AUSTRAC muzzled by Canberra as Australia defies global money-laundering authorities

by Nathan Lynch | Mar 25, 2021 | Economy & Markets

​AUSTRAC has held Australia’s largest companies to account while other regulators with vastly more resources cowered and eyed the “revolving door” of private sector jobs. In the past three years, AUSTRAC has delivered taxpayers more than $2 billion in penalties for anti-money laundering breaches. One would expect the regulator to be riding a wave of political support. Not so, writes Nathan Lynch. The power of the lawyers’, accountants’ and real estate lobbies continue to have it hobbled.

When federal parliament, under prime minister John Howard, handed the Australian Transaction Reports and Analysis Centre (AUSTRAC) a suite of new powers in 2006, it had no idea it was unleashing a legislative nuclear weapon.

Parliament had certainly not anticipated theoretical trillion-dollar penalties against banks for compliance failures, which is where Westpac found itself after breaching a law, with $21 million penalties, on 23 million separate occasions.

The Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act 2006  took a Chatswood-based financial intelligence unit and turbo-charged it by giving it regulatory oversight of 14,000 of Australia’s largest and most influential companies across the banking, finance and gambling sectors.

In the case of casinos, gambling and pokies, the legislation marked the first time that Canberra had some legal authority over the state-based cash-cows. It finally had tools to tackle the laundering activity that was undermining the federal tax base in return for microcents in the dollar in state gambling licence fees.

The financial sector found itself subject to oversight from ex cops, spooks and criminal intelligence experts, who were a different breed from the “tea and bickies” gamekeepers that had traditionally feigned oversight over the largest and most powerful institutions.

As reported previously on, AUSTRAC took some time to discover its mojo. But when former organised crime cop Paul Jevtovic took control in 2014, things changed quickly.

Jevtovic: the cop behind the CBA sting

Of lapdogs and rottweilers

Within two years the regulator triggered a cultural and leadership overhaul across corporate Australia, starting with Tabcorp, Commonwealth Bank, Westpac and more recently at Crown’s casinos.

Despite these globally significant successes, Australia is a conundrum on the world stage when it comes to fighting financial crime. In AUSTRAC, Australia has one of the most respected financial intelligence units (FIUs) and has led the way in projects such as the Fintel Alliance, the regional Counter-Terrorism Financing Summits and the enforcement cases against banks and gambling companies.

Yet when it comes to tackling the money laundering industry’s professional facilitators, Australia is an international pariah.

An astounding US$2 trillion is laundered every year, legitimising the profits from some of the worst crimes imaginable. Human trafficking, illicit drug dealing, arms smuggling, child exploitation, political corruption — the list is long and deeply dispiriting.

In this environment, vast sums of money can only be laundered with either the witting or unwitting support from lawyers, accountants and real estate agents — the “gatekeeper” professions that structure the world’s black money laundromat.

Australia has defied its international obligations for the past 15 years. While we have one of the world’s best financial crime rottweilers in AUSTRAC, for some inexplicable reason, our policymakers have kept it tethered to Canberra’s leash, firmly muzzled and “mogged”.

The Australian government has perpetuated a charade in suggesting that banks and casinos can tackle the money laundering problem alone.

On the world stage, meanwhile, Australia has shirked its obligations to the international community to truly harden the economy against serious and organised financial crime.

Muzzled, mogged and muted

In the most recent example, the Australian anti-money laundering regulator has been muzzled before the international standard setter, the Financial Action Task Force (FATF).

In a worrying development, AUSTRAC has been ordered to take a back seat while its political masters in the Department of Home Affairs drive the critical international relationship with the FATF.

AUSTRAC has been nudged into a secondary role in official meetings with the Paris-based international standard setter at the very time Australia is being called to account for its decade-old policy failures in not passing “Tranche 2” legislation.

The sad truth is that Australia has lost its mantle as the regional leader in AML/CTF. Despite having the region’s most effective respected financial intelligence unit, the country has fallen well behind its global and regional peers in extending regulation to cover so-called designated non-financial businesses and professions (DNFBPs).

In addition, AUSTRAC was “mogged” into the Department of Home Affairs following the creation of the new super-portfolio in December 2017, having previously been part of the Attorney-General’s Department. The “Tranche 2” reforms have languished in Home Affairs ever since.

