Financial Crime Set to Become a Pre-Election Battlefield in Australia

Topics: Australia, Financial Crime, Government, Money Laundering, Regulation & Compliance, Regulatory Intelligence, Terrorist Financing, Thomson Reuters


The fight against cross-border financial crime is shaping up to be a political minefield in Australia, as the major parties prepare their policy platforms for this year’s federal election. Australia is expected to go to the ballot in May, with recent polling data predicting a 2.5% swing against the incumbent Coalition. Political analysts have said the election result could go either way, with the final result too tight to predict at this early stage.

The election will be held against the backdrop of the financial services Royal Commission, which over the past year has exposed extensive misconduct in the Australian financial services sector.

Chris Bowen, the shadow treasurer, has made it clear that financial regulation and anti-money laundering (AML) policy will feature heavily in Labor’s 2019 election campaign. Last week, Bowen gave Thomson Reuters Regulatory Intelligence (TRRI) an exclusive insight into the policies that Labor will take to voters.

Crucially, the shadow treasurer has committed to “push ahead” with AML and counter-terrorism financing (CTF) laws for real estate agents, lawyers, and accountants if Labor wins the next election and Bill Shorten becomes the next Australian prime minister. A Shorten government would also reverse funding cuts to the Australian Federal Police (AFP) and the Australian Securities and Investments Commission (ASIC) to help tackle serious and cross-border financial crime.

Australia’s financial crime laws have become a pre-election policy minefield, following revelations about “dirty money” in the Project Dragon investigations on ABC’s Four Corners and TRRI last week.

Bowen said the reports about Chinese money laundering were alarming and Labor will “push ahead” with Tranche 2 laws if it wins the May election. The investigations also unearthed evidence of “bounty hunters” operating in Australia to recoup assets on behalf of the Chinese Ministry of Public Security (MPS).

Bowen said the government had “completely dropped the ball” on money laundering reform. “According to the government’s own work plan, real estate agents should already be covered by our money laundering laws. The Liberals have done nothing to progress this,” Bowen told TRRI, after viewing and reading the reports.


The incumbent government, meanwhile, has said it will begin to move on the issue as soon as the “parliamentary timetable” allows. Peter Dutton, the Home Affairs minister, has been sitting on transitional “Phase 1.5” legislation since late last year. The government said it could not set a firm timetable for laws enacting the second tranche of the AML regime, which has been a bipartisan federal policy since 2006.

Tsunami of Flight Capital

The Project Dragon investigations showed that Australia’s failure to crack down on laundering through real estate agents, lawyers, and accountants had attracted a tsunami of flight capital to the country’s shores.

China’s unprecedented moves to engage bounty hunters reflect the scale of the problem, as well as Beijing’s frustration. These private sector “civil recovery agents” are skirting dangerously close to Australia’s new foreign interference laws, experts said.

“I think they have to tread carefully… they need to walk a very, very narrow line,” said Neil Jeans, an experienced Australian financial crime consultant.

Bill Majcher, a civil recovery agent based in Hong Kong, said real estate agents, lawyers, and accountants had become central to the major laundering activities in Australia. The former undercover agent for the Canadian Mounties said it was well known that illicit funds flowed to the path of least regulatory resistance.

Tens of billions of dollars have flowed into Australia from China, as corrupt officials attempt to park their funds in a safe jurisdiction, Majcher said. “Australia is a very attractive destination for Chinese kleptoctrats,” he said.

China is also concerned about a tsunami of money flowing back into the country after being washed abroad, Majcher added. He said this was a major concern for President Xi Jinping, as the returning proceeds of corruption are undermining the authority of the Chinese state.

“It’s not all about the outflow. China’s government is also very concerned about illegal capital inflows,” explained Majcher. “They understand that billions of dollars flow outside of the country, outside of the purview of the government, as the byproduct of corruption and criminality. That money comes back into China without them seeing it and fuels further corruption and criminality. So, it’s a two-way street.”

Reinforcing Financial Crime Enforcement

Shadow Treasurer Bowen said the Coalition government’s inaction on Tranche 2 of the AML regime was consistent with its broader policy failure with regards to tackling financial crime. He pointed out that the Coalition had balked on its promised AML/CTF Act reforms since coming to power in the September 2013 election.

“The Liberals aren’t interested in prosecuting serious financial crime. They cut funding to ASIC, they planned to cut funding to the Serious Financial Crime Taskforce, and they ripped hundreds of millions of dollars out of the AFP, who work with our partners abroad to disrupt transnational organized crime,” Bowen said.

The opposition will reverse cuts to the AFP and ASIC if it takes power in May.

“Under the Liberals, we’re set to lose more than 500 AFP officers over the next four years. Who is going to crack down on these crimes?” Bowen said. “Only Labor can be trusted to take money-laundering financial crime seriously.”

With regards to China’s use of civil recovery agents in Australia, the opposition said this had set a worrying precedent and needed to be addressed. The shadow treasurer urged China to stop the practice and return to the use of official channels, such as the mutual cooperation agreements between the Ministry of Public Security and the AFP.

“We believe the best way to deal with transnational crime is through official cooperation, including arrangements that already exist between Australia and China,” Bowen told TRRI.

“Project Dragon”, which aired on ABC Four Corners, is available to view on demand free on iView