Source: 2006
Released by the Bureau for International Narcotics and Law Enforcement Affairs
I. Summary
Australia is a committed partner in international efforts to combat illicit drugs, and gives high priority to drug-related issues, both internationally and domestically. Australia manages the diverse legal, health, social and economic consequences of drug use through comprehensive and consistent policies of demand and supply reduction and circumscribed harm reduction initiatives. Australia is party to the 1988 UN Drug Convention.
II. Status of Country
Australia is a consumer nation for illicit drugs. There is no evidence indicating that narcotics destined for the U.S. are transiting Australia. U.S. and Australian law enforcement agencies have excellent cooperation on narcotics matters. While domestically produced marijuana is the most abused drug in Australia, the use of MDMA (ecstasy) and methamphetamine has risen drastically in the past few years. The UN 2005 World Drugs Report indicated that Australia has one of the highest rates of MDMA and methamphetamine abuse in the world. There are also indications that the use of cocaine has increased throughout Australia in recent years. Although the use of heroin has declined since 2000, law enforcement and health officials continue to aggressively target heroin trafficking and abuse.
III. Country Actions Against Drugs in 2005
Policy Initiatives. The Federal Government continues to vigorously pursue polices that attempt to both prevent and treat illegal drug use. Launched in 1997, Prime Minister Howard's National Illicit Drug Strategy outlines a program to address drug issues. Australia has committed more than US$750 million (AU$1 billion) to the Strategy. (NOTE: Throughout this report, figures are in U.S. dollars, calculated at an exchange rate of A$1 equals U.S. $0.75) Since 2002, following the Federal Government's creation of the Australian Crime Commission, state and federal investigators have increased their cooperation, bolstered their enforcement responses to serious crimes such as drug trafficking, and improved prosecution at the appropriate state or federal level. The Federal government committed an additional $187.4 million in 2003 to its program to reduce the supply of, and demand for, illicit drugs.
In 2004, the Australian government instituted a national program to educate customs officers, container examiners and other law enforcement personnel on the inputs and precursor chemicals used in the creation of synthetic narcotics. The government is supporting private industry's attempt to develop a pseudoephedrine product that cannot be used as a precursor chemical for methamphetamine. There is an ongoing campaign to prevent illegal sales of pseudoephedrine in Australia. On January 1, 2006 legislation tightening the access to pseudoephedrine on a national level will go into effect. In August 2005, the Australian Minister of Justice announced the implementation of the National Strategy to Prevent Diversion of Precursor Chemicals. The Australian government has committed $4.1 million to prevent the diversion of legitimate chemicals like pseudoephedrine into the manufacture of illicit drugs.
Accomplishments. The Australian government continues to implement extensive multi-faceted programs to combat drug trafficking and use in Australia. Throughout 2005, Australian law enforcement officials seized record amounts of ecstasy and crystal methamphetamine. These seizures were consistent with the reported increased use of these drugs throughout Australia. State Police agencies continue to report increases in the number of clandestine methamphetamine labs seized throughout the country, along with the seizure of several large-scale MDMA labs. The agencies believe that the level of sophistication in many of these labs has advanced. Australian efforts to control the availability of the precursor chemical pseudoephedrine have led to the increase in illegal bulk pseudoephedrine import attempts into Australia. In August 2005, Australian law-enforcement seized 400 kilograms of pseudoephedrine in a shipment of ceramic products from Vietnam. In 2005, law enforcement officials successfully completed several high profile investigations targeting Vietnamese organized crime groups operating sophisticated hydroponic marijuana growth sites. The trial for defendants arrested as a result of the April/May 2003 seizure of 125 kilograms of heroin from the North Korean cargo vessel MV Pong Su began in January 2005 and is on-going and scheduled to be completed in early 2006.
