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2004-2005-2006
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
ANTI-MONEY LAUNDERING AND COUNTER-TERRORISM
FINANCING BILL 2006
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Justice and Customs
Senator the Honourable Chris Ellison)
ANTI-MONEY LAUNDERING AND COUNTER-TERRORISM
FINANCING BILL 2006
General Outline
The Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Bill (the
Bill) forms part of a legislative package that will implement the first tranche of
reforms to Australia's AML/CTF regulatory regime.
The reforms are a major step in bringing Australia into line with international best
practice to deter money laundering and terrorism financing that includes standards set
by the Financial Action Task Force (FATF). As international businesses are obliged
to take into account AML/CTF adequacy of foreign counterparts and jurisdictions, the
Bill will enable Australia's financial sector to maintain international business
relationships.
The Bill will cover the financial and gambling sectors, bullion dealers and
lawyers/accountants (but only to the extent that they provide financial services in
direct competition with the financial sector legal professional privilege will still
apply) who provide designated services listed in the tables in Clause 6. The second
tranche will cover real estate agents, jewellers, lawyers and accountants.
The Bill adopts a risk based approach to AML/CTF compliance, under which
principal obligations are set out, but businesses will have flexibility to develop
procedures according to different risks which they identify using their own AML/CTF
Programs.
The designated services in the tables in Clause 6 cover a wide range of financial
services including opening an account, accepting money on deposit, making a loan,
issuing a bill of exchange, a promissory note or a letter of credit, issuing a debit or
stored value card, issuing traveller's cheques, sending and receiving electronic funds
transfer instructions, making money or property available under a designated
remittance arrangement, acquiring or disposing of a bill of exchange, promissory note
or letter of credit, issuing or selling a security or derivative, accepting a contribution,
roll-over or transfer in respect of a member of a superannuation fund and exchanging
currency.
The Bill builds on existing obligations imposed under the Financial Transaction
Reports Act 1988 (FTR Act). However, the new regime will apply to a wider range of
businesses than the FTR Act and impose a wider range of obligations on them.
Persons who provide the designated services to a customer become reporting entities
(REs) who incur reporting obligations under the Bill. The obligations are set out in
the following dot points:
· Identification and verification. REs must verify a customer's identity before
providing a customer with a designated service. REs must carry out ongoing
due diligence on customers.
· Reporting. REs must report suspicious matters, certain transactions above a
threshold and international funds transfer instructions.
· Developing and maintaining an AML/CTF Program. REs must have and
comply with anti-money laundering and counter-terrorism financing programs
(AML/CTF programs), which are designed to identify, mitigate and manage
money laundering or terrorist financing risks a reporting entity may reasonably
face. Members of a designated business group (DBG) may enter into a joint
AML/CTF program with other members of that DBG.
· Record keeping. REs must make and retain certain records (and other
documents given to REs by customers) for 7 years.
The Bill includes provisions relating to correspondent banking, which prevent
financial institutions from entering into a correspondent banking relationship with a
shell bank or another financial institution that has a correspondent banking
relationship with a shell bank.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) has an
enhanced regulatory role under the Bill. AUSTRAC will be required to advise and
assist REs in relation to their obligations and have regard to various factors including
competitive neutrality, economic efficiency and privacy in performing its functions.
To assist law enforcement agencies in carrying out relevant law enforcement and
security functions related to money laundering and terrorist financing, designated
government agencies will be able to access information held by AUSTRAC, under
certain conditions in Part 11 of the Bill. Except as permitted by the Bill, an
AUSTRAC official, a customs officer or a police officer must not disclose
information or documents obtained under the Bill. REs must not disclose they have
formed an applicable suspicion or reported information to AUSTRAC under the
suspicious matter reporting requirements or that they have given further information
to a law enforcement agency in response to a request.
The Bill provides a civil penalty framework for non-compliance with regulatory
obligations under the Bill. It establishes offences for producing false or misleading
information or documents, forging a document for use in an applicable customer
identification procedure, providing or receiving a designated service using a false
customer name or customer anonymity and structuring a transaction to avoid a
reporting obligation. The AUSTRAC CEO is to monitor compliance by REs with
their obligations under the Bill, the regulations and the AML/CTF Rules. He or she
may give a remedial direction to a RE that has contravened a civil penalty provision
and may accept enforceable undertakings. The AUSTRAC CEO may require a RE to
carry out an external audit or a money laundering and terrorism financing risk
assessment.
