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A Critical Analysis of the Effectiveness of Anti-Money Laundering Measures with Reference to Australia

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The Palgrave Handbook of Criminal and Terrorism Financing Law

Abstract

The global Financial Action Task Force (FATF) anti-money laundering (AML) standards provide a framework for judging national AML laws and policy. Since 2013, international peer review assessments of countries’ AML systems rate effectiveness equally as important as technical compliance. A detailed examination of Australia’s AML record is the focus of this chapter, because Australia is one of the first countries to be assessed under the new criterion of effectiveness. Ironically, Australia’s greatest success in its AML system has been achieved in tax enforcement, relying on mandatory collection of international funds transfer information, which is not part of the requirements of the global standards, and yet it is a relatively costless measure.

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Notes

  1. 1.

    See the figures published on the Financial Action Task Force (FATF) website <www.fatf-gafi.org/countries/> accessed 17 July 17.

  2. 2.

    See for example, Peter Reuter and Edwin Truman, Chasing Dirty Money: The Fight Against Money Laundering (Institute for International Economics 2004); Michael Levi and Peter Reuter, ‘Money Laundering’ (2006) 34(1) Crime and Justice 289; Jason Campbell Sharman, The Money Laundry: Regulating Criminal Finance in the Global Economy (Cornell University Press 2011); Brigitte Unger and Daan van der Linde (eds), Research Handbook on Money Laundering (Edward Elgar Publishing 2013); Brigitte Unger and others, The Economic and Legal Effectiveness of the European Union’s Anti-Money Laundering Policy (Edward Elgar Publishing 2014).

  3. 3.

    See William Gilmore, Dirty Money: The Evolution of International Measures to Counter Money Laundering and the Financing of Terrorism (3rd edn, Council of Europe 2004) 89–91.

  4. 4.

    See FATF, The Forty Recommendations of the Financial Action Task Force on Money Laundering (FATF 1990).

  5. 5.

    See FATF, FATF Mandate 2012–2020 (FATF 2012) 3.

  6. 6.

    ibid.

  7. 7.

    See FATF, International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation: The FATF Recommendations (FAFT 2012) (updated in 2013 and 2015), Recommendations 5, 6 and 8, which were previously denoted as Special Recommendations 11, 111 and VII.

  8. 8.

    See Tim Krieger and Daniel Meierrieks, ‘Terrorist Financing and Money Laundering’ (2011) paper available at <http://ssrn.com/abstract=1860069> accessed 17 July 17.

  9. 9.

    See FATF (n 7). Recommendation 7 provides for targeted financial sanctions relating to proliferation.

  10. 10.

    See FATF, Public Statement (19 February 2016).

  11. 11.

    See International Monetary Fund (IMF), Anti-Money Laundering and Combating the Financing of Terrorism (AML/CTF)—Report on the Review of the Effectiveness of the Program (2011) 20.

  12. 12.

    See Abdullahi Yusuf Shehu, ‘Promoting financial sector stability through an effective AML/CFT regime’ (2010) 13(2) Journal of Money Laundering Control 139.

  13. 13.

    IMF (n 11) 33.

  14. 14.

    Rajeev Syal, ‘Drug Money Saved Banks in Global Crisis, Claims UN Advisor’ The Guardian (London 13 December 2009) <www.theguardian.com/global/2009/dec/13/drug-money-banks-saved-un-cfief-claims> access ed 17 July 17.

  15. 15.

    See Peter Reuter, Assessing Money Laundering Controls, Paper presented at AML/CTF Conference (Sydney April 2009) <www.aic.gov.au/media_library/conferences/2009-anti-money_laundering/presentations/reuter_pet er.pdf> accessed 17 July 17.

  16. 16.

    FATF (n 5). Recommendation 3 (Money Laundering Offence), the Interpretive Note to Recommendation 3, and the definition of Designated Category of Offences.

  17. 17.

