Post on 21-Jan-2015
description
Anti Money Laundering 2014From Technical Compliance To Practical Effectiveness-
Examining Australia’s AML/CTF Regime
Senior Lawyer, Ms Carole CapleDirector of Policy, Mr Matthew Dunn
• Federal organisation
• Speaks on issues of national and international importance, federal law and the operation of federal courts and tribunals
• Represents approximately 60,000 Australian legal professionals through constituent member Bar Associations and Law Societies (‘Constituent Bodies’)
LAW COUNCIL OF AUSTRALIA
(1) The objects of this Act include:
(a) to fulfil Australia’s international obligations, including:
(i) Australia’s international obligations to combat money laundering; and
(ii) Australia’s international obligations to combat financing of terrorism; and
(b) to address matters of international concern, including:
(i) the need to combat money laundering; and
(ii) the need to combat financing of terrorism; and
(c) by addressing those matters of international concern, to affect beneficially
Australia’s relations with:
(i) foreign countries; and
(ii) international organisations.
Note 1: The objects of this Act are achieved by (among other things) requiring information to be given to the AUSTRAC CEO and by allowing certain other agencies to access information collected by the AUSTRAC CEO.
Note 2: The objects mentioned in paragraphs (1)(a),(b) and (c) relate to the external affairs power. Schedule 1 (alternative constitutional basis) contains provisions designed to attract other legislative powers (including the taxation power).
3. Objects
(2) Relevant international obligations include obligations under the following:
(a) the United Nations Convention Against Corruption, done at New York on
31 October 2003 [2006] ATS 2;
(b) the United Nations Convention Against Transnational Organized
Crime, done at New York on 15 November 2000 [2004] ATS 12;
(c) the Convention on Laundering, Search, Seizure and Confiscation of
the Proceeds of Crime, done at Strasbourg on 8 November 1990 [1997]
ATS 21;
(d) United Nations Security Council Resolution 1267 S/RES/1267 (1999);
(e) United Nations Security Council Resolution 1373 S/RES/1373 (2001);
(f) United Nations Security Council Resolution 1617 S/RES/1617 (2005).
3. Objects (cont’d)
(3) The following reflect international concern:(a) the FATF Recommendations;(b) the United Nations Convention Against Corruption, done at New York on 31 October 2003 [2006]
ATS 2;(c) the United Nations Convention Against Transnational Organized Crime, done at New York on
15 November 2000 [2004] ATS 12;(d) the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime, done at
Strasbourg on 8 November 1990 [1997] ATS 21;(e) the International Convention for the Suppression of the Financing of Terrorism, done at New York
on 9 December 1999 [2002] ATS 23;(f) United Nations General Assembly Resolution 51/210 A/RES/51/210 (1996);(g) United Nations Security Council Resolution 1267 S/RES/1267 (1999);(h) United Nations Security Council Resolution 1269 S/RES/1269 (1999);(i) United Nations Security Council Resolution 1373 S/RES/1373 (2001);(j) United Nations Security Council Resolution 1456 S/RES/1456 (2003);(k) United Nations Security Council Resolution 1617 S/RES/1617 (2005).
Note 1: FATF Recommendations is defined in section 5.Note 2: In 2006, the text of international agreements in the Australian Treaty Series was accessible
through the Australian Treaties Library on the AustLII website (www.austlii.edu.au).Note 3: In 2006, the text of United Nations Security Council resolutions and United Nations General
Assembly resolutions was accessible through the United Nations website (www.un.org).
3. Objects (cont’d)
‘Commonly Used Offences
• ss.400.3-400.8 Criminal Code – dealing in proceeds of
crime etc – money or property worth any value up to
$1,000,000 or more
• s.400.9 Criminal Code – dealing with property
reasonably suspected of being proceeds of crime etc.
The CDPP website provides
Sections 400.3 to 400.8 of the Criminal Code are all similarly drafted. Each section relates to dealing with money or property which is proceeds of crime or could become an instrument of crime. However, each section relates to money or property of a different amount.
Sections 400.3 to 400.8 contain three different offences, each with a different maximum penalty, classified according to the state of mind (fault element) of the defendant. Whether the offence is classified as being contrary to subsection (1), (2) or (3) will depend upon the classification of the fault element (intention, recklessness or negligence) associated with the circumstances that the money or other property was proceeds of crime or was a potential instrument of crime.
The CDPP website provides
Offences contained in the Anti-Money Laundering and Counter-
Terrorism Financing Act 2006 are also often used in prosecuting money
laundering – in particular the following sections:
• ss.142-143 – structuring offences;
• ss.53, 55 –the movement of physical currency both in and out of
Australia;
• ss.136-138 – opening of bank accounts using false customer
identification documents;
• ss.139-141 – use of bank accounts in false names or failing to
disclose the use of 2 or more names.’