The Bill will be implemented in stages over 24 months from Royal Assent to allow
businesses to meet their obligations in the most cost effective way.
The current legislative package is the product of extensive consultation with industry
and other interest groups that commenced in December 2003. The legislation
achieves a balance between the Government's law enforcement obligations and
industry's day-to-day operational reality.
The Bill represents a balanced and fair approach to ensuring that money laundering
and terrorist financing risk in Australia is identified, managed and mitigated. It
balances the needs of law enforcement agencies with the day-to-day realities of
businesses that are covered by the legislation.
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Financial Impact Statement
It is not possible to estimate the cost of preventing, detecting and deterring money
laundering and terrorist financing. It is also not possible to quantify accurately the
extent of money laundering and terrorism financing in Australia as the very nature of
these activities mean that they are hidden.
The International Monetary Fund stated in 1996 that the aggregate size of money
laundering in the world could be somewhere between two and five per cent of the
world's gross domestic product. For the Australian economy this is as much as $11.5
billion per year.
Benefits to be gained from implementing this legislative package are set out in the
Regulator Impact Statement (RIS). Implementing this legislative package will cause a
significant increase in available intelligence on money laundering and terrorism
financing as well as improving systems for sharing this information between domestic
and foreign law enforcement agencies. This information will aid in the detection and
prosecution of crime and the confiscation of criminal assets as well as protecting the
integrity and reputation of the Australian financial system.
There is likely to be a positive revenue outcome for the Commonwealth from enacting
the new legislation.
Regulatory Impact Statement
1 Problem
What is the problem being addressed?
The proposed Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF)
legislation is aimed at addressing up to an estimated $11.5B in money laundering per
year in Australia and the threat to national security caused by the financing of
terrorism.
The proposal also seeks to implement Australia's international obligations including a
commitment to bring our AML/CTF regime in line with the international standards as
set out by the Financial Action Taskforce on Money Laundering (FATF). The global
benchmark on money laundering and terrorism financing countermeasures has also
been progressively raised by a succession of other international standards and
legislation such as the US PATRIOT Act, the Third European Directive on Money
Laundering, Basel Committee guidance on Customer Due Diligence and the
Wolfsburg Group Principles on managing money laundering risk as well as
obligations under United Nations (UN) Conventions and UN Security Council and
General Assembly Resolutions.
Failure to meet the international standards will also be problematic for Australia's
financial services sector as the international financial services sector is obliged to take
into account adequacy of AML/CTF compliance when dealing with foreign
counterparts and jurisdictions. Failure of businesses to meet international standards
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puts at risk international business relationships, as well as the reputation of individual
companies and the Australian financial market in general.
The FATF Recommendations
The FATF is an inter-governmental body whose purpose is the development and
promotion of national and international policies to combat money laundering and
terrorist financing. The FATF was established in 1989 by the G7 and Australia was a
founding member.
The FATF Forty Recommendations on Anti-Money Laundering and Nine Special
Recommendations on Counter Terrorism Financing (the FATF Recommendations)
are an important matter of international concern and FATF regards its members as
bound to implement them. The FATF Recommendations also form part of broader
international financial sector standards and are recognised and used by the IMF and
the World Bank when they conduct assessments of a country's financial sector. A
report of Australia's assessment under the IMF Financial Sector Assessment Program
will be released later this year. On 29 July 2005, the United Nations Security Council
endorsed the FATF Recommendation in Resolution 1617.
The 2003 revised FATF Forty Recommendations are recognised as the international AML
standard and extended the scope of recommended AML measures to a wider range of
industries, including businesses and professions outside the financial sector.
Following the terrorist attacks on the United States of 11 September 2001, the FATF issued
eight Special Recommendations on Terrorist Financing. A ninth Special Recommendation
was added in 2004. The Special Recommendations build on the measures outlined in the
Forty Recommendations and are the recognised international counter-terrorist financing
(CTF) standard.
The Recommendations include measures to be taken under each country's criminal
justice and regulatory systems, preventive measures for financial institutions and
certain other businesses and professions, and measures to facilitate international
cooperation. Two key requirements of the Recommendations are:
· Expanded know your customer (or customer due diligence) obligations for
financial institutions requiring ongoing monitoring of customer activity.
· The extension of AML obligations, including customer due diligence,
suspicious transaction reporting and record-keeping obligations, to non-
financial businesses and professions such as casinos, real estate agents, dealers
in precious metals and stones, lawyers, accountants, and trust and company
service providers.