This political failure has become a hot topic in financial crime policy circles as Australia lags jurisdictions such as Singapore, Hong Kong, Malaysia, Indonesia and New Zealand when it comes to regulating gatekeeper professions. It is one of only six FATF member countries that fail on all three of the recommendations relating to gatekeeper professions (DNFBPs).

From leaders to laggards

It’s therefore no surprise that Australia has fallen behind New Zealand and Singapore in the global Corruption Perceptions Index.

Australia and China are now the regional laggards when it comes to extending AML/CTF laws to cover accountants, real estate agents, lawyers and high-value goods dealers. Under questioning from the Greens’ Nick McKim in Senate Estimates this week, AUSTRAC officials deferred the questions around the Tranche 2 policy reforms to the Department of Home Affairs.

Nicole Rose, chief executive of AUSTRAC, said the lead agency on all DNFBP law reform matters was now the Department of Home Affairs.

“I believe that the government is addressing it in a tranche-by-tranche way and that they are concentrating on Phase 1.5 [legislation], which has gone through the parliament just recently. I’m not aware that costings have started or any work has been done on Tranche 2,” Rose said.

Australia’s 15-year failure to pass its “Tranche 2” legislation was expected to be discussed at February’s 2021 FATF Plenary conference. When it was part of the Attorney-General’s Department, AUSTRAC would lead all engagements with FATF, Egmont and other regional bodies such as the Asia-Pacific Group on Money Laundering (APG).

This year, however, Australia’s delegation was led by representatives from Home Affairs, supported by a number of “EL2 level” AUSTRAC directors. The Department of Foreign Affairs and Trade also nominated an officer to attend this year’s “virtual” plenary meeting.

Peter Soros, AUSTRAC’s deputy chief executive, told Senate Estimates that the financial intelligence unit had not been made aware of any discussions at the FATF meeting about Australia’s “Tranche 2” failures.

The Australian Federal Police and AUSTRAC, meanwhile, have been increasingly gathering evidence that gatekeeper professions are involved, both wittingly and unwittingly, in money laundering.

Rose said the agency “absolutely” had evidence that professional facilitators were knowingly and actively involved in criminal activity in Australia.

“The AFP can give you details of those cases, as can state and territory police. That’s wittingly. We also know there have been professional facilitators involved unwittingly. But there are no figures available on what sort of percentage that is of the 100,000 or so of those professional facilitators,” Rose said.

New Zealand forges ahead

One official topic of discussion at the FATF plenary was the performance of New Zealand’s framework for identifying money laundering and regulating DNFBPs. New Zealand had lagged Australia on AML reform for years but had its “Road to Damascus” moment when the country was named in the Panama Papers.

New Zealand officials quickly realised that the failure to prevent money laundering was costing legitimate businesses far more each year than the revenue brought in by the tax evasion and money laundering gatekeepers.

Within years New Zealand passed both tranches of its AML/CTF regime, leapfrogging Australian policymakers in the process.

FATF caves in as Australia keeps propping up property market with black money

Second fiddle to Home Affairs

In confirmation that AUSTRAC is playing second fiddle to Home Affairs in international engagements, Soros said all questions about the recent FATF meeting and AML/CTF policy should be directed to Home Affairs.

“It’s probably more helpful if Home Affairs answers these questions as they were the lead [agency] at the delegation. I certainly haven’t been personally briefed on likely timings.”

In the meantime, as the FATF dithers and Australia’s ferocious watchdog remains mogged and muzzled, financial criminals the world over are getting a clear message.

Australia’s lawyers, accountants and property market are open for business. Any business.

Westpac’s pursuit of profit “placed children directly at risk of harm”


Nathan Lynch is a writer and international speaker who has spent two decades investigating the hidden world of dark money that fuels organised crime, corruption and violent extremism around the globe. He is certified by the US Department of Justice's elite CCIPS Cybercrime Laboratory and is a program expert with the Financial Services Volunteer Corps, which provides support to developing countries to help them combat the scourges of money laundering and other serious financial crimes. Nathan has trained police, government officials and bankers across Asia and the Middle East on the techniques the world's criminals use to conceal and clean their dirty money.

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