On 9 February 2006 , the Senate referred the Exposure Draft of the
Anti-Money Laundering and Counter-Terrorism Financing Bill 2005 to the
Senate Legal and Constitutional Legislation Committee for inquiry and
report by 13 April 2006 (separate from the Attorney General/AUSTRAC process).

The Senate committee report has now been released.

Chapter 3 deals with concerns raised in submissions and the Department’s response.

Chapter 4 sets out privacy issues.

The report concludes:

4.72 Despite expressing optimism in the previous chapter that the majority of outstanding issues will be resolved before finalisation of the regime, the committee does remain concerned about the apparent lack of formal consultation with privacy, civil rights and consumer representative groups in the development of the regime to this point. The committee is of the view that this may have resulted in some fundamental privacy, consumer and civil rights issues being overlooked. Nevertheless, the committee is also hopeful that these issues will be addressed through the parallel discussion groups established by the Department.

4.73 The committee notes the OPC’s suggestion that an independent PIA would be useful in relation to the Exposure Bill. The committee agrees with this view and believes that a PIA would be beneficial in achieving a more balanced approach to the AML/CTF regime. This is particularly important given the complexity of the Exposure Bill, the vast number of reporting entities and transactions covered by the Exposure Bill’s operation, the amount and type of information to be collected, and the ability of various agencies to access that information. The committee therefore strongly suggests that such an assessment be conducted.

4.74 The committee also notes that the Federal Government intends to address the issue of the small business exemption to the NPPs in relation to reporting entities. However, the committee believes that the concerns raised in submissions and evidence highlight a larger problem in relation to the privacy obligations of reporting entities. The committee’s view is that any PIA should include a review as to whether the privacy protections set out in the NPPs are sufficient for the purposes of the information being collected and handled by reporting entities.

According to CNN Money Dutch bank ABN AMRO’s U.S. mortgage division has been fined US$16.9 million in respect of false claims on federally insured home loans.

The Department of Urban Housing (HUD) said it discovered underwriting deficiencies and improper conduct by an ABN AMRO Mortgage employee in 2003, and alerted the company, which then launched an internal investigation.

ABN AMRO Mortgage found a number of employees falsely certified that two company underwriters had reviewed more than 28,000 loans prior to endorsement when they had not, HUD said.

The agreement settles allegations that ABN AMRO Mortgage made false certifications to HUD connected with more than 28,000 federally insured mortgages. The government said 229 of those mortgages led to defaults and resulted in losses to the housing agency of $6.25 million.

In addition ABN AMRO Mortgage has agreed to not submit hundreds of defaulted loans to the Federal Housing Administration insurance fund saving the Fund an estimated $24.35 million in losses.

The settlement with ABN AMRO’s mortgage unit follows an $80 million fine against the Dutch bank by U.S. bank regulators in December 2005 in connection with anti-money laundering violations including unauthorized financial dealings with Iran and Libya.

The Minister for Justice and Customs, Senator the Hon Chris Ellison, has released an exposure Draft Anti-Money Laundering  and and counter-terrorism financing Bill and sample AML/CTF Rules.

The exposure Bill and AML/CTF Rules will be the subject of public consultation until Thursday 13 April 2006.

The exposure Bill deals with money laundering and terrorism financing risks
specific to a number of industry sectors.  The general
principles underpinning the proposed AML/CTF system are set out in
legislation, supplemented by legally-binding AML/CTF Rules, and
non-binding Guidelines. 

AML/CTF Rules, being developed by the Australian Transaction Reports
and Analysis Centre (AUSTRAC) in consultation with industry, will set
out specific requirements on matters such as identity verification,
ongoing due diligence, reporting of suspicious matters, and the
development of AML/CTF Programs.

The proposed AML/CTF reforms would impact on the operations of
the following industry sectors:

• Accountants and financial planners
• Banks, building societies and credit unions  
• Bullion dealers  
• Bureaux de change  
• Casinos  
• Gambling service providers  
• Insurance sector  
• Remittance service providers  
• Legal practitioners  
• Securities and derivatives dealers

The International Financial Task Force has released a report evaluating Australia’s progress on implementing international anti-money laundering rules. It shows that Australia has gaps in its system and is not fully implementing the recommendations.