The FATF is currently in the process of assessing member compliance with the
revised Forty Recommendations and Special Recommendations on Terrorist
Financing. As a founding member of the FATF, Australia is committed to a process of
periodic peer assessment. Australia was among the first group of countries to be
evaluated and was last evaluated as part of the FATF Mutual Evaluations in 1996.
A mutual evaluation on-site visit to Australia, involving an assessment by officials
from other FATF member countries of our compliance with the FATF
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Recommendations, occurred in March 2005. The FATF presented and finalised its
report findings in October 2005.
Areas identified requiring improvement
The FATF Mutual Evaluation Report (MER) noted that Australia has extensive and
effective civil and criminal proceeds of crime confiscation schemes (§ 141 MER),
supported by comprehensive money laundering offences which are "well drafted and
very flexible... presenting the most appealing set of options for successful prosecution
possible" (§ 82, MER).
The FATF, however, also found that Australia has conducted only a low number of
money laundering prosecutions (§ 101, MER) and that the anti-money laundering
legislative framework for customer due diligence requirements under the FTRA "is
inadequate and fails to comply with the revised FATF requirements...substantial
amendments are required" (§328, MER).
A complete listing of Australia's FATF MER ratings are listed in the below table.
Please note:
· A Compliant (C) rating is a finding that the assessment criteria of the particular
Recommendations is fully observed.
· A Largely Compliant (LC) rating indicates that there are only minor shortcomings, with a
large majority of the assessment criteria being fully met.
· A Partially Compliant (PC) rating indicates that some substantive action has been taken which
complies with some of the assessment criteria.
· A Non-Compliant (NC) rating indicates that there are major shortcomings, with a large
majority of the assessment criteria not being met.
Table 1: Australia's MER Compliance ratings (October 2005)
Forty Recommendations Rating
1. ML offence LC
2. ML offence mental element and corporate liability LC
3. Confiscation and provisional measures C
4. Secrecy laws consistent with the Recommendations C
5. Customer due diligence NC
6. Politically exposed persons NC
7. Correspondent banking NC
8. New technologies & non face-to-face business NC
9. Third parties and introducers NC
10. Record keeping PC
11. Unusual transactions PC
12. DNFBP R.5, 6, 8-11 NC
13. Suspicious transaction reporting LC
14. Protection & no tipping-off C
15. Internal controls, compliance & audit NC
16. DNFBP R.13-15 & 21 NC
17. Sanctions PC
18. Shell banks PC
19. Other forms of reporting C
20. Other NFBP & secure transaction techniques C
21. Special attention for higher risk countries PC
22. Foreign branches & subsidiaries NC
23. Regulation, supervision and monitoring PC
24. DNFBP - regulation, supervision and monitoring PC
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25. Guidelines & Feedback PC
26. The FIU C
27. Law enforcement authorities LC
28. Powers of competent authorities C
29. Supervisors PC
30. Resources, integrity and training LC
31. National co-operation LC
32. Statistics LC
33. Legal persons beneficial owners LC
34. Legal arrangements beneficial owners PC
35. Conventions LC
36. Mutual legal assistance (MLA) C
37. Dual criminality C
38. MLA on confiscation and freezing C
39. Extradition C
40. Other forms of co-operation C
Nine Special Recommendations Rating
SR.I Implement UN instruments LC
SR.II Criminalise terrorist financing LC
SR.III Freeze and confiscate terrorist assets LC
SR.IV Suspicious transaction reporting LC
SR.V International co-operation LC
SR VI AML requirements for money/value transfer services PC
SR VII Wire transfer rules NC
SR.VIII Non-profit organisations PC
SR. IX Cash couriers PC
Why is government action needed to correct the problem?
The Interpretive Notes to the FATF Recommendations state that basic obligations
should be set out in law or regulation. These include key Recommendations dealing
with customer identification, record keeping and transaction reporting.
While industry understands the reputational risks of non-compliance with the
international standards, industry will not be able to implement all necessary
AML/CTF measures without legislative backing. It is also unlikely that customers
would comply with the requirements unless they were required to do so by law.
Any measures that Australia adopts that strengthen its anti-money laundering and
counter-terrorism financing framework, and contribute to stronger prevention world-
wide will be welcomed by the global community.
On 8 December 2003 the Minister for Justice and Customs issued a media release that
announced a review of Australia's AML/CTF policy and regulation:
"Senator Ellison said the Government will now proceed with a
fundamental overhaul of Australian legislation, including the Financial
Transaction Reports Act 1988, which will balance effective regulation
and a sensible approach to the impact of the new laws on industry and
small business... Australia will now commit to implementing FATF's
revised 40 Recommendations which will require a significant review of
Australia's anti-money laundering regime, including some new measures
intended to counter terrorist financing," Senator Ellison said."