    See Financial Services Authority, Fighting Financial Crime (FSA 2012). See now the Financial Conduct Authority, Financial Crime: A Guide to Firms, PS11/15 (FCA 2011).

  18. 18.

    Anti-Money Laundering and Counter-Terrorism Financing 2006 Act (AML/CTF Act) (Australia), s 3.

  19. 19.

    Australian Government, Report of the Statutory Review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and Associated Rules and Regulations (Attorney-General’s Department 2016), Recommendation 3(1).

  20. 20.

    Reuter (n 15). Reuter refers to ‘primary goals’ as ‘reduc(ing) predicate crimes, protect(ing) the integrity of the core financial systems and combat(ing) “global public bads”’, ‘and secondary goals’ as including ‘sanction(ing) major felons’, administer(ing) ‘just desserts’ and inconvenienc(ing) felons’.

  21. 21.

    See IMF (n 11) 6.

  22. 22.

    FATF, Methodology for Assessing Technical Compliance with the FATF Recommendations and the Effectiveness of AML/CFT Systems (FATF 2013) (updated October 2016) 13.

  23. 23.

    This observation is based on the author’s presence at several FATF meetings which have considered peer review assessments of several countries.

  24. 24.

    The FATF-style regional bodies are: Asia/Pacific Group on Money Laundering (APG), Sydney, Australia; Caribbean Financial Action Task Force (CFATF), Port of Spain, Trinidad and Tobago; Eurasian Group (EAG) Moscow, Russia; Eastern and Southern African Anti-Money Laundering Group (ESAAMLG), Dar es Salaam, Tanzania; Central Africa Anti-Money Laundering Group (GABAC), Libreville, Gabon; Latin America Anti-Money Laundering Group (GAFILAT), Buenos Aires, Argentina; West Africa Money Laundering Group (GIABA), Dakar, Senegal; Middle East and North Africa Financial Action Task Force (MENAFATF), Manama, Bahrain; and Council of Europe Anti-Money Laundering Group (MONEYVAL), Strasbourg, France. See <www.apgml.org/fatf-and-fsrb/page.aspx?p=94065425-e6aa-479f-8701-5ca5d07ccfe8> accessed 17 July 17.

  25. 25.

    IMF (n 11) 8.

  26. 26.

    ibid. 42. The 12.3% figure was based on the percentage of full compliance with the 7889 ‘observations in the data set’, which in turn was calculated by multiplying the number of assessments (161) by the number of Recommendations (49).

  27. 27.

    Michaud v France ECHR 2012-VI. See David Chaikin, ‘Financial Crime Risks and the Professions’ in David Chaikin (ed), Financial Crime Risks, Globalisation and the Professions (Australian Scholarly Publishing 2013) 12–13.

  28. 28.

    See Jason Campbell Sharman and Percy Shiavak Mistry, Considering the Consequences: The Development Implications of Initiatives on Taxation, Anti-Money Laundering and Combating the Financing of Terrorism (Commonwealth Secretariat 2008).

  29. 29.

    FATF (n 22) 15.

  30. 30.

    ibid. 15–17.

  31. 31.

    ibid. 21.

  32. 32.

    ibid. 17.

  33. 33.

    ibid. 132–139.

  34. 34.

    FATF and APG, Anti-Money Laundering and Counter-Terrorist Financing Measures, Australia, Mutual Evaluation Report (FATF and APG 2016) 18–25; See also KPMG, The FATF Mutual Evaluation of Australia: Are there lessons for New Zealand’s reporting entities? (2015), 4.

  35. 35.

    FATF and APG (n 34) 18–25.

  36. 36.

    ibid. 12–17.

  37. 37.

    The AML/CTF Act was enacted in response to the recommendations of the FATF and APG, Third Mutual Evaluation Report on Anti-Money Laundering and Combating The Financing of Terrorism (FATF and APG 2005), and after consultation between stakeholders and the Australian Attorney-General’s Department from 2004–2006.

