The Federal Government’s overhaul of the Anti-Money Laundering and Counter Terrorism Financing Bill will have an adverse affect on the Funds Management Industry, according to Australian Direct Property Industry Association.
ADPIA’s president Owen Lennie said the legislation will hit investors in their hip pocket and invade their privacy.
He added that while the Federal Government has made some important concessions in the new legislation, ADPIA remains convinced more changes are needed.
“To date the Government has bought forward no evidence to suggest that the Funds Management Industry is used for money laundering to any extent. Our members send comprehensive returns to the tax office every year and the likelihood of somebody trying to launder money through such a strictly regulated industry seems remote.
“There can be no argument that this legislation will add to the cost of doing business and that extra cost will ultimately be borne by the individual investor,” Lennie said.
According to ADPIA’s calculations, the start-up costs for a medium-sized fund (assets under management of about $500 million) will be $175,000 and the ongoing costs about $275,000 a year.
For the bigger funds, the cost could be much higher.
At the same time, Lennie said there will be more intrusion into the privacy of individuals.
“People don’t seem to appreciate that this bill will be exempted from all privacy legislation. Although we understand and appreciate why the Government wants to be able to establish an audit trail and identify suspect transactions, we don’t think this legislation will achieve this end, especially as it relates to direct property investment.
“From ADPIA’s perspective, one crucial question has to be asked: on the evidence to date just how much money has been laundered through direct property investment? We suspect none,” he added.
Lennie said five aspects of the legislation need further changes, including no additional government charges – where government bodies such as the Australian Securities and Investments Commission should not get more revenue from business because of additional information and reporting obligations.
The second change, direct property investments to be designated low-risk; this would exempt investors from many of the costly and intrusive requirements in the bill.
ADPIA also wants the onus placed on the Australian Transaction Reports and Analysis Centre to decide what “suspicious information” is and then be responsible for telling fund managers they must stop providing services to suspects.
Lennie said the Government should also reduce compliance and ADPIA wants the integration of the proposed AML/CTF program with the existing compliance regime in the funds management industry.
And finally, Lennie said the Government must assist the industry to develop guidelines to help members set up and maintain their AML/CTF programs.
ADPIA has played its role in the second and third round of consultations with the Federal Government since the original draft AML/CTF Bill 2005 was released last December.
Lennie said the Government has listened to the industry and the current bill is a significant improvement on the initial Government proposal.
“We’re a $17 billion direct property investment sector with solid growth predicted into the future. Our members are obviously very keen that this bill will not undermine the industry – or relationships with investors,” he added.
By Nelson Yap
