Generally, there are three components to a comprehensive system to combat money laundering and terrorist financing:
1. Agreement of international protocols;
2. Enactment of domestic laws giving effect to the protocols; and
3. Institutional compliance with domestic laws.
The FATF report provides valuable advice to Australia (along with Switzerland and Italy – the other two countries surveyed in this latest round[1]) on how to strengthen its system.
International protocols
The Paris-based FATF Committee was created in 1989 to generate political will to bring about domestic reforms in anti-money laundering and counter-terrorist financing. Australia is a member of FATF in addition to being a foundation member of the Asia-Pacific Group (APG) which has a similar mission in our region.
In 2003, the FATF released its revised Recommendations as the international standard for combating money laundering and terrorist financing. Despite the relatively recent adoption of these protocols, Australia is well placed to achieve compliance.
Domestic laws
Australia already has strong domestic laws covering aspects of anti-money laundering and counter-terrorist financing. For example, the following laws apply:
- Australian Financial Transaction Reports Act (FTRA) – this law requires reporting of suspicious transactions and identification of customers under the 100-points check;
- The Proceeds of Crime Acts (Commonwealth and State-based) – these laws close avenues criminals have for using illegally obtained money;
- Charter of the United Nations Act (Australian regulations) – these regulations provide for freezing of terrorist funds.
Furthermore, the Australian Government has committed to implementing the 2003 FATF Recommendations.
The FATF report on Australia provides input into ensuring this legislative process is properly informed.
Institutional compliance
Australian banks have demonstrated strong compliance with Australian laws, and have committed to implementation of the new legislative requirements when enacted by the Federal Parliament.
In addition, Australian banks operating offshore are meeting standards required in other jurisdictions, particularly the United States and the United Kingdom. ABA understands there have been no incidents of Australian banks failing to meet the legislative standards in the US or UK.
While the US has not been evaluated by the FATF, the US Patriot Act is commonly viewed as the most onerous of domestic laws. This law requires US financial institutions to obtain certain undertakings and maintain certain records about banks outside the US with which they maintain correspondent accounts.
While the US Patriot Act requires high standards, the ABA believes that Australian banks will ultimately be beneficiaries of these high standards and will lead to an increase in Australia-US trade in banking products and services.
Process going forward
The Federal Government has announced it will release draft legislation in November 2005 which will give effect to the FATF protocols affecting the financial services sector.
The ABA and its member banks have been involved in roundtable discussions with the Federal Government and will continue to work in this process.
ENDS