  38. 38.

    Australian Government (n 19) 5 and 11.

  39. 39.

    ibid. 158.

  40. 40.

    See AML/CTF Act (n 18) s 6, Tables 1, 2, and 3.

  41. 41.

    Australian Government (n 19) 23.

  42. 42.

    ibid. 23.

  43. 43.

    See Australian Transaction Reports and Analysis Centre (AUSTRAC), Annual Report 2014–2015, 38.

  44. 44.

    AUSTRAC, Productivity Commission Study: Regulator Engagement with Small Business (2013), 4.

  45. 45.

    AUSTRAC (n 43) 2.

  46. 46.

    ibid. 11–12. For criticisms of AUSTRAC’s supervisory approach, see FATF and APG (n 34) 12, 97 and 102.

  47. 47.

    Ian Ayres and John Braithwaite, Responsive Regulation: Transcending the Deregulation Debate (OUP 1992) 35.

  48. 48.

    AUSTRAC, Enforcement Strategy 2012–2014, 3.

  49. 49.

    AML/CTF Act (n 18) s 184.

  50. 50.

    ibid. s 191.

  51. 51.

    ibid. s 197.

  52. 52.

    ibid. s 162.

  53. 53.

    FATF and APG (n 34) 101.

  54. 54.

    ibid. 12.

  55. 55.

    ibid. 12, 97 and 103.

  56. 56.

    The following discussion is taken from David Chaikin (ed), Financial Crime Risks, Globalisation and the Professions (Australian Scholarly Publishing 2013).

  57. 57.

    See Law Council of Australia, Submission to the Statutory Review of the Anti-Money Laundering and Counter-Terrorism Financing Regime, 30 April 2014, 3–9. See also Australian Government (n 19) 138 and 158.

  58. 58.

    See AML/CTF Act (n 18) s 6, Table 1, item 46(b).

  59. 59.

    ibid. s 242.

  60. 60.

    See Law Council of Australia, Anti-Money Laundering Guide for Legal Practitioners (2009) (updated January 2016) 20–21.

  61. 61.

    FATF and APG (n 34) 6. For consideration of lawyers and money laundering, see Chap. 6 (Benson) in this collection.

  62. 62.

    FATF and APG (n 34) 6, 81, and 84.

  63. 63.

    See Privacy Commissioner’s observations, quoted in Australian Government, Checking the Cash: A Report of the Effectiveness of the Financial Transaction Reports Act 1988, Senate Standing Committee on Legal and Constitutional Affairs (Commonwealth of Australia 1993) 57.

  64. 64.

    See Neil Jensen, ‘International Funds Transfer Instructions: Australia at the Leading Edge of Financial Transaction Reporting’ (1993) 4(2) Journal of Law Information and Society 304.

  65. 65.

    AML/CTF Act (n 18) ss 43 and 44. A breach of this requirement gives rise to a civil penalty.

  66. 66.

    ibid. ss 53–58. See also the requirement under section 59 to report bearer negotiable instruments, when requested by a customs office or police officer. A breach of this requirement gives rise to a civil penalty.

  67. 67.

    ibid. ss 45 and 46.

  68. 68.

    ibid. s 41.

  69. 69.

    ibid. s 41(1).

  70. 70.

    See definition of money laundering, ibid. s 5.

  71. 71.

    FATF and APG (n 34) 12. See, however, AUSTRAC, Record $45 million civil penalty ordered against Tabcorp, Press Release, 16 March 2017.

  72. 72.

    See AML/CTF Act (n 18) s 51, that deems information reported under ss 41, 43, 45 or 49 as not in the possession of the reporting entity for the purpose of money laundering offences in Division 400 and Chap. 5 of the Criminal Code 1995 (Cth).

  73. 73.

    This statistic and other statistics concerning SMRs also include Suspicious Transaction Reports (STRs) which are required to be filed under the FTR Act which is still in force.

