Treasury on Notice
Treasury was invited to not one, but two public hearings for the Senate Inquiry into the Currency (Restrictions on the Use of Cash) Bill 2019. Treasury’s performance was arguably dismal - they couldn’t provide any solid data to back up their ‘black economy’ claims and actually admitted their evidence was ‘anecdotal’.
Senators Patrick, Kitching and McAllister asked questions which Treasury took on notice, their answers now published on the Parliament’s website. Several of Treasury’s answers to Senators were either extraordinarily oversimplified, not backed up by substantiated evidence (again), or appeared deliberately misleading.
Treasury said to Senator Kitching that ‘The report provided to the European Commission [CEPS] found that the effects on compliance costs can be expected to be minimal…’
The CEPS report agreed that if a Europe-wide cash ban was introduced, the cost would probably be minimal - because most of the countries already have a cash ban in place! Countries like Germany and Austria do not have cash bans, and faced significant enforcement and compliance costs from if a new cash limit was introduced. German representatives argued it was impossible to quantify the costs and losses of a cash threshold, saying “there is hardly any demonstrable benefit of an incalculable cost burden”.
In reply to Senator McAllister, Treasury said the CEPS report listed four ‘key reasons in favour of cash thresholds’:
There appear to be very limited downsides to imposing cash thresholds.
Not true. CEPS documented significant negative impacts on revenue in tourism, domestic trade and small & large businesses, particularly in high value goods like jewellery. CEPS reported a measurable impact on GDP. Cash restrictions exposed citizens to abuse by the banking sector- which charged them high fees, freezed assets and sold their private data to harassing loan collectors. Cash bans hurt the elderly, rural populations, the digitally illiterate and the unbanked.
There is a compelling argument that imposing cash thresholds will disrupt money laundering and tax evasion.
No. The report acknowledges that cash restrictions are expected to have a limited impact on money laundering and tax evasion. (Although CEPS still concludes in favour of an EU-wide cash ban!) “[T]he most important cash intensive ML schemes… can not really be hindered by legal cash payment restrictions… While positive impact in terms of reducing tax evasion might exist, the overall impacts of a prohibition remain limited.”
Cash thresholds can complement other measures to curb the illicit use of cash.
Dutch authorities don’t agree. They said “a negative consequence of a ban is that there would be less information available on cash flows, as the cash money will not disappear but just flow elsewhere.”
CEPS says studies show positive incentives can have a higher effect than cash thresholds.
Cash thresholds can be initially calibrated to minimise any perceived downside risk, then reduce over time.
What?! This statement does not appear to be referenced in the CEPS report at all. Cash bans already exist in Europe - governments don’t need to manage ‘perceived downside risk’. Regardless of the factual accuracy of this statement, risks of cash restrictions are more then merely ‘perceived’. The CEPS report demonstrates that downsides are material and demonstrable. Cash bans cost the public.
In response to Senator Patrick’s request for data to show “why we should support this legislation in the face of a significant number of constituents who are who are against it”, part of Treasury’s answer referenced the international anti-money laundering organisation, the Financial Action Taskforce (FATF), (who were not consulted at any time by the Black Economy Taskforce- I asked them.)
Treasury responded to Senator Patrick: “The FATF found that large amounts of cash are suspected to be laundered out of China into the Australian real estate market. Once implemented, the cash payment limit will reduce the ability for individuals to launder illicit money through the Australian real estate sector as they will no longer be able to purchase property or pay for any part of property in large sums of cash.”
Treasury apparently recommends a blanket cash restriction as a ‘catch-all’ solution for money laundering through Australian real estate. However, this appears unlikely to work as claimed given that the FATF report identifies:
Treasury’s ‘cherry-picked’ answers show disrespect to the Senators and insult the public. They got two chances to prove their cash ban- and failed both!
