Nation fails to choke off radicals funding

AUSTRALIA has failed to meet a key obligation in the fight to cut funding to terrorist groups such as Islamic State.

AUSTRALIA has failed to meet a key obligation in the fight to cut funding to terrorist groups such as Islamic State, says the head of the international taskforce overseeing global financial security.

The Financial Action Task Force, headed since last year by Australian Roger Wilkins, is grappling with how to deal with the challenge posed by Islamic State as a terrorist organisation requiring large sums of money to maintain its army of jihadists.

Mr Wilkins, the former secretary of the Attorney-General’s Department, said the world was not doing enough to implement existing UN Security Council sanctions, and new “targeted” rules were on the table.

“This is a mode of terrorism that requires quite considerable finance and therefore one would think that if we can successfully attack their sources of finance, we could strangle them,” he said.

In September, Australia’s ­financial security agency Austrac shut down Sydney money transfer business Bisotel Rieh, owned by the sister and brother-in-law of terrorist Khaled Sharrouf, after it admitted smuggling large amounts of cash from Turkey to Lebanon.

Mr Wilkins and bankers fear that moves by banks to get remittance businesses off their books will be counterproductive because they might force people into the shadow banking system where they cannot be easily tracked.

Laws cracking down on money-laundering and terrorism finance in the finance sector were introduced in 2006, following the taskforce’s first “mutual evaluation” of Australian laws. The multinational group, based in Paris, sets the standards against which national laws are measured.

At the time, authorities planned “Tranche 2” legislation that would extend the laws to cover other professionals, including lawyers, accountants, real estate agents and gem dealers, but ­successive governments have failed to act.

A report into Islamic State funding and the results of a regular review of Australia’s compliance with international anti-money-laundering and counter-terrorism financing guidelines will be ­tabled at the taskforce’s next plen­ary meeting in Paris later this month.

Australia’s banking sector and tax activists have expressed support for an open register of who ultimately owns companies — something that is being introduced in Britain — but Mr Wilkins said he was “sceptical about the costs and benefits” of the idea.

It is believed Tranche 2 was raised in consultation meetings the taskforce’s team held with civil society groups during a visit to Australia last July and August.

Mr Wilkins said because he was an Australian, he was not involved in the mutual evaluation process, but implementing Tranche 2 was “a requirement of the FATF regulations, there’s no doubt about that”.

“The failure to do that is something that I have no doubt will come up in the mutual evaluation, although I’m not privy to that,’’ he said. “But I would have thought that is a fairly clear thing Australia is required to do under the recommendations and hasn’t done.”

A spokeswoman for Justice Minister Michael Keenan said the taskforce’s report would be considered as part of a review the ­Attorney-General’s Department had been conducting since ­December 2013.

She said the government was “determined to detect and disrupt terrorism financing in Australia and take action against people who provide support to terrorist organisations” and had given ­Austrac $20 million to improve its anti-terror work.

Banks and other financial institutions are required to identify their customers, even if identities are concealed behind trust or company structures, and report suspicious transactions to Austrac.

Mr Wilkins said this was difficult to balance with the obligation of lawyers to keep the confidences of their clients — an issue also raised by the Law Council of Australia in its submission to the ­departmental review.

However, the Australian Bankers Association said introducing Tranche 2 would bring transparency to the corporate structures used by clients.

This would reduce costs for banks that have so far spent more than $750m implementing anti-money-laundering and counter-terrorism financing rules.

“Banks deal with the money but they don’t necessarily set up the structures like trusts … those trusts are set up by accountants and gatekeepers like lawyers,” an ABA spokesman said.

“Banks — and not just banks, anybody who provides money services — have difficulty identifying who are the beneficial owners of these structures.”

He said he did not have a strong view on a public ownership register but “if I was to go one way or the other, sunshine is the best disinfectant so I think yes, as a principle it should be a public register”.

Mark Zirnsak, who works on justice and international development for the Uniting Church and represents the Tax Justice Network in Australia, said: “A public registry makes it easier for every company to do the work and ­reduces red-tape costs.”

Drawing on his experience tracing the proceeds of alleged corruption in Papua New Guinea, he said the government needed to act on Tranche 2.

“Where you leave loopholes and easy pathways, that’s where the dirty money is going to flow,” he said.

“Certainly with the work we’ve done with PNG, real estate looks like an easy target for potentially dirty money.”

Mr Wilkins said the world ­already had “a lot of requirements of countries in relation to terrorism funding” but compliance was “not impressive”, with only about 2 per cent of the countries rigorously complying with UN Security Council requirements.

“We think it’s just a matter of people doing what they are supposed to do, and not necessarily creating any new requirements or standards,” he said.

He said in contrast to the relatively cheap terrorism of previous years, Islamic State was “a terrorist operation which I think for the first time needs to run an army, it needs materiel, it is sort of running some sort of state apparatus”.

“The taskforce we’ve got going is looking at trying to get a better understanding of how ISIL ­(Islamic State) gets its money and the modus operandi for the flow of funds,” he said. “That might create more targeted obligations among some of our members, because the FATF effectively includes most of the countries in Europe, the ­Middle East and North America.

“And they may be outside of the financial markets — there may be issues around logistics and transport, stuff like that.”

He said Islamic State funding “has to flow to people in the ­business of shipping arms and ­materiel”.

“It doesn’t necessarily need to come into Syria or Iraq, it needs to go to wherever those people are.”