Morris-Cotterill: Australia should give up Tranche 2.

Australia passed its near incomprehensible second edition of its counter-money laundering laws, called "The Anti-Money Laundering and Counter-Terrorism Financing Act" in 2006. In that Act it divides regulated businesses into two classes for implementation purposes. Now, 18 years later, "Tranche 2" has still not been brought into effect. It's time to abandon it, says Nigel Morris-Cotterill

Contributor

Let's be clear: Tranche 2 has nothing to do with the offences of money laundering and/or terrorist financing.

It's got nothing to do with the Mercedes Ladies, Guns for Hire or whether Beds are Burning. It has one job and one job only: to make lawyers, accountants and auditors, estate agents, company and trust service providers and dealers in high value goods such as precious metals, minerals (including diamonds, etc.) antiques, boats and cars put in place measures to detect, deter and report suspicions of money laundering and terrorist financing.

But after more consultations, inquiries, reviews and statements from all manner of departments and foreign bodies than there are fish in the sea, Tranche 2 remains moribund.

So, forget it. It actually serves no purpose except a regulatory regime that in other countries, for example, the UK, has become excessive. So, let it shrivel up and die and repeal or, better still, revoke it at the first chance.

Australia: you don't need Tranche 2. Save money time and effort. Stop talking about it. Consign it to the dustbin. Let it wither on the vine. Let it rot in Hell. Let it become the equivalent of a Dead Parrot.

There's a better way.

Nigel Morris-Cotterill is a financial crime risk and compliance strategist. He can be contacted at www.countermoneylaundering.com

This is it.

A regulatory regime hijacks the energies that the country and businesses need to achieve the prime objective.

What is the prime objective, you ask. I'm glad you asked that. I've already told you: it's to detect, deter and report money laundering and terrorist financing or, at least, the suspicions of them.

The basic regulatory regime requires certain classes of business to do five things:

1. to train those in the business to identify suspicious activity
2. to create an internal system for the confidential reporting of those suspicions
3. to appoint someone to receive those suspicions and review them having regard to all information held within the company
4. to create a system for making sure a business knows who it is dealing with and enough about that person to know if something is suspicious
5. to make reports to a designated body, usually the Financial Intelligence Unit, containing details of the suspicions.

There is no need for a regulation that says "and don't launder the money" because that's in the criminal law.

And that's where it all starts to become so simple.

Just prosecute lawyers etc for being involved in an arrangement to launder moneys where they have advised on a scheme and for being money launderers where they have, at any point, had possession, custody or control of the relevant assets, benefits or moneys. Apply wilful blindness to them as to anyone else. No special cases.

What will happen? Well, moneys will be confiscated rather than penalties paid so that's good. Oh, keep up: remember "commingling"? There will be fines and there will be jail. Breaches of regulations cost money: breaches of the criminal law cost freedom.

Lawyers, jewellers, car dealers and even more interestingly auditors and accountants will end up in jail. Well, perhaps it's a bit more complicated in relation to auditors but it's not impossible to make a case.

And what will happen next?

Every one of those businesses that fall under Tranche 2 will start to worry about their collars being felt. Some will say "we'll never get caught" but most will say "let's put those five measures in place because if we do it, it's an insurance policy, not to keep people off our backs but because it helps us identify dodgy activity and people and so we can avoid laundering or helping to create an arrangement.

In short, they will do what is required voluntarily. And they will make reports because it protects them.

They will volunteer because they will be able to show that there were no suspicious circumstances so a court will not find them wilfully blind. They will document the absence of suspicion and produce evidence.

They will have something to put before a jury and say "we did our best. We should not be judged in hindsight."

At present, they have nothing. They have no idea what is happening in their case files or their books.

I'd prosecute recklessness. And I'd win. And I'd do it again and again and again.

Until they realised that the five steps, done right, are for their own protection.

With no need for a colossal regulatory regime.

In the real world there is no Money for Nothing, they can't Say Nothing at All.


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