Law Enforcement Efforts. Australian law enforcement agencies continued their aggressive counternarcotics efforts in 2005. Responsibility for these activities is divided among the Federal government -- primarily the Australian Federal Police (AFP), the Australian Customs Service (ACS), the Australian Crime Commission (ACC) and the Therapeutic Goods Administration (TGA) -- and state/territorial police services throughout the country. In recent years, the AFP has restructured its liaison network, which has led to a slight reduction of officers and overseas posts, in order to better focus on transnational crime, including drug trafficking, terrorist activities and people smuggling. The AFP currently maintains more than 60 officers in 30 overseas liaison posts in 25 countries to assist in narcotics investigation. AFP Liaison Officers, particularly those in the Pacific Islands and throughout Asia, also assist local law enforcement agencies in training and institution building. The AFP and other Australian law enforcement agencies continue to have close working relationships with U.S. agencies including the DEA and FBI.
Corruption. The Australian Government is vigilant in its efforts to prevent narcotics-related corruption. There is no indication of any senior official of the government facilitating the production or distribution of illicit drugs or aiding in the laundering of proceeds from such activities. Although some state police officers have been investigated and tried for drug-related corruption, corruption is not common or widespread.
Agreements and Treaties. The U.S. and Australia cooperate extensively in law enforcement matters, including drug prevention and prosecution, under a bilateral mutual legal assistance treaty and an extradition treaty. The USG has a Customs Mutual Assistance Agreement (CMAA) with Australia. Australia is a party to the 1988 UN Drug Convention, the 1971 UN Convention on Psychotropic Substances, and the 1961 UN Single Convention as amended by its 1972 Protocol. Australia is a party to the UN Convention against Transnational Organized Crime and its protocols against migrant smuggling and trafficking in persons. Australia also is a party to the UN Convention Against Corruption.
Cultivation/Production. Cannabis is the only significant illicit drug cultivated in Australia. The use of hydroponic growth sites has been increasing throughout the country in recent years. The cannabis grown in Australia is primarily destined for the domestic market and there is no evidence that Australian marijuana reaches the U.S. in any significant quantity. Australia has a well-established and controlled licit opium crop (13,000 hectares) on the island of Tasmania. Although recent significant seizures of foreign produced methamphetamine have revealed a change in trafficking patterns, a large amount of amphetamine and methamphetamine consumed in Australia is produced in small, often mobile, domestic clandestine laboratories.
Drug Flow/Transit. Historically, Australia has been the target for Asian-based criminal groups trafficking in heroin. This trend is continuing and many of these organizations are also involved in the trafficking of methamphetamines into Australia. The primary source for heroin in Australia continues to be the Golden Triangle area of Laos, Burma and Thailand. Ecstasy consumed in Australia is primarily imported from Europe with some shipments transiting Asia prior to arrival in Australia. South American cocaine trafficking organizations are utilizing the improved transportation/commercial links between Australia and South America to facilitate the smuggling of cocaine. Couriers from South America are intercepted at international airports on a regular basis. There has been a steady increase in couriers transiting South Africa to convey cocaine into Australia.
Domestic Programs. The Federal Government has continued to pursue an aggressive policy to prevent and treat drug use. The Prime Minister's National Illicit Drug Campaign committed the equivalent of $4 million to drug prevention programs in schools and $40 million for compulsory education and a treatment system for drug offenders. Under Australian law, the Federal Government has responsibility for national health and crime issues, while the States and Territories have responsibility for the delivery of health and welfare services. The Ministerial Council on Drug Strategy brings together Federal, State and Territory Ministers responsible for health and law enforcement to determine national policies and programs to reduce the harm caused by drugs in Australia.
Although the Federal Government opposes supervised injecting rooms, the legal authority to provide injecting rooms rests with the health and law enforcement agencies in the States and Territories. In May 2001, the State of New South Wales passed legislation to permit the licensing and operation of an injecting center for a trial period of 18 months. This trial period has been extended to October 2007. The center, which is now in operation, provides for medically supervised heroin injections. The Australian Capital Territory has passed similar legislation but has not opened an injection center.
IV. U.S. Policy Initiatives and Programs
U.S. Policy Initiatives. U.S. counternarcotics activities in Australia feature strong ongoing U.S.-Australian collaboration in investigating, disrupting, and dismantling international illicit drug trafficking organizations. In mid-2002, the U.S. and Australia signed a Memorandum of Understanding to outline these objectives.
Bilateral Cooperation. Cooperation between U.S. and Australian authorities is excellent.
