Banking Laws Amendment Bill 2015

It gives me great pleasure to rise this evening to speak on the Banking Laws Amendment (Unclaimed Money) Bill 2015. This is a very important bill for the savers and the taxpayers of Australia. Under the previous Labor government, over $550 million was raided from 156,000 accounts after Bill Shorten, the then responsible minister, reduced this inactive period for bank accounts from seven years to three years. Effectively, it was the greatest period of bank robbery since Ned Kelly was fandangling around the Victorian bush. This is a good bill because it is on the side of Australian taxpayers and Australian savers. No government should be taking the savings of Australians after such a small period as three years. Returning it to seven years is, I think, an appropriate balance for the taxpayers and savers of Australia.

In May 2014, the government released a discussion paper on potential changes to the unclaimed moneys regime. It requested comments in relation to three particular options. The first option was retaining the status quo of three years that had been brought in by Labor—and that huge cash grab of half a billion dollars in one year alone that I mentioned before. The second option was increasing the period of inactivity to five years. The third option was to return it to a period of seven years. This particular discussion paper also included comments and discussion on related issues, including whether foreign currency accounts should be captured and balancing the privacy requirements with the requirement to publish information on unclaimed moneys and other administrative matters.

In November 2014 the financial system inquiry discussed unclaimed moneys in an appendix to its final report. That report stated:

At present, bank accounts and life insurance policies are deemed to be unclaimed monies and transferred to Government if they are inactive for three years. The present position was changed in 2012, from a longstanding arrangement that required an inactive period of seven years.

The Australian Bankers’ Association estimates that reverting to seven years would halve the number of claims. The Inquiry believes Government should act to ensure bank accounts and life insurance policies are deemed unclaimed after seven years of inactivity and that these monies should be held in a separate trust account.

The final report recommended that the government should define bank accounts and life insurance policies as unclaimed moneys if they are inactive for seven years. So, in the 2015-16 budget the government announced that effective from 31 December 2015 it would make a number of changes to the unclaimed moneys provisions in the Banking Act 1959 and the Life Insurance Act. The Banking Laws Amendment (Unclaimed Money) Bill 2015 will amend the Banking Act and the Life Insurance Act to specify that funds in bank accounts and life insurance policies cannot be deemed to be unclaimed and therefore transferred to the Commonwealth until they have been inactive for a period of seven years.

The bill will also introduce secrecy provisions into the Banking Act and the Life Insurance Act to ensure that even under a freedom of information request the particulars of the amount of unclaimed money or the person to whom the money is payable cannot be released to anyone other than the account holder or an agent acting on their behalf. This bill also amends the Banking Act to exempt funds held in foreign currency from the unclaimed money provisions; to exempt funds held by or on behalf of an individual under the age of 18 from unclaimed moneys provisions; to ensure that if an account holder or their agent notifies their financial institution that they would like their account to remain active at any time prior to its transfer to the Commonwealth that this account does not have to be transferred; and to remove the requirement to publish an unclaimed moneys gazette while still ensuring that the Treasurer can make the details of those with unclaimed accounts publicly available in such a manner as the Treasurer determines.

Even though the matter is quite simple in terms of what the government is trying to achieve here—that is, returning the period of inactivity from three years to seven years before the government can get their grubby fingers on the money and the savings of Australian taxpayers—it is actually quite a complex matter. I think it is worthwhile going into some detail of the terms of particular provisions of what the government is attempting to achieve. This bill makes amendments to the Banking Act and the Life Insurance Act to give effect to the unclaimed moneys measures announced in this year's budget. The bill extends from three years to seven years the period of inactivity required before funds from what are called authorised deposit-taking institutions, or ADIs—I do not want to get caught up in the big words—and life insurance provider accounts and life insurance amounts can be transferred to the Commonwealth. As such, accounts held by ADIs and life insurance providers will have to be inactive for a period of seven years before they are deemed to be unclaimed moneys and transferred to the Commonwealth. The bill exempts ADI accounts created for children and those that are held in a foreign currency from the unclaimed moneys provisions. It will also stop ADI accounts from being transferred to the Commonwealth where the account holder provides notification that the account should be treated as active after the account is assessed as unclaimed money at the end of the calendar year but before it is transferred to the Commonwealth.

