Lillywhite says another weakness in Australia’s laws is the lack of a register that lists the beneficial owners of companies incorporated in the country or a register of trusts. “This is where Australia has absolutely fallen off the wagon and is lagging behind international trends.
“This is absolutely becoming the norm in more and more countries, that some form of beneficial ownership register is put in place specifically for this very purpose – to really try to circumvent the flow of dirty money that is moving around the world.”
Treasurer Josh Frydenberg says the government is committed to increasing the transparency of beneficial ownership of companies available to relevant authorities by modernising and consolidating the more than 30 different business registers in a new Australian Business Registry Services.
“This register will hold valuable information with respect to the share capital of companies, their top 20 shareholders and a comprehensive list of current and former company directors and secretaries,” Frydenberg says.
But the register would not give the full look through that a register of beneficial interests would because it will still allow for nominee directors and not include trust beneficiaries.
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The Pandora Papers have also renewed calls to improve Australia’s anti-money laundering and counterterrorism financing (AML-CTF) laws which only require financial institutions and betting shops and casinos to report suspicious transactions. The Financial Action Task Force, set up by the G7 to develop policies to combat money laundering, has long pushed for Australia to broaden its AML-CTF laws to cover real estate agents, accountants and lawyers.
ALP senator Deborah O’Neill has launched an inquiry into Australia’s AML-CTF regime and is seeking industry feedback on the costs and benefits of broadening our laws to include accountants and lawyers to bring Australian laws into line with international standards to prevent financial crime.
Lawyers have long resisted being included in such a regime given lawyer-client confidentiality is central to their profession. The Real Estate Institute of Australia forcefully made the case against additional regulation in a submission to a Senate inquiry into Australia’s AML regime, claiming it would be “burdensome” given “most real estate agencies will never encounter suspect transactions”.
“Small businesses also lack the time, resources and expertise to carry out compliance activities and reporting.”
Former Australian Federal Police officer Chris Douglas, who worked in serious and organised crime for more than three decades, says while there has been an effort to regulate money remitters and virtual currencies, the regulations are still missing the “big movers of money” – real estate.
The regulations are still missing the “big movers of money” – real estate, says former AFP officer Chris Douglas.Credit:iStock
“The real estate sector is a very, very powerful industry. It has influence at both state and federal level,” he says. “Why is it popular for laundering money? Bricks and mortar are safe and secure.”
“Real estate holds its value and unless there’s a trigger as to why authorities should be looking at a particular person or asset, it’s safe.”
Minister for Home Affairs Karen Andrews, who oversees Australia’s AML-CTF laws, did not respond to specific questions about expanding the regime to cover accountants, real estate agents and lawyers. A spokesman for the minister said: “The government is committed to continually improving Australia’s response to illicit financing and is taking a phased approach to reforming the AML/CTF regime, passing reforms to bolster our response.”
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This included, he said: “strengthening money laundering offences to better target professional money laundering syndicates, and two phases of specific anti-money laundering and counter-terrorism financing law reforms to deal with high risk digital currency and correspondent banks, enhance financial intelligence sharing and provide regulatory relief to industry.“
The Tax Justice Network has been a leader in advocating for changes to AML-CTF laws, and the introduction of trust and beneficial ownership registers.
It believes there could be additional changes that could improve Australia’s ranking on the TJN’s global financial secrecy index which places Australia in the middle, far from best in class and far from worst.
Mark Zirnsak, part of the secretariat for the Tax Justice Network Australia, says the organisation also supports broadening whistleblower reforms to at least include a Whistleblower Protection Authority to help people speaking up out against malfeasance and to include reward style payments to people who report wrongdoing to authorities.
“We can say ‘well, people should be really, really noble and just throw themselves in front of the bus and do the right thing’. But the reality is the person still probably has to think about their family and think about the future.”
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Zirnsak also points to an idea floated by Joe Hockey when he was treasurer to introduce rules that require groups promoting or marketing aggressive tax practices to self-report to authorities.
”It’s worked really well in the UK and other jurisdictions have it as well,” he says.
“And, ideally, you also have a safeguard where a recipient also has to report to the tax office that they are the recipient of an aggressive tax arrangement.
“In the UK, that self-reporting mechanism has resulted in hundreds of amendments to legislation to close off tax loopholes,” he says.
But former AFP officer Douglas says loading up regulators with more responsibilities will require additional funding. “Otherwise it’s a dropbox,” he says. “We don’t want a situation with AUSTRAC, where we’re filing reports and nothing happens.”
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