Australian Banker’s Association Inc.
The 4th Annual Anti-Money Laundering Forum

Hilton Hotel, Sydney
Friday 14 March 2008, 8.45am

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Acknowledgements

Other Acknowledgements

 Introduction

  1. Good morning - thank you for the opportunity to speak with you today.
  2. Government, no matter what political colour, will always be committed to doing it what it can to reducing the crime of money laundering.
  3. Legitimate business will always support Government in this task.
  4. These two statements are uncontroversial.
  5. It is to our mutual benefit that we tackle the problem. However a shared goal does not always mean shared ideas about how to achieve the goal.
  6. Notwithstanding this I am pleased to say that meetings I have had so far with industry about the implementation of the anti money laundering regime so far indicate the main concerns surround areas of administration and ease of implementation – not one person has indicated they do not share the goal.
  7. I am also pleased that whilst I have had some initial discussion with bankers, financial planners and associated organisations, there has not been a flood of concerns.
  8. However it would be a gloss to say there are not some matters industry wishes to see addressed and I will talk a little further on about how we may do that.
  9. Money laundering and terrorism financing undermine the fundamentals of good society.
  10. And whilst we are not perfect, I can honestly say that we in Australia start from a basic foundation of a ‘good society’ that is be protected through the implementation of policy and law such as the Anti Money Laundering and Counter Terrorism Funding regimes put in place by the previous government and honoured by the new Government.
  11. Each year, illicit funds are generated from activities such as drug trafficking, tax evasion, people smuggling, theft, arms trafficking and corrupt practices and these funds are mostly in the form of cash.
  12. By some estimates, more than AUD 1.5 trillion of illegal funds are laundered worldwide each year. This amount represents almost half a trillion dollars more than Australia's current GDP!
  13. Last year, the Australian Institute of Criminology estimated that $4.5 billion is laundered in Australia each year.
  14. And in the Asia-Pacific region − it’s estimated that
    AUD 200 billion is laundered each year.
  15. Of course by its very nature , money laundering is unlikely to ever be measured accurately.
  16. Unlike money laundering, terrorism financing can be generated through legitimate sources such as fundraising activities and business profits, as well as illegitimate sources such as the drug trade and fraud.
  17. Governments must remain vigilant to the potential for money to be siphoned into activity that may lead to terrorism.
  18. Terrorist organisations come in all shapes and sizes and may be  loosely organised and self-financed international networks.
  19. Ideology is not necessarily expensive and implementation can often be simple and easy to achieve with minimal financial resources.
  20. I am informed for example:
  1. Money laundering and terrorism financing are serious risks to international financial systems, and have potentially devastating effects on Australia’s national security.
  2. Whilst sometimes we have to think twice about what constitutes national security in terms of broad or narrow definitions -  including things like climate vulnerability and threats of disease -  it is not at all difficult to include anti money laundering and counter terrorism financing measures into the mix.
  3. Today’s forum allows us to discuss the best approaches and current standards that enhance our security in this context.
  4. It also provides an opportunity to identify and study money laundering and terrorist financing trends, and to review the role of relevant Government agencies in developing and implementing an effective AML/CTF system.

Legislative Framework

  1. Australia is well and truly a part of the global economy and exposed to the benefits and risks that brings.
  2. In Australia we recognise that implementing an AML/CTF system that meets international benchmarks, is critical to safeguarding our international business and financial reputation.
  3. You would be aware that in 2003 the Financial Action Task Force – or the FATF − released its revised international AML/CTF standards.
  4. The new standards have moved beyond concern with the movement of cash, and reflect the dramatic changes in the products and technologies available for the creation and movement of funds.
  5. AML/CTF compliance is now an essential aspect of international business relationships − particularly in the financial services sector.
  6. The Australian Government is committed to implementing the FATF standards and is continuing with reforms to strengthen Australia’s AML/CTF system in line with those standards.
  7. This reform package received bi-partisan support during its inception and development, and we are keen to ensure its long term success. 