The Road Ahead. Australia shows no sign of lessening its commitment to the international fight against drug trafficking. Australian counternarcotics efforts throughout Asia and the Pacific Islands continue to be extremely robust. The U.S. can expect strong bilateral relations with Australia on counternarcotics issues. The two countries will continue to work closely in support of the UN Drug and Crime Program and other multi-lateral fora.
Australia is one of the major centers for capital markets in the Asia-Pacific region. Annual turnover across Australia's over-the-counter and exchange-traded financial markets was AUD82 trillion (approximately $61.50 trillion) in 2005. Australia's total stock market capitalization is over $500 billion (approximately $375 billon), making it the ninth largest market in the world, and the second largest in the Asia-Pacific region behind Japan. Australia's foreign exchange market is ranked seventh in the world by turnover; with the U.S. dollar and the Australian dollar the fourth most actively traded currency pair globally. While narcotics offences provide a substantial source of proceeds of crime, the majority of illegal proceeds are derived from fraud-related offences. One Australian Government estimate suggested that the amount of money laundered in Australia ranges between AUD2-3 billion (approximately $1.5-$2,25 billion) per year.
The Government of Australia (GOA) has maintained a comprehensive system to detect, prevent, and prosecute money laundering. The major sources of illegal proceeds are fraud and drug trafficking. The last three years have seen a noticeable increase in activities investigated by Australian law enforcement agencies that relate directly to offenses committed overseas. Australia's system has evolved over time to address new money laundering and terrorist financing risks identified through continuous consultation between government agencies and the private sector.
In March 2005, the Financial Action Task Force (FATF) conducted its on-site Mutual Evaluation (FATFME) of Australia's anti-money laundering/counterterrorism financing (AML/CTF) system. Australia is one of the first member countries to be evaluated under FATF's revised recommendations. The FATF's findings from the mutual evaluation of Australia were published in October 2005 and Australia was found to be compliant or largely complaint with just over half of the FATF Recommendations. The FATFME noted that although Australia "has a comprehensive money laundering offense, the low number of prosecutions indicates that the regime is not being effectively implemented".
In response, the GOA has committed to reforming Australia's AML/CTF system to implement the revised FATF Forty plus Nine recommendations. The Attorney General's Department (AGD) is coordinating this process, which is expected to significantly reshape Australia's current AML/CTF regime in line with current international best practices. In December 2003, the Australian Government confirmed its intention to implement the revised FATF standards and an extensive process of consultation with industry has been underway since then.
Australia criminalized money laundering related to serious crimes with the enactment of the Proceeds of Crime Act 1987. This legislation also contained provisions to assist investigations and prosecution in the form of production orders, search warrants, and monitoring orders. It was superseded by two acts that came into force on January 1, 2003 (although proceedings that began prior to that date under the 1987 law will continue under that law). The Proceeds of Crime Act 2002 provides for civil forfeiture of proceeds of crime as well as for continuing and strengthening the existing conviction-based forfeiture scheme that was in the Proceeds of Crime Act 1987. The Proceeds of Crime Act 2002 also enables freezing and confiscation of property used in, intended to be used in, or derived from, terrorism offenses. It is intended to implement obligations under the UN International Convention for the Suppression of the Financing of Terrorism and resolutions of the UN Security Council relevant to the seizure of terrorism-related property. The Act also provides for forfeiture of literary proceeds where these have been derived by a person from commercial exploitation by the person of notoriety gained from committing a criminal offense.
The Proceeds of Crime (Consequential Amendments and Transitional Provisions) Act 2002 (POCA 2002), repealed the money laundering offenses that had previously been in the Proceeds of Crime Act 1987 and replaced them with updated offenses that have been inserted into the Criminal Code. The new offenses are graded according both to the level of knowledge required of the offender and the value of the property involved in the activity constituting the laundering. As a matter of policy all very serious offenses are now gradually being placed in the Criminal Code. POCA 2002 also enables the prosecutor to apply for the restraint and forfeiture of property from proceeds of crime. POCA 2002 further creates a national confiscated assets account from which, among other things, various law enforcement and crime prevention programs may be funded. Recovered proceeds can be transferred to other governments through equitable sharing arrangements. It also authorizes the seizure and forfeiture of property used in, intended to be used in, or derived from, terrorist offenses. It is intended to implement obligations relating to property that arise under the UN International Convention for the Suppression of the Financing of Terrorism.
