The Intel

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. 

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.

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.