Some of the findings:

While narcotics offences provide a substantial source of proceeds of crime, the majority of illegal proceeds are derived from fraud-related offences. One Australian Government estimate suggested that the amount of money laundering in Australia ranges between AUD 2—3 billion per year…

Criminals use a range of techniques to launder money in Australia. Generally, money launderers seek to exploit the services offered by mainstream retail banking and larger financial service and gaming providers. Visible money laundering is predominantly carried out using the regulated financial sector, particularly through the use of false identities and false name bank accounts facilitated by forged documents to structure and transact funds. Money launderers often move funds offshore by using international funds transfers. Money launderers also move funds through smaller or informal service providers such as alternative remittance dealers. Australian authorities also identified other methods that served as money laundering vehicles: cash smuggling into and out of Australia, and the use of legitimate businesses to mix proceeds of crime with legitimately earned income/profits. Law enforcement has also recognised a growing trend in the use of professional launderers and other third parties to launder criminal proceeds…

Australia generally pursues money laundering via proceeds of crime action using the Proceeds of Crime Act (POCA); however, the key issue in terms of effective implementation of the money laundering offence is the low number of money laundering prosecutions at the Commonwealth level (ten dealt with summarily and three on indictment since 2003, with five convictions), indicating that the regime is not being effectively implemented. Money laundering is also criminalised at the State and Territory level, and these offences vary in comprehensiveness. The lack of statistics on State and Territory prosecutions and convictions for ML prevents an evaluation of their effectiveness…

The Suppression of the Financing of Terrorism Act 2002 (SoFTA), which came into force in July 2002, amended a number of existing Acts to implement Australia’s obligations under the UN Suppression of the Financing of Terrorism Convention and relevant UN Security Council Resolutions. As amended, the Criminal Code Act 1995 now contains several offences related to the financing of terrorism: receiving funds from or making funds available to a terrorist organisation; providing or collecting funds to facilitate a terrorist act. While broadly satisfactory, this offence does not specifically cover the collection of funds for a terrorist organisation or provision/collection of funds for an individual terrorist. This should be rectified. There have not been any prosecutions for terrorist financing.

The Australian Government has agreed to reforms to strengthen
Australia’s anti-money laundering (AML) and counter-terrorist financing
(CTF) system, the Minister for Justice and Customs, Senator Chris
Ellison, has announced.

The Government has agreed to progress Australia’s implementation of the FATF recommendations in two tranches:

• The first tranche will cover the financial and gambling sectors and
  bullion dealers. It will also cover lawyers and accountants but only to
  the extent that they provide services in directcompetition with the
  financial sector.
• The second tranche will extend the obligations to real estate agents, jewellers and professionals, such as accountants and lawyers, when they provide non-financial services.

Under the first tranche of reforms, the industry sectors covered will be required to:

• Verify the identity of customers
• Report suspicious matters and high value transactions
• Maintain rigorous internal AML/CTF programs, and
• Keep appropriate records.

Importantly, the legislative framework will include AUSTRAC’s
development of a package of AML/CTF Rules which allow for a risk-based
approach. This means that the legislative package will reflect
commercial reality by recognising low-risk transactions. This will
ensure businesses are not subject to unnecessary compliance costs or a
‘one size fits all’ strategy.

The next step of
the reform process will be the release of an Exposure Draft of a Bill
for public consultation in November 2005 for a period of four months.

The Minister for Justice and Customs, Senator Chris Ellison has issued a Joint Communiqué: Fourth Industry Roundtable on Anti-Money Laundering and Counter-Terrorist Financing with representatives of the Financial Services Sector.

It announces that he has held a fourth roundtable meeting in Sydney on 9 September with representatives of the Australian financial services sector, to finalise agreement on outstanding high level issues related to proposed anti-money laundering (AML) and counter-terrorist financing (CTF) reforms and prepare for the release of draft exposure legislation. 

Government and industry agreed that standards for customer due diligence would be set in legislation with greater detail to be
developed in Rules agreed between AUSTRAC and industry.

The meeting agreed that the framework for reporting of suspicious transactions would be enhanced and consultations with industry would be undertaken to develop appropriate risk triggers to be incorporated in Rules.

It was agreed that transition issues will need to be the subject of further consultation due to the complexity and potential cost to the sector.

It was also agreed that there would be a consultative structure established which would facilitate the
development of the details of Rules and Guidelines.

It was agreed that the Government should proceed to release exposure draft legislation that will form the basis of future consultations on more detailed implementation issues.