Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697638017116.pdf (Australia)
Submission to the Australian Senate Inquiry into the adequacy and efficacy of Australia's anti-money laundering and counter-terrorism financing (AML/CTF) regime Jason Sharman Sir Patrick Sheehy Professor of International Relations University of Cambridge I have been researching money laundering and anti-money laundering policy as an academic for almost 20 years.

I worked in Australian universities until 2016 when I relocated to the UK.
I have also undertaken applied AML policy work for the FATF, World Bank, United Nations, Asia-Pacific Group on Money Laundering, government agencies in Canada, Kenya and Papua New Guinea, and various private sector bodies.

I have published a number of books and articles on the subject (a full list is available via my CV online), I attach one that might be relevant to this Inquiry.
I restrict my comments below to AML, as Countering the Finance of Terrorism is largely a form of political theatre that even practitioners privately regard as pointless.

Even by the low standards of AML policy, CFT has proven completely ineffective in achieving its professed aims, though is it politically impossible to admit this.

Australia’s AML system is characterised by strong laws, weak enforcement, and hence low effectiveness.
As with almost every other country, Australia’s AML system has never been subject to a proper cost-benefit analysis, it has merely been asserted as an article of faith that AML is a net benefit to Australia.

The terms of reference of the Inquiry tend to reinforce the major weakness of the AML system in Australia and more generally.
This is a focus on laws on the books, and formal assessments of these in FATF Mutual Evaluation Reviews, rather than concentrating on actual effectiveness and what happens in practice.

It is also related to a process whereby means to an end become ends in themselves, for example collecting ever-larger volumes of financial data, or expanding the number of reporting entities.
Both Australian and international experience gives no reason to think that feeding more information into the AML system in this manner will increase effectiveness; it may actually reduce it.

The endless fascination with Tranche 2, something of a holy grail for the (small) Australian AML community over the last 15 years, indicates the triumph of optimism over international experience.
For example, the UK has incorporated lawyers and real estate agents into its AML reporting system; almost no one thinks that this has been a success.

Both professions make a relatively small number of low-quality reports.

Both those submitting and receiving reports regard them as a waste of time.

This is not because there is no money being laundered, to the contrary the British real estate and legal professions are used to launder vast quantities of money.
But including these areas within the AML reporting regime has done nothing to change this.

Similarly, even though there are almost certainly substantial amounts of money laundered via Australian real estate and lawyers, including these sectors in the AML reporting regime would increase expense and inconvenience for consumers without generating any off-setting benefit in terms of criminal justice.
When it comes to the volume of financial intelligence collected or the strength of asset confiscation laws Australia is a world-leader.

However, this has failed to translate into The adequacy and efficacy of Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regimeSubmission 36 catching more money launderers or reducing money laundering or predicate crimes.
Once again the framing of the Inquiry in terms of legislation and compliance with FATF standards, reinforces the tendency to lose sight of the actual goal of AML, for means to become ends in themselves.

Over the last 30 years the central tenet of the AML system has been to shift most of the regulatory burden to the private sector, first banks, and then a wider variety of other firms.

By and large this approach has not worked.


As the head of the FATF remarked in an interview with the International Consortium of Investigative Journalists last year, when it comes to AML ‘everyone is doing badly’ (https://www.icij.org/investigations/panama- papers/everyone-is-doing-badly-anti-money-laundering-czar-warns/).

The central problem with Australia’s AML system is a lack of enforcement.

Until the last few years, AUSTRAC never imposed serious penalties on banks or other reporting entities.
The effect of this can be gathered by the fact that almost 30 years after Australia’s first AML legislation, drug dealers were able to launder their proceeds by simply depositing bags of drug cash over the counter at Australia’s largest bank (Commonwealth Bank) and using ATMs.

There have been recurrent scandals of massive laundering operations through casinos that have not led to robust enforcement action.
State and federal police have very little capacity for or even interest in investigating financial crime, especially if such crimes have an international angle.

This reflects a lack of skills and practice, which themselves often reflect a lack of political will.

For example, for several years after it was set up (and possibly even now), the Australian Federal Police Fraud and Anti- Corruption Centre did not employ anyone with accounting skills.
Despite having some of the strongest confiscation laws in the world, Australia has a dismal record of confiscating criminal wealth, instead defaulting to the tax system.

The weakest areas of all are those to do with international corruption, whether it is Australian firms bribing abroad, or Australia acting as a host for foreign corruption proceeds.
Here the most telling examples are the spectacular failure to hold guilty parties to account for the Oil- for-Food and Securrency scandals, and the much less publicised but equally large continuing in-flows of dirty money into Australia from corrupt officials in the South Pacific, Southeast Asia, China and elsewhere (see my article attached).

To improve the current very low level of AML effectiveness Australia needs to put much more emphasis on enforcement.
This means AUSTRAC taking a much tougher line with banks, casinos and other regulated entities, including large fines and prosecutions.

Even more important it means federal and to a lesser extent state law enforcement having much more money and expertise in investigating and prosecuting financial crime, which requires a gradual process of building up practical experience.
More generally, it requires a cultural shift away from legislation, achieving good grades with the FATF, and collecting financial information for its own sake to convicting money launderers, reducing money laundering and predicate crimes.

The adequacy and efficacy of Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regimeSubmission 36