The bill also promotes and protects the privacy of individuals who have accounts with unclaimed moneys by removing the requirement for the Australian Securities and Investments Commission, or ASIC, to publish details of unclaimed moneys in the annual unclaimed moneys gazette, introducing a secrecy provision to prevent access to information on unclaimed moneys via the Freedom of Information Act and making consequential amendments to the FOI Act to restrict access to information about unclaimed moneys under freedom of information requests. Chapter 1 of the bill, which is an amendment to the Banking Act 1959, will amend the Banking Act to provide for new arrangements for unclaimed moneys held by ADIs. Currently ADIs are required to assess all accounts to determine whether they consist of unclaimed moneys by 31 December each year and transfer any that do to the Commonwealth by 31 March the following year. An account held by an ADI consists of unclaimed moneys if, in the previous three years, there have been no transactions in the account other than interest or charges and the account holder has not satisfied the notification requirements by, for example, checking their account balance online or on the phone or specifically advising their bank that they would like the account to remain active.

Evidence suggests that many of the accounts that are declared unclaimed and transferred to the Commonwealth are effectively active, as the account holder remains aware of them. For example, around 15 per cent of unclaimed funds transferred from ADIs are reclaimed in the same year that they are transferred to the Commonwealth. Approximately 50 per cent of all funds transferred to the Commonwealth as unclaimed moneys are reclaimed within two years. The proportion of effectively active accounts that are transferred to the Commonwealth each year under the current provisions—that is, the three-year period for inactive accounts—increases the regulatory burden of the unclaimed moneys provisions for ADIs but also, and I think more importantly, for account holders—that is, the taxpayers and the savers of Australia who have put the money away for a rainy day but wake up one day to find that someone, 'Big Brother' or 'Big Sister' down in Canberra, has swiped their account. ADIs have to assess and transfer all accounts with unclaimed moneys to the Commonwealth even though many of the accounts are still effectively active. Once these accounts have been transferred, account holders have to complete the necessary paperwork and verify their details in order to reclaim their accounts.

To minimise the number of effectively active accounts that are transferred to the Commonwealth, regulation 20A of the Banking Regulations enables account holders to notify their ADI that an account should be treated as active. If notification is provided prior to 31 December—that is, when ADIs have to assess accounts as unclaimed moneys—then the account does not have to be transferred to the Commonwealth. If, however, the account holder provides notification after the account is assessed as unclaimed money on 31 December but before the ADI transfers the sum of money to the Commonwealth, then the amount must still be transferred. This is inconsistent with the treatment of accounts where the account holder satisfies the activity requirements, such as completing a transaction, after the account has been deemed to be unclaimed but before the funds are transferred to the Commonwealth, as these accounts do not have to be transferred to the Commonwealth.

The unclaimed money provisions currently apply to foreign currency accounts and children's accounts. The application of the unclaimed money provisions to these accounts does not align with how they are used by the community. Foreign currency accounts are generally used by consumers who are a little bit more sophisticated in relation to the settlement of their business transactions in relation to foreign currencies. Transferring these accounts to the Commonwealth under the unclaimed money provisions requires the account to be converted into Australian dollars, potentially exposing the account holder to exchange rate fluctuations. Given this risk and the fact that these accounts are used by such sophisticated consumers who are likely to know of these accounts, it is not appropriate to transfer them to the Commonwealth under the provisions. Likewise, children's accounts are generally established for long periods so that the money can be set aside in a high-interest account for a child to access on, for example, their 18th birthday. Transferring these accounts to the Commonwealth may result in some children losing out on higher interest rates because accounts transferred to the Commonwealth will only accrue interest at the rate of the consumer price index.

Details of unclaimed moneys held by the Commonwealth must be published annually in the Australian Securities and Investments Commission's unclaimed money gazette. Information on unclaimed moneys is also released under the Freedom of Information Act and is published on the ASIC website. Details of unclaimed moneys are also searchable online via the ASIC MoneySmart website. The level of information available has created the opportunity for groups to approach account holders offering to reunite them with their account for a fee. Account holders can reclaim their money from the government at no charge. The level of information could also potentially be used for identity theft.

