3 FCN: Are Australia and New Zealand more or less exposed than other Countries in the Region and why?

GB: Australia and New Zealand are advanced economies, with stable political systems, and traditionally relatively open borders which have welcomed both trade and people from overseas, making both countries culturally diverse and successful, but at the same time the same conditions for success have also enabled criminal activities to exploit these attributes. This means opportunities in all aspects of financial crime from fraudsters, scammers, drug dealers, money launderers in general as well as for financiers of terrorism. In response, we have been trying to understand better, flows of funds, in particular to and from Asia to segregate those that are legitimate from those that are not. Much of the responsibility for detecting and managing this risk has fallen to financial institutions as the AML/CTF regime in Australia has not yet extended to capture real estate agents, lawyers, and other designated non financial service businesses. NZ has, however, recently broadened their laws to include those businesses so that is positive for the region.

4 FCN: What are the main ML/TF risks affecting Australia?

GB: The Australian Government produces ML & TF risk publications via separate Government agencies. AUSTRAC publishes ML Risk Assessments on specific sectors, recently issuing a Risk Assessment on the Mutual Banking sector, and currently is in the process of updating Risk Assessments on Major Domestic Banks, Foreign Banks and branches in Australia as well as Gambling/Casinos and Remitters. These are all due for publication in 2020 with the Private Sector consulted / interviewed as part of each of these. Whilst there is no official government estimates for the size of financial crime affecting Australia, Peter Soros, the Deputy CEO of AUSTRAC in a recent speech, provided some interesting figures when he stated that, “According to the Australian Institute of Criminology, serious and organized crime cost the country an estimated A$47.4 billion (US$33 billion) during the financial year 2016-17 — equal to about 3.8 percent of Australia’s A$1.25 trillion (US$860 billion) economy in 2017. One-third of this number, A$15.9 billion, (US$11 billion) is spent on prevention and response by law enforcement, the criminal justice system, various other government agencies, the private sector and individuals in the community.”

These numbers highlight the immense challenge Australia faces in attempting to stop various forms of financial crime, including money laundering, terrorism financing and tax evasion.” Some key areas of ML threat from offshore to Australia are (1) the outflow of funds to offshore locations from organised crime groups involved in the importation of drugs to Australia (Australia is an attractive option due to the high prices drugs can be sold for here), (2) the significant inflow of funds to invest in property in Australia from a range of developing Asian Countries (in particular China and Vietnam), and (3) the outflow of funds from the growing number of scams against residents of Australia (investment scams, romance scams etc). Australia in general still has relatively high levels of cash in use for genuine business purposes and criminals take advantage of this for co-mingling of criminal proceeds however from 2020 the Government is expected to introduce a limit of $10K cash that will apply to many business transactions as an attempt to stem some of the illegitimate cashflow.

For more information, AUSTRAC as both the FIU and Regulatory Supervisor in AU issues an Annual Report. The most recent (2018-19) sets out actions taken in oversight of 14,000+ reporting entities, and outreach to industry and regulatory action. It includes the use of the suspicious matter reports information, including that more than 4,500 Australian Taxation Office (ATO) cases used AUSTRAC’s financial intelligence capability. These cases contributed to the ATO’s raised revenue of more than A$210 million (US$145 million) for the financial year.

From a Terrorism Finance perspective, The Australian Government publishes a National Counter-Terrorism Plan as well as the Counter- Terrorism Strategy and other related publications. The current terrorism rating is “Probable” and the Government highlights that “The primary terrorist threat in Australia today comes from a small number of Australian-based individuals who are committed to a violent anti-Western, Sunni Islamist extremist ideology. These individuals present a direct threat as well as a secondary threat through their ability to influence others.” Areas of risk include onshore attack planning by those that have had their Australian passports cancelled — preventing them from travelling to join terrorist groups in conflict zones and from those that return from the conflicts, as well as radicalisation by extremists of vulnerable community members.

5 FCN: What are the risks and threats faced in New Zealand?

GB: New Zealand published their National Money Laundering and Terrorism Financing Risk Assessment in 2018. The FIU in NZ estimated that NZD 1.35 billion (USD870 million) is generated annually for laundering, primarily from drug, fraud and tax offending. That amounts to just 0.4% of NZ GDP for 2018. This figure excludes though transnational laundering of overseas proceeds and laundering the proceeds of domestic tax offending, as such the overall value of money laundering is likely to be significantly more than this figure. According to the NZ FIU, three key areas of known threat from offshore to NZ are from i) transnational organised crime groups linked to NZ, such as transnational drug distribution networks, ii) overseas criminal organisations not generally connected to NZ who may seek to move funds through NZ and/or utilise NZ’s legal structures, and iii) dedicated money laundering networks, which may also seek to move funds through NZ’s financial system or via NZ’s legal structures.

The highest priority observed vulnerabilities for New Zealand are: International wire transfers, Alternative payment methods, New technology, Gatekeeper professional services including formation of companies, trusts and charities, Cash, businesses & High value goods.

As far as Terrorism and Terrorism finance is concerned, the Risk Assessment focussed on NZ as traditionally a low risk environment, with groups such as Islamic State / Da’esh or Al-Qaeda named, though given the low level of domestic support for terrorist causes, it was considered more likely that this threat would manifest in NZ as isolated disaffected individuals or small groups. Of course this is what happened in Christchurch in March 2019, though this was a radicalised far right extremist from Australia that carried out NZ’s worse terrorist attack.