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Identification of problems and risks
FATF released their revised 40+9 recommendations in June 2003. Banking sector
industry groups (the Australian Bankers Association and the then named International
Banking and Securities Association now AFMA) wrote to the Treasurer shortly
thereafter urging the Government to take immediate action to implement the revised
recommendations so that their members could maintain their international position.
The Minister for Justice and Customs first considered whether Australia's existing
laws (with some minor amendments) were sufficient to comply with the revised
recommendations. Ultimately the Minister concluded that it was necessary to
comprehensively review Australia's legislation. This decision was vindicated in
October 2005 when FATF released a report which evaluated Australia's compliance
with the recommendations. The findings of the evaluation clearly identify that
Australia's AML/CTF regime requires far reaching review.
2 Objectives
What are the objectives of government action?
The policy objective behind this is to ensure that Australia implements the most
effective and proportionate measures to deter, detect and disrupt money laundering
and the financing of terrorism.
Effective money laundering and terrorist financing controls are required to:
Provide a disincentive to crime by reducing its profitability. Robust systems of
controls make it difficult for criminals to introduce their ill-gotten gains into the
financial systems and permit the detection, interception and confiscation of
criminal funds make it harder for individuals or groups to profit from their
crimes.
Provide a disincentive to crime by reducing the pool of money available to
finance future criminal activity. Robust systems of controls to detect, intercept
and confiscate criminal funds make it harder for individuals or groups to fund
their next crime.
Aid the detection and prosecution of crime. The intelligence provided from
money laundering and terrorist financing controls may provide leads, which can
be crucial in disrupting terrorism, money laundering and linked offences, in
convicting criminals and in identifying assets to assist civil recovery effort.
Protect the integrity of the financial system and reputation of Australian
business. The internationally competitive position of Australian business
depends upon its reputation for integrity, good governance and honest dealing.
Avoid economic and competitive distortions. Legitimate businesses are
disadvantaged when competing against businesses controlled by criminals who
may be willing to accept lower rates of return or even losses to maintain the
appearance of being legitimate investments.
The proposed legislation is intended to update Australian legislation in line with the
FATF 40 + 9 Recommendations, ensuring that Australia is in line with international
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best practice for preventing money laundering and terrorist financing. The proposed
legislation seeks to implement other Australia's international obligations and matters
of international concern including
the United Nations Convention Against Corruption (UNCAC) 2003,
the United Nations Convention Against Transnational Organised Crime
(UNTOC) 2000 (the Palermo Convention),
the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds
of Crime 1990,
the International Convention for the Suppression of the Financing of Terrorism,
United Nations General Assembly Resolutions 51/210, and
United Nations Security Council Resolutions1267, 1269, 1373, 1456 and 1617.
Is there a regulation/policy currently in place? Who administers it?
Australia's existing financial reporting regulation is the Financial Transaction Reports
Act 1988 which is administered by the Australian Transaction Reports and Analysis
Centre (AUSTRAC).
3 Options
Assessment of regulatory forms for their suitability
There are three options for implementing reforms to Australia's AML/CTF system:
retain the status quo; update the existing legislative framework; or, develop a new,
more robust legislative framework.
Retaining the status quo (the do nothing option) is an inappropriate option as
Australia's compliance with the relevant international conventions would remain
inadequate. Australia's systems would remain unable to respond to the significant
technological shift in the operation and composition of the financial system since the
introduction of the existing legislative framework (1988) and the increased risk of
terrorism financing in today's climate.
Updating the existing legislative framework should also be dismissed as a feasible
option. This legislative system is designed around cash dealing and significant
changes would be required to bring it in line with international standards and today's
financial markets which are growing more dependent on electronic commerce and
non-face-to-face business relationships. An additional obstacle would be broadening
the coverage of the existing legislation, which is essentially based on cash transactions
through the banking system, to cover other sectors such as insurance, superannuation,
bullion dealers and gambling services. This problem would be increased when it
came time to include real estate agents and jewellers.
It was therefore decided to develop a new, more robust legislative framework which
has ultimately resulted in a legislative package consisting of the AML/CTF Bill 2006
(the Bill), the AML/CTF (Transitional Provisions and Consequential Amendments)
Bill 2006 (the Transitional Bill) and a draft indicative set of AML/CTF Rules (the
Rules).