Senators Patrick, Kitching and McAllister asked questions which Treasury took on notice, their answers now published on the Parliament’s website. Several of Treasury’s answers to Senators were either extraordinarily oversimplified, not backed up by substantiated evidence (again), or appeared deliberately misleading.
Treasury said to Senator Kitching that ‘The report provided to the European Commission [CEPS] found that the effects on compliance costs can be expected to be minimal…’
The CEPS report agreed that if a Europe-wide cash ban was introduced, the cost would probably be minimal - because most of the countries already have a cash ban in place! Countries like Germany and Austria do not have cash bans, and faced significant enforcement and compliance costs from if a new cash limit was introduced. German representatives argued it was impossible to quantify the costs and losses of a cash threshold, saying “there is hardly any demonstrable benefit of an incalculable cost burden”.
In reply to Senator McAllister, Treasury said the CEPS report listed four ‘key reasons in favour of cash thresholds’:
There appear to be very limited downsides to imposing cash thresholds.
Not true. CEPS documented significant negative impacts on revenue in tourism, domestic trade and small & large businesses, particularly in high value goods like jewellery. CEPS reported a measurable impact on GDP. Cash restrictions exposed citizens to abuse by the banking sector- which charged them high fees, freezed assets and sold their private data to harassing loan collectors. Cash bans hurt the elderly, rural populations, the digitally illiterate and the unbanked.
There is a compelling argument that imposing cash thresholds will disrupt money laundering and tax evasion.
No. The report acknowledges that cash restrictions are expected to have a limited impact on money laundering and tax evasion. (Although CEPS still concludes in favour of an EU-wide cash ban!) “[T]he most important cash intensive ML schemes… can not really be hindered by legal cash payment restrictions… While positive impact in terms of reducing tax evasion might exist, the overall impacts of a prohibition remain limited.”
Cash thresholds can complement other measures to curb the illicit use of cash.
Dutch authorities don’t agree. They said “a negative consequence of a ban is that there would be less information available on cash flows, as the cash money will not disappear but just flow elsewhere.”
CEPS says studies show positive incentives can have a higher effect than cash thresholds.
Cash thresholds can be initially calibrated to minimise any perceived downside risk, then reduce over time.
What?! This statement does not appear to be referenced in the CEPS report at all. Cash bans already exist in Europe - governments don’t need to manage ‘perceived downside risk’. Regardless of the factual accuracy of this statement, risks of cash restrictions are more then merely ‘perceived’. The CEPS report demonstrates that downsides are material and demonstrable. Cash bans cost the public.
In response to Senator Patrick’s request for data to show “why we should support this legislation in the face of a significant number of constituents who are who are against it”, part of Treasury’s answer referenced the international anti-money laundering organisation, the Financial Action Taskforce (FATF), (who were not consulted at any time by the Black Economy Taskforce- I asked them.)
Treasury responded to Senator Patrick: “The FATF found that large amounts of cash are suspected to be laundered out of China into the Australian real estate market. Once implemented, the cash payment limit will reduce the ability for individuals to launder illicit money through the Australian real estate sector as they will no longer be able to purchase property or pay for any part of property in large sums of cash.”
Treasury apparently recommends a blanket cash restriction as a ‘catch-all’ solution for money laundering through Australian real estate. However, this appears unlikely to work as claimed given that the FATF report identifies:
- There is already a $10,000 payment declaration threshold for cross-border cash transfers. Declarations are not investigated by AUSTRAC and are apparently not of concern either: "The authorities do not appear to be investing serious effort in mitigating this risk”.
- Real estate agents are “not subject to AML/CTF requirements or supervision and, with limited exceptions, demonstrated a low understanding of their respective ML/TF risks.”
- Money laundering though illicit funds received from abroad, into the real estate market occurs “despite the fact that, for example, buying real estate with cash would trigger a significant cash transaction report”.
Treasury’s ‘cherry-picked’ answers show disrespect to the Senators and insult the public. They got two chances to prove their cash ban- and failed both!