Underneath the framework of offenses, the Financial Transaction Reports Act (FTR Act) of 1988 was enacted to combat tax evasion, money laundering, and serious crimes. The FTR Act requires banks and non-banking financial entities (collectively referred to as cash dealers) to verify the identities of all account holders and signatories to accounts, and to retain the identification record, or a copy of it, for seven years after the day on which the relevant account is closed. A cash dealer, or an officer, employee, or agent of a cash dealer, is protected against any action, suit, or proceeding in relation to the reporting process. The FTR Act also establishes reporting requirements for Australia's financial services sector. Required to be reported are: suspicious transactions, cash transactions in excess of Australian $10,000 (approximately $7,500), and all international funds transfers into or out of Australia, regardless of value. The FTR Act also obliges any person causing an international movement of currency of Australian $10,000 (or a foreign currency equivalent) or more, into or out of Australia, either in person, as a passenger, by post or courier to make a report of that transfer.
FTR Act reporting also applies to non-bank financial institutions such as money exchangers, money remitters, stockbrokers, casinos and other gambling institutions, bookmakers, insurance companies, insurance intermediaries, finance companies, finance intermediaries, trustees or managers of unit trusts; issuers, sellers, and redeemers of travelers checks, bullion sellers, and other financial services licensees. Solicitors (lawyers) also are required to report significant cash transactions. Accountants do not have any FTR Act obligations. However, they do have an obligation under a self-regulatory industry standard not to be involved in money laundering transactions.
The FTR Act established the Australian Transaction Reports Analysis Centre (AUSTRAC). Australia's financial intelligence unit (FIU). AUSTRAC collects, retains, compiles, analyzes, and disseminates FTR information. AUSTRAC is Australia's AML/CTF regulator, ensuring compliance with the FTR ACT.AUSTRAC also provides advice and assistance to revenue collection and law enforcement agencies, and issues guidelines to cash dealers in terms of their obligations under the FTR Act and regulations. As such, AUSTRAC plays a central role in Australia's AML system both domestically and internationally. Between 2004 and 2005, AUSTRAC's FTR information was used in 2,224 investigations. Of these, 578 matters identified FTR information as being very valuable to investigation outcomes. Results from the Australian Taxation Office shows that the FTR information contributed to more that AUD61.65 million (approximately $45 million) in Australian Taxation Office assessments during the year. By November 2005, AUSTRAC received a total of 12,575,531 financial transaction reports, with 99.5 percent of the reports submitted electronically through the EDDS Web system. AUSTRAC received 17,212 suspect transaction reports (SUSTRs), an increase of 49.9 percent from the precious year.
In 2005, there was a significant increase in the total number of financial transaction reports received by AUSTRAC. Significant cash transactions reports (SCTRs) account for 18 percent of the total number of FTRs reported to AUSTRAC each year and are reported by cash dealers and solicitors. In 2005, AUSTRAC received 2,288,373 SCTRs, an increase of 11.3 percent from the previous year. Cash dealers are required to report all international funds transfer instructions (IFTIs) to AUSTRAC. Cash deakers reported 10,243,774 IFTIs to AUSTRAC -- a 17.9 percent increase from 2004. The remittances generated 1,229,592 IFTI reports -- a 76 percent increase in number from the previous year. International currency transfer reports (ICTR) are primarily declared to the Australian Customs Service by individuals when they enter or depart from Australia. AUSTRAC received 26,172 ICTRs -- a 2.3 percent increase from the previous year. In April 2005, the Minister for Justice and Customs launched AUSTRAC's AML eLearning application. This application has been well received by cash dealers as a tool in providing basic education on the process of money laundering, the financing of terrorism, and the role of AUSTRAC in identifying and assisting investigations of these crimes
AUSTRAC expanded its involvement in the fight against financial crimes by signing agreements for using AUSTRAC's financial transaction data with Centrelink (an Australian public assistance agency) and the Child Support Agency in an effort to reduce welfare fraud and related criminal conduct. The information available to Centrelink officers will relate specifically to significant cash transaction reports, international currency transfer reports, suspect transaction reports, and international funds transfer instructions.
