Client Spying Plan "Draconian"
by Karen Dearne
Australian IT
FEDERAL Government proposals forcing businesses such as real estate agents, jewellers, lawyers, accountants and bookies to spy on their clients are a massive expansion of existing, already draconian, measures to control money laundering, industry groups say.
Critics say planned changes to the Financial Transaction Reporting Act needlessly increase already intrusive electronic surveillance.
Despite key industry groups expressing deep concerns about the planned regime, Justice Minister Chris Ellison last week released a policy principles paper that draws small businesses and individuals into the fight against global terrorism.
The changes call on businesses such as real estate agents, accountants and bookies to spy on suspicious clients and keep secret computer files about "suspicious activities".
The legislation will update and extend the Financial Transaction Reports Act, which obliges banks, cash dealers and other service providers to notify large or suspicious transactions to the nation's financial intelligence unit, AusTRAC.
Concerns about compliance costs, professional liability and customer confidentiality had been raised by industry groups, Senator Ellison said, but it was crucial that measures against money laundering were applied consistently across industry sectors.
A consistent regulatory framework would stop criminals exploiting weak links in the system "and provide transparency for both business and customers", he said.
The Government was preparing a draft exposure bill based on the principles outlined in the policy paper, he said.
In the recent Budget, AusTRAC was given an extra $36 million over four years to boost its capabilities, including $3.4 million to develop IT systems for the capture, storage and analysis of financial information that may relate to terrorist financing.
The Australian Privacy Foundation said the proposed law was "ostensibly to comply with international obligations" under the Financial Action Task Force on Money Laundering (FATF), but "it is already clear that the existing transactions reporting regime goes well beyond what is required".
"We are deeply concerned that an already highly intrusive electronic surveillance system is proposed to be massively extended using FATF as a convenient excuse," the APF said.
"At the very least, the Government should follow the Privacy Commissioner's general recommendation for a thorough, independent, privacy impact assessment so the community can debate the price it is prepared to pay for the dubious benefits of a massively expanded reporting regime."
In its submission to the Attorney-General's Department, the APF said the most "objectionable extension of the regime" concerned real estate. "Currently, accurate identification in property transactions only comes into play during conveyancing - involving lawyers, not real estate agents," it said.
"Requiring realtors to demand evidence of identity, potentially even for inquiries about rentals, would be a massive intrusion into privacy."
The suspect transaction reporting requirements were "inherently flawed", with no value thresholds and limited guidance on criteria for suspicion, the APF said.
"Already junior staff in financial institutions are under a legal obligation to exercise judgements that could result in a secret file on any one of us," the APF said.
"The whole principle of permanent and secret files, with potentially adverse consequences for individuals, based on lay interpretations of vague guidelines, is anathema to a civilised society."
The Real Estate Institute of Australia said there were too many property transactions for each one to be treated as potential money laundering.
"It is our view that extending anti-money laundering obligations to all clients and transactions is onerous, impractical and resource-intensive," the REIA said.
"Real estate agents are not trained to detect money laundering. How, for instance, could an agent detect a false passport or fake driver's licence?
"It is more reasonable to ask the industry to implement risk-based procedures, but the industry has neither the information base nor the appropriate resources to identify transactions, individuals or groups who might pose a risk."
Accountancy group CPA Australia is also concerned that the proposed obligations would require its members "to undertake investigations on behalf of government" through mandatory reporting and ongoing surveillance of clients' actitivies.
"CPA Australia does not support the proposal to make accountants agents of the state," it said. "As a general principle, reporting requirements should not extend beyond information collected in the ordinary course of business."
The CPA also raised the issue of protecting whistleblowers, and the amount of due diligence required to detect whether an offence had been committed.
"The paper is silent on the proposed enforcement regime. However, it is assumed that some form of criminal sanctions for a failure to report suspect activity is envisaged," it said. "We also note the tightrope walk between the necessary questioning of a client to satisfy due diligence obligations, while being required to be careful not to tip off the suspect.
"This goes further than requiring accountants to act as whistleblowers - it suggests accountants should become investigators."
A major concern in any mandatory reporting regime is the "possibility of payback' against the informant, the CPA said. "The risk of retribution and compensation needs to be more closely examined where clients may be engaged in complex cross-border activities and could have criminal or terrorist connections."
Gambling operator Tab said it already had stringent measures in place to detect and combat money laundering, and would be "guarded" in its support for further compliance requirements.
Imposing a $5000 transaction reporting threshold would have a "significant impact" on business efficiency. "On any given day, Tab processes in excess of 1.3 million transactions, 20 per cent of which are made within one minute of the start of a race," it said.
Tab would not support tracking individuals without specific reason. "Tracking of customers based on prior profiling would in our view be contrary to normal privacy protection protocols and would also present a significant administrative burden," it said.