8
Development of this legislative package has been an iterative process between the
Attorney-General's Department (AGD), the Australian Transaction Reports Analysis
Centre (AUSTRAC), law enforcement agencies and industry. Since the
announcement of the legislative review in December 2003 there has been a series of
meetings between Government agencies and industry to discuss the nature and form
of the proposed legislation.
Earlier consultation was based around high level principles set out in a series of Issues
Papers which were released for several weeks for public comment. These Issues
Papers proposed a range of feasible policy options including self-regulatory and co-
regulatory approaches. In submissions made in response industry groups made it clear
that, although they may assist in developing operational guidelines and standards for
compliance it was not appropriate for them to undertake a regulatory function.
The consultation process throughout 2004 and early 2005 established that the
legislative obligations needed to respond flexibly to a range of different operational
needs across a range of different business sectors and be able to respond to both small
and large business. It was ultimately agreed that the implementation of the
obligations should be based on an assessment by the affected business of the risk of
money laundering and terrorist financing posed by the services offered and the
customer base. A risk based regulatory approach is common across other jurisdictions
which have implemented the FATF Recommendations including the United States
and the United Kingdom and has been endorsed by the Third European Union
Directive on Monday laundering and terrorist financing.
This regulatory approach would be included in a legislative framework that set out the
regulatory objectives and parameters in legislation (the AML/CTF Bill 2006 (the
Bill). Detailed guidance on how these objectives could be achieved would be set out
in subordinate legislative instruments known as the "AML/CFT Rules" (the Rules)
which would be developed in close consultation with industry. Several working
groups were established and met throughout 2005 and 2006 to draft an indicative set
of Rules that achieved the objectives of the legislation but had minimal impact on
industry. These Rules will continue to be refined and augmented throughout the life
of the regulatory regime so that industry will have an ongoing role in determining the
extent of the obligations under the regulatory regime.
As a further step towards minimising the compliance burden it was decided to
approach the new legislation in two tranches, with the first tranche covering the
financial services sector where they provide designated services and those businesses
already subject to some anti-money laundering regulation as cash dealers under the
Financial Transaction Reports Act1988. This includes banks, credit unions, building
societies, insurance companies, money remitters, bureaux de change, and trustees and
extends to casinos, TABs wagering service providers and bullion dealers.
The second tranche will cover real estate agents, jewellers, and a range of non-
financial transactions provided by accountants and lawyers. The second tranche will
focus more closely on the small business sector and will be developed once
implementation of the first tranche has commenced.
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4 Impact analysis (costs and benefits) of each option
Who is affected by the problem and who is likely to be affected by its proposed
solutions?
The issues of money laundering and terrorism financing have the potential to affect all
Australians.
Terrorism financing is an integral component of terrorism activity. Any act of
terrorism could have a far reaching impact on wide sections of the community and the
Australian economy.
Obligations under the AML/CTF Bill are imposed when entities provide designated
services. Entities providing any of the designated services listed in Tables 1-4 of
clause 6, Part 1 of the Bill are referred to as reporting entities. The services covered
by the Tables in clause 6 are separated into financial service, bullion, gambling
services and prescribed services (i.e. a service specified in the regulations).
Financial services providers
The list of financial services covered by Table 1 of clause 6 of the Bill is extensive but
these businesses will only have obligations when they provide designated services (for
example when accepting a deposit, supplying goods by way of lease, providing a
issuing a debit card, issuing or selling a security or derivative and accepting
contributions to a superannuation fund). The business types likely to be affected by
the Bill include banks, insurance providers, superannuation funds, finance and leasing
providers, stockbrokers, and remittance dealers. In addition, accountants and lawyers
will also be affected to the extent that they provide financial services (they are not
captured for providing advice and services relating to other aspects of their business).
Due to the distributional role that financial planners play in the financial sector
industry has requested that they be subject to customer identification obligations
under the Bill when they make arrangements for a person to receive a designated
service. To maintain efficiency in the distribution of financial products the financial
planning industry will have obligations limited to customer identification, record
keeping and suspicious matter reporting.
Bullion dealers
Any entity that buys or sells bullion, where the transaction is in the course of carrying
on a business, will be affected by the Bill.
Gambling service providers
Business types likely to be affected by the Bill include casinos, bookmakers, online
gambling service providers, and pubs and clubs (in their capacity as providers of
electronic gaming machines). The Bill excludes lottery type games such as instant
scratchies, keno, powerball and lotto.