APRA is the prudential supervisor of Australia's financial services sector. AUSTRAC regulates anti-money laundering/counterterrorist financing (AML/CTF) compliance. AUSTRAC's powers include criminal, but not administrative sanctions for non-compliance. AUSTRAC has conducted very few compliance audits in recent years and places a great deal of emphasis on educating and continuously engaging the private sector regarding the evolution of AML/CTF regime and the attendant reporting requirements. The FATFME noted that a comprehensive system for AML/CTF compliance for the entire financial sector needed to be established by the GOA, as does an administrative penalty regime for AML/CTF non-compliance.
In June 2002, Australia passed the Suppression of the Financing of Terrorism Act 2002 (SFT Act). The aim of the SFT Act is to restrict the financial resources available to support the activities of terrorist organizations. This legislation criminalizes terrorist financing and substantially increases the penalties that apply when a person uses or deals with suspected terrorist assets that are subject to freezing. The SFT Act enhances the collection and use of financial intelligence by requiring cash dealers to report suspected terrorist financing transactions to AUSTRAC, and relaxes restrictions on information sharing with relevant authorities regarding the aforementioned transactions. The SFT Act also addresses commitments Australia has made with regard to the UNSCR 1373 and is intended to implement the UN International Convention for the Suppression of the Financing of Terrorism. Under this Act three accounts related to an entity listed on the UNSCR 1267 Sanction Committee's consolidated list, the International Sikh Youth Federation, were frozen in September 2002. There have been no arrests or prosecutions under this legislation. The Security Legislation Amendment (Terrorism) Act 2002, also inserted new criminal offenses in the Criminal Code for receiving funds from, or making funds available to, a terrorist organization
The Anti-Terrorism Act (No.2) 2005 (AT Act) recently amended offenses related to the funding of a terrorist organization in the Criminal Code so that they also cover the collection of funds for or on behalf of a terrorist organization. The AT Act also inserted a new offense of financing a terrorist. The SFT Act amendments to the FTR Act were a significant milestone in the enhancement of AUSTRAC's international efforts. These amendments gave the Director of AUSTRAC the right to establish agreements with international counterparts to directly exchange intelligence, spontaneously and upon request. A review of the FTR Act is currently being undertaken to improve procedures, implement international best practices, and address further aspects of terrorist financing, including alternative remittance systems.
Investigations of money laundering reside with the Australian Federal Police (AFP) and Australian Crime Commission (Australia's only national multi- jurisdictional law enforcement agency). The AFP is the primary law enforcement agency for the investigation of money-laundering and terrorist- financing offences in Australia at the Commonwealth level and has both a dedicated Financial Crimes Unit and Financial Investigative Teams (FIT) consisting of 44 members with primary responsibility for asset identification/restraint and forfeiture under the POCA 2002. The Commonwealth Director of Public Prosecutions (CDPP) prosecutes offences against Commonwealth law and to recover proceeds of Commonwealth crime. The main cases prosecuted by the CDPP involve drug importation and money laundering offences. No convictions for money laundering have been reported for 2005.
In April 2003, the AFP established a Counter Terrorism Division to undertake intelligence-led investigations to prevent and disrupt terrorist acts. Eleven Joint Counter Terrorism Teams (JCTT), including investigators and analysts with financial investigation skills and experience, are conducting a number of investigations specifically into suspected terrorist financing in Australia. The AFP also works closely with overseas counterparts in the investigation of terrorist financing, and has worked closely with the FBI on matters relating to terrorist financing structures in South East Asia.
