August 18, 2022

Is Australia missing in action on financial crime?

The Pacific is a top foreign policy priority for Australia – ODA in the region has hit over $1.4 billion. Add in increased development focus from other donor countries, and a known issue of corruption in the region, we have to ask: can economic growth really be achieved without serious action on financial crime?

Other donors have large teams working on this – but Australia doesn’t. Domestically, we’ve even been described as the ‘Cayman Islands of the Pacific’. So this week we gathered the experts to ask if Australia is missing in action on financial crime – and what we should do about it.

Dr Grant Walton
Fellow, Development Policy Centre

Australia’s financial crime fighting credentials have often been found wanting. Indeed, the Financial Action Taskforce’s 2015 mutual evaluation of Australia’s compliance with anti-money laundering and counter terrorism measures noted significant shortcomings. While we have long known that illicit money from the Pacific has been laundered through Australian real estate, the report noted that there had been no convictions for this activity.

In its financial secrecy index, the Tax Justice Network assess Australia as more likely to be complicit in helping individuals to hide their finances from the rule of law than its Pacific Island neighbours included on the index.  Given its reputation for hiding laundered money from the Pacific Islands region, ex-head of Papua New Guinea’s Taskforce Sweep, Sam Koim, has called Australia the ‘Cayman Islands of the Pacific’.

In March 2022 the Senate Standing Committee on Legal and Constitutional Affairs made four key recommendations to improve Australia’s response to money laundering and counter-terrorism financing.  This includes tighter regulation of high-risk professions and businesses – including lawyers, casinos, real estate agents and other financial gatekeepers – to bring Australia in line with the Financial Action Taskforce's recommendations. Australia must implement these recommendations. It should also learn from jurisdictions with stronger responses to this problem, such as efforts to tighten ‘economic crime’ in the United Kingdom

Australia has been at the forefront of efforts to help countries across the Pacific respond to corruption and poor governance. However, it still has much to do in its own backyard if it is to show its neighbours, and the world, it is serious about combatting financial crime. 

Grant is currently a researcher and lecturer at the ANU, with over 15 years experience in corruption, international development and civil society focussing on PNG and the Pacific. Among many roles, he’s the Chair of the Transnational Research Institute on Corruption and the Lab values his expertise and the fascinating and multi-dimensional ways he looks at corruption and the connection with development.

John Chevis
Independent AML and CTF Consultant

Many of the development challenges faced by countries in our region are caused, or exacerbated, by some element of financially-motivated crime. Corruption, illegal logging and fishing, and tax and duties evasion all entrench poverty and inequity in the region. This in turn destabilises countries – and with them, the region.

Australia has for decades been a key destination for the storage of illicit proceeds from our region and elsewhere. While we’ve known this, we have done nothing substantive to prevent our country being used as a veritable ‘safety-deposit box’ for illicit proceeds from our region. We’ve failed to prevent illicit assets coming in, and we’ve failed to confiscate and repatriate them once they are here. To exacerbate this, Australia has been a flag-bearer for an international process that overwhelmingly punishes small developing countries that are the source of these illicit proceeds (for their anti-money laundering ‘deficiencies’) while waving-through the misdeeds of major money-laundering centres of the world – along with the failings of countries like Australia.

If Australia is going to assist countries in our region to achieve the SDGs – and prevent further fragmentation of security in the region – we need to do three things:

1. We need to start a process to confiscate and repatriate illicit assets that are located in Australia;

2. We need to implement systems to detect and prevent the movement of illicit assets into our country in the future; and

3. We need to start the difficult conversations required to drive reforms in the international anti-money laundering processes to ensure that those processes actually identify and address entities and jurisdictions that launder illicit proceeds from developing countries in our region.

John is a global expert who has dedicated his career to tackling financial crime in developing countries. In addition to being a forensic accountant, John served in the police force and as a money laundering adviser for the United Nations, Transparency International and over 10 governments globally. At the Lab, we enjoy John’s no nonsense approach to financial crime and his ability to balance international standards with the practical needs of emerging economies. There are few people with the mental dexterity, wit and technical know-how that John has.

Bridi Rice
Founder & CEO, Development Intelligence Lab

Missing in action is a bit much. But we certainly haven’t put two and two together on why this work is core to development assistance and Australia’s reputation. My case for doing more is: 

Financial crime kills – forget development impact if domestic budgets that are meant to get kids in schools, medicine to people and goods to markets instead disappear into criminal hands at scale. Whether it’s the estimated $318m annual theft of Government funds in PNG or the millions generated through illegal fishing, logging and drug trafficking – financial crime costs lives and undermines the impact of local leadership and aid budget spends. It erodes the tax base, and hampers structural transformation and economic growth.

There’s precedent for action – the U.S. tackles kleptocracy and returns millions to countries. President Biden positions this work as central to U.S. development and democracy support efforts, and U.K. has teams doing similar things. Australia previously had a world class Anti-Money Laundering Assistance Team partnered up with Pacific countries – but it has since been diminished in bureaucratic changes.

Perceived challenges can be overcome – the counter case to an Australian step-up on this is the challenge of this work when compared to funding a simpler aid project. It will take cooperation between the agency with the relevant dollars (Department of Foreign Affairs & Trade) and those with the capability (Attorney-General’s Department, Australian Federal Police, AUSTRAC and development experts outside Government).

A key first step would be to pilot anti-money laundering support services attached to Pacific Financial Intelligence Units in target countries. A more ambitious move would be to establish a multi-donor funded Pacific Centre for Financial Crime that supports countries achieve their FATF obligations and recover stolen assets. If there’s a chance to spend $5m to recover $500m, then this work is genuine value for money.

Bridi is the founder and CEO of the Lab, currently working from Washington DC as a Fulbright Visiting Fellow at CSIS. She has over 15 years experience in development, specialising in corruption and anti-money laundering during her time as a senior public servant in PNG. The team at the Lab love Bridi’s commitment to creating a space to explore pathways to development that is locally-led, geo-strategically attuned and which represents the best Australia has to offer. She’s known by her peers for expertly gathering different perspectives on issues and working in collaboration to tackle development challenges that lie ahead.

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