Anti-money laundering laws must cover lawyers and accountants

Westpac Banking Corporation and Crown Resorts’ failures to prevent money laundering have caused both companies huge reputational and financial damage.

Yet The Age's reporting this week on global tax evasion schemes suggests these two examples are the tip of the iceberg. While national regulators such as the Australian Taxation Office and the Australian Transaction Reports and Analysis Centre (AUSTRAC) appear to be tackling the problems, the federal government needs to do more to regulate the lawyers, accountants and other professional enablers who lawfully facilitate the global flow of black cash.

The Age revealed relations between Euro Pacific, a bank in the tax haven of Puerto Rico, and about 400 Australians including Simon Anquetil, the Australian businessman jailed for engineering Plutus Payroll, the country’s biggest tax scam, and financial institutions such as the Perth Mint. About 100 of these clients are considered to be dubious.

The bank is the target of Operation Atlantis, a sweeping international tax probe by the “J5”, a taskforce made up of the tax chiefs of Australia, the US, UK, the Netherlands and Canada that was set up after the leak of legal documents known as the Panama Papers.

The ATO is to be commended on taking this tough approach. Going after the money is the only way to stop not just tax evasion but also organised crime such as drug dealing and political corruption.

Unfortunately, those involved in setting up and managing the international cash transfers can operate with relative impunity because of gaping holes in Australian law.

The federal government has dragged its feet in complying with global best-practice standards that are now in force in Britain and New Zealand. The rules say that lawyers, accountants, real estate agents, precious-stone dealers, and trust and company service providers should have an obligation to take steps to “know their customers” and report suspicious transactions to authorities.

The anti-money-laundering rules were developed over a decade ago by the Financial Action Task Force, an anti-money-laundering agency under the Paris-based Organisation for Economic Co-operation and Development.

Australian lawyers, accountants and real estate agents have, however, fought the rules tooth and nail arguing that, even though the City of London can do it, here in Australia they cannot afford the burden of complying with anti-money-laundering red tape.

Australian banks and casinos are at least required to monitor and report suspicious transactions, even if in the case of Westpac and Crown they have failed.

But the federal government has ignored requests from the Financial Action Task Force in 2015 and a statutory review by the Attorney-General’s Department in 2016 to impose the same obligations on the other professional groups.

The Age reported this week on lawyers in Melbourne, Sydney and Perth, whose stock-in-trade is setting up accounts in jurisdictions such as Puerto Rico, which do not automatically have to share information with outside law enforcement. One of the lawyers who deals with Euro Pacific bank was caught on tape explaining how to reduce the risk of criminal charges using these offshore shell companies.

Australia’s failure to comply is a source of global shame and it could soon become a problem for its nomination of Senator Mathias Cormann as secretary-general of the OECD.

The OECD is about to start another round of assessments to identify countries that have failed to comply with the rules. If he gets the job, Senator Cormann will have to ask why the government in which he served has failed to do what it has promised for more than a decade.