Tab also noted that a loophole in federal legislation, which allows offshore rivals free access to gamblers, had led to an "exponential leap in online wagering". While this loophole persists, "a mockery is made of local attempts to ensure compliance with anti-money laundering policies", Tab said.
by Karen Dearne
Australian IT
FEDERAL Government proposals forcing businesses such as real estate agents, jewellers, lawyers, accountants and bookies to spy on their clients are a massive expansion of existing, already draconian, measures to control money laundering, industry groups say.
Critics say planned changes to the Financial Transaction Reporting Act needlessly increase already intrusive electronic surveillance.
Despite key industry groups expressing deep concerns about the planned regime, Justice Minister Chris Ellison last week released a policy principles paper that draws small businesses and individuals into the fight against global terrorism.
The changes call on businesses such as real estate agents, accountants and bookies to spy on suspicious clients and keep secret computer files about "suspicious activities".
The legislation will update and extend the Financial Transaction Reports Act, which obliges banks, cash dealers and other service providers to notify large or suspicious transactions to the nation's financial intelligence unit, AusTRAC.
Concerns about compliance costs, professional liability and customer confidentiality had been raised by industry groups, Senator Ellison said, but it was crucial that measures against money laundering were applied consistently across industry sectors.
A consistent regulatory framework would stop criminals exploiting weak links in the system "and provide transparency for both business and customers", he said.
The Government was preparing a draft exposure bill based on the principles outlined in the policy paper, he said.
In the recent Budget, AusTRAC was given an extra $36 million over four years to boost its capabilities, including $3.4 million to develop IT systems for the capture, storage and analysis of financial information that may relate to terrorist financing.
The Australian Privacy Foundation said the proposed law was "ostensibly to comply with international obligations" under the Financial Action Task Force on Money Laundering (FATF), but "it is already clear that the existing transactions reporting regime goes well beyond what is required".
"We are deeply concerned that an already highly intrusive electronic surveillance system is proposed to be massively extended using FATF as a convenient excuse," the APF said.
"At the very least, the Government should follow the Privacy Commissioner's general recommendation for a thorough, independent, privacy impact assessment so the community can debate the price it is prepared to pay for the dubious benefits of a massively expanded reporting regime."
In its submission to the Attorney-General's Department, the APF said the most "objectionable extension of the regime" concerned real estate. "Currently, accurate identification in property transactions only comes into play during conveyancing - involving lawyers, not real estate agents," it said.
"Requiring realtors to demand evidence of identity, potentially even for inquiries about rentals, would be a massive intrusion into privacy."
The suspect transaction reporting requirements were "inherently flawed", with no value thresholds and limited guidance on criteria for suspicion, the APF said.
"Already junior staff in financial institutions are under a legal obligation to exercise judgements that could result in a secret file on any one of us," the APF said.
"The whole principle of permanent and secret files, with potentially adverse consequences for individuals, based on lay interpretations of vague guidelines, is anathema to a civilised society."
The Real Estate Institute of Australia said there were too many property transactions for each one to be treated as potential money laundering.
"It is our view that extending anti-money laundering obligations to all clients and transactions is onerous, impractical and resource-intensive," the REIA said.
"Real estate agents are not trained to detect money laundering. How, for instance, could an agent detect a false passport or fake driver's licence?
"It is more reasonable to ask the industry to implement risk-based procedures, but the industry has neither the information base nor the appropriate resources to identify transactions, individuals or groups who might pose a risk."
Accountancy group CPA Australia is also concerned that the proposed obligations would require its members "to undertake investigations on behalf of government" through mandatory reporting and ongoing surveillance of clients' actitivies.
"CPA Australia does not support the proposal to make accountants agents of the state," it said. "As a general principle, reporting requirements should not extend beyond information collected in the ordinary course of business."
The CPA also raised the issue of protecting whistleblowers, and the amount of due diligence required to detect whether an offence had been committed.
"The paper is silent on the proposed enforcement regime. However, it is assumed that some form of criminal sanctions for a failure to report suspect activity is envisaged," it said. "We also note the tightrope walk between the necessary questioning of a client to satisfy due diligence obligations, while being required to be careful not to tip off the suspect.
"This goes further than requiring accountants to act as whistleblowers - it suggests accountants should become investigators."
A major concern in any mandatory reporting regime is the "possibility of payback' against the informant, the CPA said. "The risk of retribution and compensation needs to be more closely examined where clients may be engaged in complex cross-border activities and could have criminal or terrorist connections."
Gambling operator Tab said it already had stringent measures in place to detect and combat money laundering, and would be "guarded" in its support for further compliance requirements.
Imposing a $5000 transaction reporting threshold would have a "significant impact" on business efficiency. "On any given day, Tab processes in excess of 1.3 million transactions, 20 per cent of which are made within one minute of the start of a race," it said.
Tab would not support tracking individuals without specific reason. "Tracking of customers based on prior profiling would in our view be contrary to normal privacy protection protocols and would also present a significant administrative burden," it said.
Tab also noted that a loophole in federal legislation, which allows offshore rivals free access to gamblers, had led to an "exponential leap in online wagering". While this loophole persists, "a mockery is made of local attempts to ensure compliance with anti-money laundering policies", Tab said.