The CDPP website provides
Australian Anti-Money Laundering Legislative Outcomes
ML
Legislation
2002-
03
2003-
04
2004-
05
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
Total
POCA s 81, s 82 1 9 0 1 3 0 1 0 15
Criminal Code
s 400 n/a 5 6 11 14 40 42 50 168
AML/CTF Act n/a n/a n/a n/a 16 37 9 12 74
FTR Act 131 168 79 76 53 23 19 17 566
Total 132 182 85 88 86 100 71 79 823
Figures obtained from Commonwealth Department of Public Prosecutions, 2011
The Australian anti-money laundering regime is unique and highly
complex.
The effectiveness of Australia’s anti-money laundering system is
difficult to measure because there has been very few money laundering
convictions in comparison to say other member nations, i.e. United
Kingdom and Hong Kong. This is an issue that was also highlighted in
the FATF’s 2005 mutual evaluation assessment of Australia’s anti-
money laundering programme.
Australian Anti-Money Laundering Legislative Outcomes
The AGD and AUSTRAC’s Review AML/CTF Regime - Issues Paper of December 2013 said at page 11:
‘From fewer than 4,000 cash dealers under the Financial Transaction Reports Act 1988 (Cth) (FTR Act), the regime now has a regulated population of over 13,800 individuals and businesses (called ‘reporting entities’) in the financial, remittance, gambling and bullion sectors.’ 1
‘Transaction reporting from industry to AUSTRAC grew from 18 million reports in 2007-08 to over 84 million reports in 2012-13, a 466 per cent rise.’
However in terms of prosecutions the CDPP website provides that
‘In 2012-2013 the CDPP prosecuted 47 indictable money laundering offences and 61 summary money laundering offences.’
Reporting to AUSTRAC and ML Prosecutions
1 According to enrolments on the AUSTRAC Reporting Entity Roll at 30 September 2013
• Unlike other Designated non- financial businesses and professions, the legal profession is already subject to an extensive regulatory system and core professional obligations not to break or facilitate breaking the law
– extensive existing regulatory regime
– developed over a long period of time
– tailored to the unique role lawyers play
Existing Regulation
• At least 5 relevant ethical rules:
– paramount duty to the court and the administration of justice
– must provide legal services avoiding compromising integrity
– must not engage in dishonest or disreputable conduct
– must follow client’s lawful and proper instructions
– must supervise employees
Existing Regulation
• Trust money keeping highly regulated
– special requirements for holding trust money
– regulation of trust accounts is procedurally detailed and comprehensive
– annual audits of trust accounts
– random audits by regulatory authorities
– managers, supervisors and receivers can be appointed
– fidelity funds exist to cover any defaults
Existing Regulation
• Extensive and unique sanctions for breaches:
– regulators can appoint themselves receivers of your business at any time
– licence to practice can be cancelled at any time
– prison
– maximum fines ranging $10,000 to $100,000
– striking off – loss of occupation, not just a ban
Existing Regulation
• Suspicious matter reporting doesn’t fit in with existing regulatory regime:
– obligation to report
– obligation not to tip off about making a report (s123 AML Act)
– obligation to withdraw acting for client
Existing Regulation
• The cost and burden of additional further regulation are undesirable and unjustifiable
– significant costs in implementation
– look to UK experience
– 2008/9 surveys in UK cite costs to legal practices of compliance with AML/CTF between £26,000 and £1,035,000 per year on easily quantifiable AML costs
Costs of more regulation
• Australian legal sector demographics
– despite global connections, overall legal practices tend to be smaller businesses in Australia
– approximately 15,392 Australian legal practices
– UK experience of compliance costs equivalent to $51,861.40 per legal practice
Costs of more regulation
Costs of more regulation
Jurisdiction Private Law
Practices
Conservative
Indicative Compliance
costs AUD 2013
Victoria 6,599 $342,233,378.60
New South
Wales
5,324 $276,110,093.60
Queensland 1,653 $85,726,894.20
Western
Australia
828 $42,941,239.20
South Australia 625 $32,413,375.00
Australian
Capital Territory
169 $8,764,576.60
Tasmania 126 $6,534,536.40
Northern
Territory
68 $3,526,575.20
Total 15,392 $798,250,668.80
• Costs in context
– $800 million in potential AML/CTF compliance costs
– about 4% of all revenue in the domestic legal services market
– $855 million - export market value of Australian legal services in 2010/11
– $482 million - total national funding for legal aid in 2012/13
Costs of more regulation
• Conclusion
– legal profession committed to core values of integrity, ethics, trust worthiness and social responsibility
– certain obligations fundamentally incompatible with role of legal practitioners in the system of justice
– little or no evidence of legal practitioner involvement in unwitting participation in ML or TF activity
– way forward is best realised through current regulatory scheme, raising awareness and providing guidance
– the existing regulatory scheme is already extensive– additional costs are undesirable and unjustifiable
Costs of more regulation
Thank You
Law Council of Australia
19 Torrens Street, Braddon ACT 2612 GPO Box 1989, Canberra ACT 2601Direct: (02) 6246 3788 Email: mail@lawcouncil.asn.auWebsite: www.lawcouncil.asn.au