One of the country’s leading political science researchers has urged the federal government to act on an OECD survey which ranks Australia among the least effective in stemming the flow of dirty money from overseas.
Professor Jason Sharman, Deputy Director of Griffith University’s Centre for Governance and Public Policy, says the survey released just before Christmas is “a wake-up call”.
Professor Sharman believes Australia’s hosting of the 2014 G20 Leaders Summit in November places an added onus on the government to take action.
Australia ranked 33 of 34 OECD countries in the report which assessed how international money-laundering standards and regulations were being implemented.
Only Poland ranked lower than Australia when it came to enforcing recommendations of the Financial Action Task Force on customer due diligence and record-keeping procedures.
Belgium, Hungary, Norway, Italy and Spain were the five top-ranked OECD countries in the survey.
“The Australian government needs to own up and admit the problem is there,” Professor Sharman said. “We are meant to be the paragon of all virtues as the host of the G20 Leaders Summit later this year.
“It’s the biggest wake-up call for Australia since 2006, and it shows that not a lot has changed in eight years (when the last survey of this type was published).”
Professor Sharman was critical of reports that Australia was among countries that attempted to suppress the report.
“The report focuses on the hundreds of billions of dollars of illicit financial flows,” he said.
“This occurs through the proceeds of tax evasion, money laundering and corruption that flow out of poor, developing countries and into rich, developed countries every year.
“As part of its OECD and G20 obligations, Australia has committed to take steps to block and return such illicit funds, yet the report finds that Australia’s compliance is the second-worst of all OECD countries.
“According to The Economist, the Australian government tried to cut this portion of the report.”
The OECD report, published at the end of 2013, draws on research first published on the Centre for Governance and Public Policy website. The research showed that untraceable shell companies, a key mechanism for facilitating illicit financial flows, are in practice and widely available from OECD countries, despite being prohibited by international rules.
“There are pretty dangerous consequences for the region if the government doesn’t act. Our financial system is being used and abused by criminals. Australian banks, Australian property markets, Australian law firms are facilitating foreign tax evasion.
“Australian banks need to establish the legitimacy of foreign wealth involving overseas customers. They need to seek proof about how they’ve come into possession of large sums of money, especially if it involves a high-ranking official from another country.
“It is important that banks see beyond potentially lucrative clients and inquire about the origins of the money. Unfortunately, the tricky questions are not being asked which means the government needs to step in ensure regulations are enforced.”