Banks should not be liable for all kinds of "serious crimes" committed through money being laundered in their institutions, Australia's peak banking body says as it pushes the government to put limits on tough new legislation.
On Wednesday, a Senate inquiry into anti-money laundering and counter-terrorism financing was told new legislation targeting the banks should be limited to apply only to "serious financial crimes".
Such a limitation could make it difficult for law enforcement agencies to punish banks when money is laundered to fund drugs and child pornography, but would still take in terrorism financing in its scope.
The inquiry is being held after million of dollars were alleged to have flown into the hands of terrorists through 53,000 breaches at the Commonwealth Bank.
Last week, Fairfax Media also revealed international crime gangs were washing up to $5 million in drug money per day in Australia's major banks.
The Australian Bankers' Association claims that expanding the legislation to all "serious crimes" would generate "substantial regulatory costs" for banks.
"If all serious crimes are to be caught under the legislation as a result of this amendment, would this mean that all reporting entities regardless of size would need to develop a detailed understanding of all serious crimes across Australia?," asked Aidan O'Shaughnessy, the Australian Bankers' Association's acting executing director of industry policy.
"The bill, as it stands, may result in all reporting entities having to expand their transaction monitoring scenarios, and in some instances, their entire platforms will need to be updated, modified and realigned to look for all other types of serious crimes that are currently not monitored."
Power to search
The Australian Federal Police and the Australian Transaction Reports and Analysis Centre urged the inquiry to hand police and border forces greater powers to give even the most junior officers the authority to stop and search individuals that they suspect of carrying more than $10,000 without a warrant.
The Law Council strongly opposed the move.
"You are talking about the seizure of personal assets on suspicion," said the Law Council's president-elect Morry Bailes. "It is troubling that there is no mechanism whatsoever to seek authorisation."
Senator Derryn Hinch suggested the powers given to police to confiscate money should be similar to those for searching drug suspects.
"If I'm carrying illegal money, why is that any different from carrying drugs?," he said.
But the inquiry also heard physical currency being laundered may already be a thing of the past, with Australia falling behind other countries on monitoring the illegal flows of digital currencies to pay for child pornography, drugs and weapons.
Dark web
The inquiry heard there were now up to 42 child sexual abuse businesses that allowed the digital currency Bitcoin to be used as payment on the dark web, a space behind the public internet that allows users to operate with anonymity.
There are more than 16 digital currency exchanges operating in Australia alone.
"There are a couple of challenges with digital currencies that make it very difficult to regulate," said Bradley Brown, AUSTRAC's acting deputy CEO of international and policy.??
"Using this technology there is a high degree of anonymity. Transactions are commenced and verified in multiple jurisdictions and it is very difficult to regulate what is going on in the digital currency world per se."
Australian Federal Police commander Stephen Dametto said he did not have a clear picture on the number of offences being committed through digital currency.
"There is in intelligence that this is a worldwide phenomenon, but we wouldn't have exact numbers," he said.
The Attorney General's Department said the new legislation would help put controls on money laundering in the digital currency exchange sector.
But in its submission it said there were still key risks including greater anonymity compared with traditional non-cash payment methods, limited transparency because transactions are made on a peer-to-peer basis, and different components being located in many countries and subject to varying degrees of oversight.