  74. 74.

    In 2013–2014, there were 64,076 SMRs/STRs filed; in 2012–2013, the total was 44,062.

  75. 75.

    AUSTRAC (n 43) 65.

  76. 76.

    For consideration of AML and the remittance sector, see Chap. 42 (Cooper) in this collection.

  77. 77.

    See AUSTRAC, AUSTRAC Cancels Registration: Bisotel Rieh Pty Ltd, Press Release (10 November 2014).

  78. 78.

    See AUSTRAC (n 43) 67.

  79. 79.

    ibid. 61.

  80. 80.

    ibid.

  81. 81.

    See AML/CTF Act (n 18) ss 142 and 143.

  82. 82.

    See John Walker, Some Thoughts on Assessing Australia’s Performance in Response to the FATF 40+ Recommendations, Submission to the FATF Mutual Evaluation Assessment Team, Canberra, Australia 31 July 2014 (on file with the author).

  83. 83.

    For the background, see Jensen (n 64).

  84. 84.

    See David Chaikin, Measuring Performance and Australia’s Anti-Money Laundering Laws, Submission to the FATF Mutual Evaluation Assessment Team, Canberra, Australia, 31 July 2014 (on file with the author).

  85. 85.

    See the definition of a designated agency in AML/CTF Act (n 18) s 5.

  86. 86.

    ibid. s 126(1).

  87. 87.

    See Memorandum between the Director of AUSTRAC and the Commissioner of the ATO on Access to and Use of AUSTRAC Data (9 December 2003).

  88. 88.

    AUSTRAC, Submission to the Parliamentary Joint Committee on Law Enforcement Inquiry into Financial Related Crime (Australian Parliament 2014) 4.

  89. 89.

    AUSTRAC (n 77) 52.

  90. 90.

    ibid. 4.

  91. 91.

    AUSTRAC (n 43) 44.

  92. 92.

    Australia Crime Commission, Annual Report 2015–2016, 70–71.

  93. 93.

    FATF and APG (n 34) 5 and 8.

  94. 94.

    ibid. 5.

  95. 95.

    See Walker (n 82).

  96. 96.

    For further discussion of measuring AML systems, see Chap. 14 (Ferwerda) and Chap. 15 (van Duyne et al) in this collection.

  97. 97.

    See FATF and APG (n 34) 8 and 56–60.

  98. 98.

    ibid. 60.

  99. 99.

    ibid.

  100. 100.

    ibid. 41.

  101. 101.

    ibid. 40 and 50.

  102. 102.

    ibid. 59–60.

  103. 103.

    See Tesco Supermarkets Ltd v Nattras [1972] AC 153.

  104. 104.

    FATF and APG (n 34) 47.

  105. 105.

    Thorn v R (2009) 198 A Crim R 135. See discussion in Chaikin (n 84).

  106. 106.

    Nahlous v R [2010] NSWCCA 58 [17].

  107. 107.

    FATF and APG (n 34) 115–120.

  108. 108.

    The Egmont Group of Financial Intelligence Units consists of 151 member FIUs. See <www.egmontgroup.org> accessed 17 July 17.

  109. 109.

    See AUSTRAC (n 43) 4.

  110. 110.

    ibid. 50.

  111. 111.

    FATF and APG (n 34) 115–116.

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  1. School of Business, The University of Sydney, Darlington, NSW, Australia

    David Chaikin

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  1. University of Sussex, Falmer, United Kingdom

    Colin King

  2. University of Leeds, Leeds, United Kingdom

    Clive Walker

  3. Notre Dame Law School, Notre Dame, IN, USA

    Jimmy Gurulé

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Chaikin, D. (2018). A Critical Analysis of the Effectiveness of Anti-Money Laundering Measures with Reference to Australia. In: King, C., Walker, C., Gurulé, J. (eds) The Palgrave Handbook of Criminal and Terrorism Financing Law. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-64498-1_13

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