Money Laundering Regulatory Practice

Money laundering refers to the transfer of criminally acquired money through disguise and deceit both at the domestic and international level. 1 The fast pace of globalisation has seen an increase in money laundering crimes throughout the world and it is for this reason that different countries are enhancing their anti-money laundering regulatory frameworks so as to reduce and where possible eliminate the prevalence of the vice.

Australia has been at the forefront in developing anti-money laundering laws, with the Anti – Money Laundering and Counter – Terrorism Financing Act of 2006 (AML/CTF 2006) and the subsequent amendments of in 2008 being the latest moves. 2 These laws demonstrate the Problem Statement The fast pace of globalisation has brought with it new and more complicated challenges in the business, gambling, banking and financial sectors around the world.

3 Money launderers are adopting more advanced techniques to penetrate the world’s financial systems and transfer proceeds from criminal activities such as proceeds from sale of drugs, piracy, and smuggling through disguised conduits. Therefore, there is need for enhanced anti-money laundering laws across the entire spectrum of the international system to curb the crime effectively. Purpose of the Research The main purpose of this research proposal is to assess the effectiveness of the existing ant-money laundering regulatory practice in Australia and how the regulatory practice can be applied as a model in the United Arabs Emirates (UAE).

The research project will identify the appropriate ways through which aspects of the AML/CTF 2006 can be laid out as functional model for UAE. Rationale of the Research The rationale of this research is based on the inherent disconnects between international money laundering laws and the complexities of the world’s financial systems. The research project will focus on the comparative analysis of the challenges facing banking and financial institutions in Australia and UAE with regards to money laundering.

Statistical analysis and assessment of the variables bearing direct and indirect influence over the strategic objectives of the research will be applied to deduct the functional aspects and relativity status of AML/CTF 2006 as the probable model for UAE. Research Question The research is designed to evaluate the applicability of the Australian anti - money laundering regulatory practice as a model for the UAE. The research will seek to answer the following question: • To what extent can the Australian anti - money laundering regulatory practice be adopted as a model for the UAE?

To this end, regulation will be identified as the independent variable while money laundering will be identified as the dependent variable. Hypothesis The Australian anti-money laundering regulatory practice is an appropriate model that can be applied in enhancing anti-money laundering laws in UAE. Significance of the Research The research project will form framework through which anti-money laundering laws and policies in UAE will be enhanced and perfected to the recommended international standards and requirements. Research Limitations

The scope of the research project will be hampered by existence of wide ranging differences in political, organisational, structural and regulatory frameworks between Australia and UAE. For example, Australia is a secular country4 while UAE is a dominantly Muslim country where many banks observe Islamic banking5. LITERATURE REVIEW Review of existing literature reveals that Australian money laundering laws were passed in two tranches, with the first tranche being the AML/CTF Act of 2006 and the second tranche being the AML/CTF Amendment Act of 2008.

6 Signed into law on 12 December 2006, the AML/CTF Act of 2006 set out the comprehensive reforms and enhancements in Australia’s anti-money laundering regulations by expanding the obligatory requirements of financial and reporting entities across the board. 7 The new obligations expected of reporting entities include: identifying and verifying customer identities; systematic record keeping procedures; establishment and maintenance of AML/CTF programs and consistent due diligence tests and reports on customers with the objectives of identifying and reporting suspicious transactions that exceed recommended thresholds.

8 To this end, the AML/CTF Act of 2006 take a risk-based regulation approach whereby financial institutions and reporting bodies were granted the rights to conduct informed risk assessments to determine if certain designated services requested by customers would amount to acts of money laundering or financing of terrorism.

9 The AML/CTF Act of 2006 also approved the continued role of Australian Transactions Reports and Analysis Centre (AUSTRAC) as the financial oversight, supervisory and intelligence for ensuring smooth transitions and implementation of the anti-money laundering and counter terrorism financing laws. 10 The second tranche of the counter terrorism regulations as presented by the AML/CTF Amendment Act of 2008 by incorporating additional sectors that had earlier been unintentionally been exempted by the earlier Act of parliament.

11 The additional sectors mentioned by the amendment act include: real estate-related transactions; precious stones and metals dealerships; the legal and accounting fraternity with particular emphasis to lawyers, accountants and notaries who assist in financial transactions; and trusts and service providing companies which carry out transactions on behalf of clients as stipulated by the Financial Action Task Force (FATF). 12 The preventive and control measures provided by the regulatory framework the two tranches of anti-money laundering laws in Australia form the basis of the inquiry of their applicability in UAE.

METHODOLOGY The research methodology will involve field research followed by data collection and sampling. Research Design It is proposed that a group focus study be conducted on three categories of people who are affected by anti – money laundering legislations: managers of banks and financial institutions, customers and regulators in Australia and UAE. The three categories will be comprised of a minimum of 50 participants of either sex per group and a total of 150 participants for all the three groups.

The subject of the research will be validated by redefining the important functional aspects of anti – money laundering regulatory practices. Data Collection and Analysis Determination of significant differences between the three main focus groups will be attained by applying a design that will allow the drawing of repeated measures to track variations. Data collection and analysis will be based on both quantitative and qualitative techniques.

As such, quantitative data collection will involve unlimited reference to books, law journals, treaties, legislations, case laws and websites in addition to other appraised indispensable data sources validated through the SPSS software. 13 Qualitative data collection will be achieved through the administration of questionnaires and direct interviews and validated through analytic induction process. 14 Sampling Query clusters will be constructed to determine likely future events and their occurrences with response from near term, future, to never.

The samples will consist of 150 participants representing three different pools of samples of adult male and female participants with varied education and professional backgrounds. Interviews will generally be centred on the views of knowledgeable financial and legal experts who work for different banks, financial institutions and law enforcing agencies in Australia and UAE. Conclusion The research structure and approach that will be adopted will impact on the final outcome of the evaluation of the applicability of the Australian anti-money laundering practise as a model for the UAE.

Political, organisational, religious and legal setbacks notwithstanding, the risks posed by money laundering to the entire international system can no longer be taken for granted, and cooperative approaches and regulatory model replications is the right step forward. Therefore this research project will bring to the fore conditions that must be observed to ensure that the crime money laundering is eliminated in all countries around the world. Bibliography ‘Anti – Money Laundering and Counter – Terrorism Financing Regulations 2008’ AML/CTF Act 2008 (Cth).

‘Anti – Money Laundering and Counter – Terrorism Financing Act 2006’ AUSTRAC <http://www. austrac. gov. au/aml_ctf. html> at 6 March 2009. Ao, Young, P W, ‘Australian Law Journals and Reports’ (2005) Denise Myerson, ‘Using Judges to Manage Risk: The Case of Thomas vs Mowbray’ (2008) 36 Federal Law Review 2. Lawrence Maher, ‘Half Light Between Law and Peace Herbert Vere Evatt, The Rule of International Law, and The Corfu Channel Case’ (2005) 9 Australian Journal of Legal History 1.

Margaret McKerchar, ‘Philosophical Paradigms, Inquiry Strategies and knowledge Claims: Applying the Principles of Research Design and Conduct to Taxation’ (2009) 6 Australia Law Journal 1. Sebastian Muller, ‘An informal Payment System and its use to Finance Terrorism’ (2006) ‘United Nations Convention on the Use of Electronic Communications in International Contracts (2005) Australian E-Commerce Review – UN Convention on Electronic Communications <http://www. ag. gov. au/ecommercereview> at 6 March 2009.