House of Representatives

Second Reading Speech

Mr CHESTER (Gippsland - Minister for Veterans and Defence Personnel and Deputy Leader of the House)

I move:

That this bill be now read a second time.

The Morrison government is strongly committed to combating transnational, serious and organised crime. Organised criminal groups systematically target the health, prosperity and safety of Australians, and in the process erode public trust in institutions. The cost to Australia's economy alone is estimated to be up to $47 billion each year.

The realisation of profit is the primary motivation underlying transnational, serious and organised crime. These groups mercilessly pursue profit, having no regard to the harms caused. As a result of this, money laundering has become one of the key enablers of the criminal business model, allowing the profits of crime to be realised, concealed and reinvested in further criminal activity or used to fund lavish lifestyles.

Criminal and terrorist threats are not static. Methods to launder dirty money and finance terrorism - by their very nature - evolve to exploit opportunities, with criminals and terrorists constantly working to find new ways to circumvent controls and avoid detection.

Accordingly, our legal and policy settings must also continue to evolve to ensure law enforcement agencies can effectively combat and disrupt money laundering, terrorism financing and other serious crimes.

The government is committed to responding to these evolving threats and taking every step necessary to keep Australians safe. On 7 and 8 November this year, Australia will host a global ministerial conference on combating terrorist financing. The No Money for Terror conference provides an opportunity for Australia to continue to progress the important international dialogue on global efforts to deprive terrorist groups of funding.

The Anti-Money Laundering and Counter-Terrorism Financing and Other Legislation Amendment Bill 2019, which I introduce today, is another example of our commitment to dismantling the criminal business model. 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.

I will now outline the specific amendments contained in the bill.

The first reform is to customer due diligence requirements.

A key pillar of the AML/CTF regime is the requirement for regulated businesses to identify their customers and verify their identity. This enables regulated businesses to identify, and efficiently manage, any money laundering or terrorism financing risks posed by customers and the services provided.

The bill will broaden the circumstances in which the approximately 14,000 regulated businesses may enter into an arrangement with another regulated entity to rely on checks already conducted.

These amendments are expected to reduce the cost of customer verification for businesses, delivering a substantial saving of up to $3.1 billion over 10 years. This amendment furthers the government's agenda of reducing unnecessary regulatory burden and improving the customer experience.

The bill also amends correspondent banking obligations.

Correspondent banking relationships are essential in the global payment system and vital to international trade and the global economy as a whole. They allow one bank to provide services on behalf of another, while relying on the other bank to carry out the verification procedures such as identifying the customer, determining the real owners, and monitoring such transactions for risks.

However, these banking relationships can pose significant money laundering and terrorism financing risks. This is particularly true with cross-border correspondent banking relationships.

The bill will impose more stringent obligations on Australian banks by requiring them to conduct appropriate due diligence on correspondent banking relationships to ensure that its correspondent banks are not doing business with shell banks and have robust AML/CTF systems and controls. This represents international best practice.

Third, this bill reforms cross-border reporting requirements.

The movement of cash and other valuable items across borders is a common money laundering and terrorism financing method. Criminals move cash and valuables across borders to launder funds, pay for illicit goods, use illicit funds to purchase assets, and to hide proceeds of crime from authorities.

Currently, travellers into and out of Australia must declare all cross-border movements of physical currency of $10,000 or more. The bill expands this requirement so that, in addition to physical currency, bearer negotiable instruments, such as travellers cheques, must also be declared at the border where the combined amount is $10,000 or more.

The bill also increases the penalties for failing to comply with cross-border declaration requirements to further deter bulk cash smuggling.

These changes will bring Australia's regime into alignment with other comparable regimes across the world.

The bill also modernises secrecy and access provisions.

In the global fight against organised crime and terrorism, it is crucial that our national security, law enforcement and revenue protection agencies can efficiently and effectively access and use valuable financial intelligence in performing their functions.

AUSTRAC information often plays a crucial role in the work of these agencies. For example, in the 2017-18 financial year, AUSTRAC data contributed to:

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$26.67 million in savings from increased detection of welfare fraud;

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208.8 million in income tax assessments;

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$207.4 million recovered in tax liabilities; and

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the seizure of 1.2 tonnes of methamphetamine with an estimated street value of over $1 billion.

The bill will make important changes to the 'secrecy and access' provisions in the AML/CTF Act, which establish a framework for the access, disclosure and use of financial information held by AUSTRAC.

The proposed reforms will put in place a simplified and streamlined regime to ensure the secrecy obligations are more clearly and readily understood, and the potential for inconsistency and ambiguity between provisions is minimised. These changes will enhance the government's ability to deepen collaborative approaches to investigating money laundering, terrorism financing and other serious crime.

These reforms will also ensure the regime for sharing AUSTRAC information keeps pace with new, more collaborative approaches to investigating these crimes, for example, in partnership with the private sector and through multi-agency taskforces.

The reforms in the bill are accompanied by appropriate safeguards and protections around the handling of sensitive information held by AUSTRAC. This includes a new power to set conditions on the access, disclosure and use of AUSTRAC information to reflect particular sensitivities of the information.

Criminal enterprises are not confined by national borders and exploit differences between jurisdictions to prevent detection. Recognising this, the bill seeks to better equip reporting entities operating in a globalised environment to manage their exposure to transnational crime risks. It does this by enabling them to share information about money-laundering and terrorism-financing risks in relation to customers with appropriately regulated foreign members of a corporate group and designated business group.

This will enable businesses to more effectively manage money-laundering and terrorism-financing risks within their business structure and across jurisdictions in relation to risks posed by shared customers.

To ensure that the privacy of customers is protected, the bill also imposes additional safeguards that ensure the confidentiality of sensitive information is maintained and that the information will only be used for the purpose for which it is provided.

The government is also seeking to strengthen money-laundering offences in the Criminal Code.

It is well known that police use undercover operations to investigate serious offending, such as large-scale money-laundering syndicates.

Currently, where police supply cash to a money-laundering syndicate as part of an authorised undercover operation, the would-be money launderers cannot be prosecuted because, technically, the money laundered is not the proceeds of crime, despite what the would-be money launderer may have believed.

This technicality should not be the reason why criminals escape prosecution. The bill rectifies this anomaly through changes to the Criminal Code to clarify that cash used in undercover operations is considered 'proceeds of crime' for the purpose of Commonwealth money-laundering offences.

The final measure in the bill amends the Australian Federal Police Act to make it an offence for a person to dishonestly represent that a police award has been conferred on them.

It's important to recognise and celebrate the bravery and heroism of police officers who put their lives on the line every single day.

The introduction of this offence will preserve the significant honour associated with receiving a police award and recognise the outstanding contribution these individuals make to their country. We must not let this contribution be devalued by imposters.

I urge members to support the passage of this important legislation, which will further harden our financial sector against money laundering and terrorism financing and empower our law enforcement agencies to better detect it and prosecute those responsible.

Further, this bill represents an important next step in the Morrison government's commitment to reducing the burden of red tape on our economy.

I commend the bill to the House.

Debate adjourned.