A BUDGIE, a Melbourne housewife with a dodgy share portfolio and the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 are an eclectic trio, but the three are inextricably linked, thanks to a share transaction under a fake name.
BusinessDay's Mr Bud Gerigar made headlines after buying a share in listed Downer EDI using a loophole in the law and some very lax checks and balances within the nation's off-market transfer system.
That system allows shares to be directly transferred, free, at the registry office into just about any name you can think of — such as Bud Gerigar.
According to a spokeswoman for Nick Sherry, the federal Minister for Superannuation and Corporate Law, registering shares in the name of a budgie is a clear breach of the nation's anti-money laundering laws, introduced by the Howard government in 2006.
"Under section 136 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, it is an offence to provide false or misleading information to a reporting entity or produce false or misleading documents," a spokeswoman for the minister said.
One of the leading lawyers in the field of money laundering insists the budgie is innocent under that act — and a clear loophole exists that allows criminals and, potentially, terrorist organisations, to launder money through the Australian sharemarket.
"You have identified a clear loophole in the act," said Alison Deitz, a partner in leading law firm Deacons and author of the Anti-Money Laundering Handbook, released late last year.
"The act is designed to ensure that the money obtained from criminal or illegal activity cannot be washed through the financial system. The off-market transfer system for shares is a way that The Age has clearly identified as a means of washing money, a system of laundering money, that isn't captured by the legislation.
"It's a scheme a terrorist organisation could use but, more likely, a scheme a money-laundering operation could use."
Central to the loophole are the words "reporting entity". The act lists what it deems to be reporting entities — such as banks, credit unions, bookmakers that provide account services and department stores that provide gift vouchers — but share registry offices are not included.
"On my reading of the act, a share registry is not a reporting entity," Deitz said. "There are circumstances where they could be an agent, but in the instance The Age has reported, where the vendor is not a professional trader or a broker, then in that case there is a scheme that could be used to launder money.
"If the purchaser is buying through a stockbroker, then the broker is the reporting entity. In terms of an off-market purchase, unless the seller is itself involved in the business of selling shares, then it's not captured by the act, in my reading."
Alan Peckham, a Melbourne-based partner with leading law firm Freehills, concurred that the anti-money laundering legislation did not cover an off-market transfer to a fake name.
"A registry office could, in some circumstances, be a reporting entity, but I agree that in this instance, with the off-market transfer of a share into the name of a budgie, it is not strictly covered by the act," he said. In 2005, the Paris-based Financial Action Taskforce estimated that money laundering in Australia was worth up to $3 billion a year. According to the taskforce, criminals use accounts in Australia registered under false identities and substantiated by forged documents — the very technique used to obtain a shareholding in the name of a budgerigar. Continued…