The new law amends the Banking Act to extend the unclaimed moneys period from three years to seven years. The new law also provides that ADI accounts created for children and those with foreign currency accounts are exempt from the unclaimed moneys provisions. The new law stops ADI accounts being transferred to the Commonwealth where the account holder provides notification that the account should be treated as active after the account is assessed as unclaimed moneys at the end of the calendar year but before it is transferred to the Commonwealth. The new law amends the Banking Act to remove the requirements for ASIC to publish details of unclaimed moneys in the unclaimed money gazette and introduces a secrecy provision to prevent access to information on unclaimed moneys via the FOI Act. The Treasurer will retain the ability to publish information on unclaimed moneys, such as on the ASIC's MoneySmart website.

Chapter 2 of the bill will provide for new arrangements for unclaimed moneys held by life insurance providers. Currently life insurance providers are required to assess all accounts to determine if they consist of unclaimed moneys by 31 December each year and, similar to those with ADIs, transfer any such funds to the Commonwealth by 31 March of the following year. An account held by a life insurance provider consists of unclaimed moneys if there have been no transactions in the account other than interest or charges in the previous three years. Many of the accounts that are transferred to the Commonwealth are still effectively active, as the account holder, similar to those with ADIs, remains aware of them. Around nine per cent of life insurance accounts are reclaimed in the same year as they were transferred to the Commonwealth, and 50 per cent of all funds transferred are reclaimed within two years.

The high proportion of effectively active accounts that are transferred to and reclaimed from the Commonwealth creates a regulatory burden for life insurance providers and account holders. Life insurance providers have to assess and transfer all accounts with unclaimed moneys to the Commonwealth even though the accounts may still be effectively active. Once these accounts are transferred, account holders have to complete the necessary paperwork and verify their details in order to reclaim their accounts. Information on any unclaimed moneys is released under the Freedom of Information Act and is published on the ASIC website. Details of unclaimed money are also available to search online via the ASIC MoneySmart website. This level of information that has been available has created the opportunity for groups to approach account holders offering to reunite them with their account for a fee, similar to those under ADIs. But account holders can reclaim their money from the government at no charge. The level of information could also potentially be used for identity theft. In summary, this new law amends the Life Insurance Act to introduce new secrecy provisions and to extend the unclaimed moneys provision from three years to seven years from 31 December 2015.

We should consider how this has come about. It was an act of the previous Labor government, back in 2012, to reduce the period for unclaimed moneys to be transferred to the Commonwealth from seven years to three years. In 2012-13, the federal government was able to pilfer from Australian taxpayers and Australian savers a sum of over half a billion dollars.

When the previous government reduced the required period of inactivity before funds in bank accounts and life insurance policies could be transferred, the value of unclaimed money transferred to ASIC grew more than eightfold in a single year. Much of this money, however, was not truly unclaimed and the previous government's changes left many Australian families in a position of financial distress. It also imposed a large red-tape cost on industry which, first, had to transfer accounts to and then reclaim them from ASIC on behalf of their customers, often in the same year. This situation must not continue. It had a particular impact on the savings accounts of elderly Australians who had worked for decades to put money away for a rainy day or put money away for their children and grandchildren. They suddenly woke up one day and found that the people in Canberra had got their grubby fingers all over their savings. It is a shameful period in how we look after people who work to save money for the greater benefit of Australia.

In order to protect these account holders and industry, this bill returns the required period of inactivity before funds can be transferred from bank accounts or life insurance policies to seven years—that is, once they are truly unclaimed. A seven-year period had been in existence for a considerable amount of time. People knew that they had seven years. Reducing it—

Senator Whish-Wilson: Come on, fire up!

Senator McGRATH: Do you want me to fire up? I am happy to fire up. I was going to take a gentle path, but if you want me to fire up I am more than happy to fire up. You know that. I am easily provoked.

The ACTING DEPUTY PRESIDENT: Senator McGrath, address the chair.

Senator McGRATH: Through you, Mr Acting Deputy President, I think this is a very good bill because it returns the savings of Australians to them and returns the period of inactivity of bank accounts before they can be taken from three years to seven years. The government of Australia should be helping people save money, not taking it from their bank accounts like some nefarious Ned Kelly.