Archive | January, 2017

Sluggish anti-money laundering reform in Australia

Australia has resiliently protected its revenue base. Under Australian law and administration it is risky for Australian tax residents to have involvements in tax havens. Australia is a firm committer to a comprehensive series of double tax agreements and is rarely thought of as a tax haven.

Financial Secrecy Index ranking

In its Financial Secrecy Index (2015), the Tax Justice Network noted that “Australia accounts for less than 1 per cent of the global market for offshore financial services, making it a tiny player compared with other secrecy jurisdictions…. Australia has taken significant steps to address tax evasion and tax avoidance, especially as it relates to revenue loss from Australia. However, its record of helping other countries combat tax evasion and money laundering is somewhat mixed.” Australia was given a 44 rating in this study, which is better than Switzerland (1), USA (3), Great Britain (15) and the Netherlands (41). Still, this middling rating does reflect sluggish progress by Australia with anti-money laundering measures.

Extent of scrutiny of money flows

In 2006, the Anti-Money Laundering and Counter-Terrorism Financing Act and Rules were introduced empowering AUSTRAC to track money flows through providers of banking, remittance and gambling services. In 2007 the Australian Government announced measures to extend the regime to non-financial businesses and professions including the legal, accounting and real estate professions. Now it is 2017 and the extended measures are yet to be implemented. Various lobbies and sectional interests have successfully pressed successive governments to delay and reconsider the extended measures.

Is that scrutiny enough?

Although the 2006 measures appear to be functioning successfully there is growing concern that a vast amount of illicit foreign money, particularly from China, has eluded AUSTRAC scrutiny and has found its way into the very buoyant Australian real estate market.

According to the Financial Action Task Force and the Asia/Pacific Group Mutual Evaluation Report of April 2015 Australia has strong legal, law enforcement and operational measures for combating money laundering and terrorism financing, but the report says important improvements are needed in a number of key areas and an underlying concern remains that Australian authorities are overly focussed on predicate crime rather than on money laundering risks.

Australia could achieve an improved Financial Secrecy ranking by commencement of the extended money laundering measures.