisted making this change to their regime. There are a multitude of reasons for this. The question is how long can it go on for and will there be a party willing to take on this political football?
Money laundering, legislation, and lobbying
AML legislation was introduced to Australia in 2006 which is earlier than some other countries such as New Zealand where the AML Act came into full force in 2013. The key difference here is that in 2018 and 2019 New Zealand brought lawyers, accountants and real estate into the Act but Australia has not made this step.
There is belief that it would be hugely unpopular to make any changes to the Australian Act, and both the Law Commission and Real Estate representatives have lobbied parliament against such changes. But as Australia is a founding member of FATF there is pressure to include all entities. The Committee’s view was that:
“In order for our economy, financial system and certain industries, such as legal services and real estate, to remain robust, competitive and appealing to legitimate clients and consumers, they must not only withstand but actively seek to prevent money laundering and terrorism financing.”
The spotlight on money laundering has become harsher as high profile criminal cases continue to make the headlines. In February this year we saw the AFP charge nine suspects believed to be involved in a massive money laundering operation, and seize approximately AUD $150 million worth of property and other assets. Overall in 2022, the AFP charged 74 people with 82 money laundering offences.
The AFP states that in the same year the, ‘AFP-led Criminal Assets Confiscation Taskforce (CACT) obtained restraining orders over criminal assets, including real estate, cash, cryptocurrency, vehicles, jewellery and luxury items, with a combined value of about $160 million.’
Another factor to consider is that in February Peter Soros (AUSTRAC Deputy CEO Regulatory Strategy) noted:
“that at a recent senate inquiry into AML/CTF legislation the AFP gave evidence that about 56 per cent of their confiscated assets are related to real estate purchases.”
It is now over 16 years since Australia’s AML/CTF Act came into force so how much longer can successive governments avoid making real estate, accountants and lawyers part of the AML regime?
The cost of non-compliance
It’s likely to be a huge and costly challenge for any government to tackle legislation changes, as well as being unpopular in some sectors, however lack of change could come with its own consequences.
The FATF are due back in Australia next year for another Mutual Evaluation and they will expect to see some change. If there is no change Australia could, in theory, be placed on the grey list. This would send a signal to the rest of the world that Australia is deemed a safe haven for money laundering, which could have massive impacts on Australian business, financial sectors and see a drop in foreign investment.
A report from the International Monetary Fund estimates that capital inflows decline on average by 7.6 percent of GDP when the country is grey listed, and other investment inflows decline on average by −3.6 percent of GDP.
Between a rock and a hard place
So, if there could be huge impacts to the economy by not implementing recommendations why is change taking so long? Well dealing with AML obligations takes time and money. The setting up of compliance frameworks, training, resourcing and regulating is massive, and is likely to require a lot of upskilling by both regulators and entities.
In New Zealand the Ministry of Justice estimates the cost to NZ business sectors could be in the order of $0.8 to $1.1 billion over 10 years. That’s no small amount, and while governments may work hard to minimise costs there is bound to be an impact on businesses. And when you think of the further challenges in Australia with its large geographical spread, its state law and federal law, the complexity (and cost) increases.
For AUSTRAC, the number of reporting entities requiring regulation would grow massively, and would require an enormous amount of resource. For example, stakeholder engagement would need to be managed, technology considered, registers such as beneficial ownership would need to be developed, the list goes on.
Add to that, nobody wants to make changes which would negatively impact the housing market and put at risk a combined $9.3 trillion of real estate value.
It’s true, even when companies are regulated they can still fail in their obligations. Just take a look at Westpac who was ordered to pay a $1.3 billion penalty for breaches of the AML/CTF Act, and STAR Casino who was fined $100 million. Amongst all this we cannot forget that money laundering is not a victimless crime. It is a problem which needs to be addressed around the world and if there is a weak link, criminals will find it.
Time to get ready
Pressure to widen the AML/CTF Act in Australia to include real estate, accountants and lawyers does not appear to be decreasing. The enormity of the task is not going to get easier so is it time to just get on with it?
Until the government makes an explicit move to indicate a law change, entities included in the proposed changes are unlikely to make a move and start investing in AML procedures. Entities will need time if the regime widens to include them. Time to understand the required processes, and the time and resource to get procedures in place.
Australia has committed to the implementation of FATF recommendations and reaffirmed its commitment at the G20 Summit in October 2021, so surely, this political football can’t go on forever.
How Australia will go about fulfilling their commitments is not yet known but it must only be a matter of time before change starts to take place.
According to Thomson Reuters the government is preparing to move ahead with changes and is expected to publish its response to recommendations by the end of April 2023 – so watch this space!
Sources
tic company 
Fiona Hall 
Tabassum Rauf 