A draft AML/CTF Bill developed by the AGD and a package of draft AML/CTF Rules, developed by AUSTRAC, have recently been released for public comment. The package of draft legislation and rules will form the basis of further consultations on proposed enhancements to current customer due diligence, reporting and record keeping obligations, and deficiencies in regulatory coverage identified in Australia's FATF Mutual Evaluation Report. The consultation package represents a first tranche of reforms, which would apply to financial services, including when provided by professionals such as lawyers and accountants, gambling services and bullion sellers. Businesses providing these designated services would be required to, amongst other obligations, verify the identity of customers, report suspicious matters, keep appropriate records, and maintain rigorous internal AML/CTF Programs.
The release of the draft bill and AML/CTF Rules followed the passing of interim legislation in the form of Anti-Terrorism Act (No 2) 2005 (AT Act). The AT Act contains a range of measures to improve Australia's compliance with the FATF Special Recommendations on Terrorist Financing VI, VII and IX:
The Australian Government will consider a second tranche of reforms, extending to real estate agents, jewelers, and specified non-financial legal and accounting services once the first tranche of AML/CTF reforms are implemented. The proposed legislative framework provides scope for operational detail to be settled in AML/CTF Rules, which will be developed by (AUSTRAC) in consultation with industry.
Australia is a party to the 1988 UN Drug Convention, the UN Convention for the Suppression of the Financing of Terrorism, and the UN Convention against Transnational Organized Crime and its protocol on migrant smuggling. In September, 1999, a Mutual Legal Assistance Treaty between Australia and the United States entered into force. Australia participates actively in a range of international fora including the Financial Action Task Force, a member of the Pacific Islands Forum, and the Commonwealth Secretariat. Through its funding and hosting of the Secretariat of the Asia/Pacific Group on Money Laundering, of which it serves as permanent co-chair, the GOA has elevated money laundering and terrorist financing issues to a priority concern among countries in the Asia/Pacific region. AUSTRAC is an active member of the Egmont Group of Financial Intelligence Units. AUSTRAC has signed Memoranda of understanding (MOUs) allowing the exchange of financial intelligence with FinCEN and the FIUs of 40 other countries.
Following the bombings in Bali in October 2002, the Australian Government announced an ADOL AUD 10 million (approximately $7.5 million) initiative managed by AusAID, to assist in the development of counterterrorism capabilities in Indonesia. As part of this initiative, the AFP has established a number of training centers such as the Joint Centre for Law Enforcement Cooperation. As part of Australia's broader regional assistance initiatives, AUSTRAC has embarked on a long-term technical assistance program to help Indonesia in developing an effective Financial Intelligence Unit (FIU). AUSTRAC is exploring similar assistance to other regional FIUs, with AUD 7.8 million (approximately $5,85 million) in funding over the next four years under the Southeast Asia Counter-Terrorism Technical Assistance and Training Package. AUSTRAC has provided training and other technical assistance to developing FIUs in Southeast Asia, including the Philippine FIU and regional training provided by AUSTRAC through the Malaysian Government's South East Asian Regional Centre for Counter Terrorism. In the Pacific region, AUSTRAC has developed and provided unique software to six nascent Pacific island FIUs to fulfill their domestic obligations and share information with foreign analogs. The AGD received a grant of AUD 7.7 million (approximately $5.75) to develop an a four year program AML/CTF regimes for the Pacific island jurisdictions. The AGD's program will work cooperatively with the U.S. Department of State funded Pacific Islands Anti-Money Laundering Program (PAPL). The PALP, projected to be a four-year program, will be managed by the Pacific Islands Forum (PIF) and will employ residential mentors to develop or enhance existing AML/CTF regimes in the fourteen non-FATF member states of the PIF.
Simultaneously, the GOA continues to pursue a comprehensive, anti-money laundering/counterterrorist financing regime to meets the objectives of the revised FATF Forty Recommendations and Nine Special Recommendations on Terrorist Financing. To enhance its AML regime, as noted in FATFME, AUSTRAC should conduct more on-site compliance audits and be enabled to levy administrative sanctions for non-compliance with AML/CTF laws and regulations. Additionally, the GOA should consider coordinating all regulatory agencies of its financial, securities and insurance sectors. It should also continue its exemplary leadership role in emphasizing money laundering/terrorist finance issues and trends within the Asia/Pacific region and its commitment to providing training and technical assistance to the jurisdictions in that region.