The Reforms

  1. You well know that in order to best manage the impact on industry, and particularly small business, the reforms are taking place in two separate tranches.
  2. The first tranche is contained in the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).
    This covers the sectors already familiar with existing AML/CTF obligations, under the Financial Transaction Reports Act 1988.
  3. The AML/CTF Act makes considerable improvements to our existing regulatory scheme to detect and deter money laundering and terrorism financing.
  4. It also increases our compliance with the FATF recommendations for the financial and gambling sectors and bullion dealers.
  5. As I am sure most of you will know, the AML/CTF Act imposes a number of obligations on businesses when they provide designated services.
  6. Key obligations imposed on reporting entities include:
  1. The Act is being implemented over a 24 month period from 12 December 2006, to give businesses adequate time to develop necessary systems in the most cost efficient way.
  2. The AML/CTF Act also recognises that Australian businesses provide vastly different services that expose them to different levels of risk, and has set out a principles-based framework that encourages a risk-based approach to compliance.

Implementation Issues

  1. The AML/CTF Act is complex legislation, and I would like to commend you all for your efforts in developing the necessary AML/CTF systems. The feedback I have received to date is that the implementation process for the first tranche of reforms is generally going well.
  2. I’ve had discussions with various stakeholders about the inevitable issues that arise when such complex legislation is implemented.
    And I am keen to continue that engagement throughout the implementation process. 
  3. In particular, I would like to encourage businesses that are facing implementation challenges to continue to engage with AUSTRAC early, to address any issues that may come up.

Tranche 2

  1. The AML/CTF reform process in Australia still has some way to go.
    Work has commenced to extend the AML/CTF regime to capture specified transactions conducted by lawyers, accountants, jewellers and real estate agents. 
  2. And the Government is taking a highly consultative approach towards these reforms.
  3. Peak body representatives from the accounting and legal professions, as well as the real estate and jewellery industries, were involved in the initial consultations throughout 2003 and 2004.
    This included meetings of the Anti-Money Laundering and Counter-Terrorism Financing Ministerial Advisory Group.
  4. In August last year, draft designated services tables, which proposed the transactions to be captured under the second tranche of reforms were released to stakeholders for comment.  
  5. Twenty-two submissions were received on the draft provisions and the Attorney-General's Department and AUSTRAC will be consulting with stakeholders over the coming weeks about the issues they raised.
  6. I take the opportunity today to propose a meeting of the AML/CTF Council in the near future, perhaps in May, in order to settle the issues that have been raised with me since I took on the portfolio responsibilities and discuss any emerging matters directly with first and second tranche industry groups.

How Government is Helping

  1. As the AML/CTF regulator, AUSTRAC is supporting industry in its efforts to comply with obligations under the AML/CTF Act.
  2. I understand Thomas Story, Acting Chief Executive Officer of AUSTRAC, will be speaking more about this shortly.
  3. Fundamental to AUSTRAC’s engagement with industry is the process of continued consultation on education and training needs. As one of my first duties as Minister for Home Affairs I launched a valuable set of resources, developed by AUSTRAC, to assist industry in this regard.
  4. These resources include a self-assessment questionnaire, regulatory guide, an e-learning program and an informative typologies and case studies report and complement the policies, guidance notes, rules and other materials to assist industry available on AUSTRAC’s website.
  5. The Attorney-General’s Department has developed a range of communications materials to help industry communicate the changes to their customers available on the Department’s website.

Conclusion

  1. I know that you have all been working hard to implement AML/CTF systems while also striving to minimise disruption to your clients and to educate stakeholders, executives and boards.
  2. The ongoing cooperation and dialogue between Government and industry has made for a relatively smooth implementation of what are quite significant changes, and I would like to acknowledge the important role industry has played in that process.
  3. The Australian Government is committed to ensuring that our businesses are protected from being misused by money launderers and those seeking to fund terrorism.
  4. Thank you for helping us form a strong partnership in the fight against money laundering and terrorism financing. 
  5. I wish you well for today’s forum and I look forward to hearing the outcomes.

ENDS