Australia's New Anti-Money Laundering Strategy

Abstract

In 2006 the Australian Government undertook major reform of the regulatory framework to detect, prevent and prosecute money laundering. These reforms were responses to the changing nature of money laundering as well as the limitations inherent in the existing compliance or rule-based regulatory approach. Originally intended to deal with the laundering of cash generated mainly by drug trafficking, contemporary anti-money laundering systems must now deal with a range of ‘public bads’, including organised fraud, the financing of terrorism, corruption and the theft of state assets, and the financial weaknesses of ‘failed states’. Existing regulatory systems have generated unwieldy volumes of defensive reports of suspicious transactions, but little in the way of tangible outcomes. Australia's money laundering regulatory deficiencies were highlighted by an evaluation review conducted in 2005 by the Financial Action Task Force. This article considers how the new Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) addresses these regulatory deficiencies. It examines the change from a compliance to a risk-based approach, increased customer due diligence requirements and their impact on bank privacy and related issues, and how the new regulatory framework is likely to impact on the role of the Australian Transaction Reporting and Analysis Centre (AUSTRAC) and its relationship with financial institutions and other reporting entities.