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Asia-PacificMarch 5 2007

Aussies taken to cleaners by money laundering law

New laws to combat money laundering and terrorist financing in Australia will place a big burden on banks and taxpayers as well as compromise personal privacy, warns Michael Imeson.
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What is it?

Australia has strengthened its anti-money laundering laws by passing the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act. It received Royal Assent on December 12, 2006. It applies to financial institutions and specified businesses and professionals.

Who dreamed it up?

The Attorney-General’s Department, the government’s law office. The Australian Transactions Reports and Analysis Centre (AUSTRAC), the country’s financial intelligence unit, will implement the law by writing a set of rules. However, the real mastermind is the Financial Action Task Force (FATF), the inter-governmental body. Australia is a founding member.

What are its main provisions?

  • It introduces a new regulatory and reporting regime that imposes various obligations on banks and other organisations. These obligations include verifying customers’ identities, monitoring transactions, reporting suspicious activity, record keeping and setting up an AML/CTF programme.
  • It expands the information available to AUSTRAC.
  • It gives AUSTRAC a bigger role as the national AML/CTF regulator, with educational, supervisory, monitoring and enforcement functions.

 

What’s in the small print?

The Act is “risk-based”, laying down broad principles and obligations, not prescriptive rules. The specific rules are still in draft form and will be finalised by AUSTRAC – in consultation with the organisations affected.

What does the industry say?

Publicly, the Australian Bankers’ Association (ABA) “welcomes” the Act. In reality, it is worried. “[Much] detail has been left for specification in the rules, and banks will need to see that before a workable AML/CTF regime can be fully achieved,” says the ABA.

The Association of Building Societies and Credit Unions (Abacus) is more outspoken. “Customers of financial institutions, including members of credit unions and building societies, will be subject to significantly increased surveillance” as a result of “these sweeping new laws”, it says. Abacus is calling on AUSTRAC to ensure that the rules are “proportionate” and targeted at high risks, and that “intrusion into customer privacy” and the regulatory burden on financial institutions are minimised.

How much will it cost?

A survey of Abacus members (three big credit unions, three building societies) showed that estimated one-off implementation costs ranged from A$405,000 ($316,000) to A$3.7m per member, and that estimated ongoing annual compliance costs ranged from A$120,000 to A$775,000 per member.

According to the Attorney-General’s Department, taxpayers will have to fork out over four years:

  • an additional A$139m for AUSTRAC;
  • A$15.3m for the Attorney-General’s Department’s public and industry awareness campaign;
  • A$3.4m for The Institute of Criminology for research;
  • and A$1.9m for the Office of the Privacy Commissioner to monitor how the new laws will affect the handling of personal information and erode personal privacy.

What do the law-makers say?

Senator Chris Ellison, the justice and customs minister, says the laws “are part of Australia’s continuing efforts to combat terrorism funding and stamp-out money laundering”.

The law of unintended consequences

Josh Moyes, a senior adviser at Abacus, has warned: “Consumers may be willing to support measures against terrorist-financiers but they may baulk at the personal intrusion caused by the identification and monitoring requirements.”

Could we live without it?

Yes, if Australia lived in splendid isolation. But it lives in the real world, so it must do what FATF says.

Rating: 3

Rating scale:

5 = Essential;4 = Useful; 3 = Neutral; 2 = Unnecessary; 1 = Waste of time.

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