The Bill will extend customer identification obligations to these sectors only to the
extent that the value of the winnings paid out reach a certain threshold. The current
threshold being negotiated with industry is AUD10,000.
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Service providers to be prescribed
The Bill contains a provision allowing the inclusion of other designated services in the
regulations so that the Government is able to place AML/CTF obligations on
providers of new products or services or to include products or services specifically
designed to otherwise avoid coverage.
Obligations under the FTRA
Many of the reporting entities under the first tranche have existing obligations as cash
dealers under the FTRA which will be similar to those that they will incur as reporting
entities providing designated services. The following table illustrates the incremental
burden on affected sectors which are covered under both existing legislation and
under the proposed new regime. It is clear that the proposed legislation builds on
existing requirements.
Existing Proposed
requirem
requirements ents
AML/CT
F Bill &
FTRA Rules
Customer identification
Ongoing customer due
diligence
Record keeping
Suspicious matter reporting
Transaction monitoring
Threshold transaction
reporting
International funds transfer
instructions
AML/CTF programs
Correspondent banking
Some obligations of the new legislation may also be currently undertaken by some
businesses despite them not forming part of the requirements of the FTRA. These
obligations may be part of good business practice or requirements under other
legislation.
Customers of reporting entities
Customers of reporting entities will be indirectly affected by the obligations imposed
by the Bill. However, the impact will be significantly reduced due to the fact that
existing customers of that reporting entity will be exempted from the identification
requirements of the Bill.
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All new customers of a reporting entity will be required to verify their identity. For
new customers of banks and some other financial institutions this will impose similar
requirements as currently imposed under the FTRA. Customer identification and
verification obligations will be new for new customers in the other sectors.
How will each proposed option affect existing regulations and the roles of
existing regulatory authorities?
The AML/CTF Bill will replace the FTRA. In doing so AUSTRAC's role will
expand to encompass a regulatory role with responsibility for monitoring and
enforcing compliance with obligations under the Bill.
Identify and categorise the expected impacts of the proposed options as likely
benefits or likely costs
The task of accurately quantifying the extent of money laundering and terrorism
financing in Australia has proven to be difficult due to the fact that our current system
is not robust enough to be able to identify the extent of the problem. It is also
inherently problematic to quantify the economic benefit of deterring, detecting, and
preventing money laundering and terrorism financing.
The very nature of money laundering means that there is very little reliable data on the
extent and impact of the crime. Unlike a burglary, theft or assault, the crime of
money laundering is not visible there are no immediate victims to report the crime.
Without reports or prosecutions the magnitude of the problem can only be estimated.
This difficulty is supported by international experience in several jurisdictions
including the United States and the United Kingdom. Officers from the US Treasury
have confirmed that there has been no formal cost benefit analysis done of AML/CTF
legislation. The FATF confirm the difficulty and state that "it must be said that
overall it is absolutely impossible to produce a reliable estimate of the amount of
money laundered and therefore the FATF does not publish any figures in this regard".
The most recently released study of the problem in Australia was the AUSTRAC
report Estimates of the Extent of Money Laundering In and Throughout Australia by
John Walker Consulting Services (1995). This study also highlights the difficulties in
reaching conclusive results:
Assembling all the estimates of the extent of money laundering is an interesting exercise, as it
demonstrates the wide range of opinions held by those who are regarded as experts in the field.
A range of between $1000 and $4500 million would appear to be a sensible interpretation of the
information provided in these sets of estimates, with perhaps some confidence that the most
likely figure is around $3500 million, since this figure lies within all three estimate ranges.
There is no doubt that the estimates contained in this report cannot be used in isolation with
absolute confidence.
Therefore, the extent of money laundering according to the Walker report can be best
estimated to be $3.5B, and up to an estimated $4.5B.
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The International Monetary Fund has stated in 1996 that the aggregate size of money
laundering in the world could be somewhere between two and five percent of the
world's gross domestic product. For the Australian economy this equates to as much
as $11.5B per year.
It is perhaps even more problematic to accurately quantify the benefit of stopping a
terrorism attack. Despite an ongoing threat, effective policing, monitoring and
surveillance help to minimise the risk of a terrorism attack, and it is difficult to derive
a probability of such an attack occurring. Attempting to measure the cost of a
potential attack is perhaps more difficult and would depend on a number of variables
including the location, casualties, property damage, infrastructure damage etc in
conjunction with intangible effects such as loss of confidence and productivity.
Despite the difficulty in quantifying the benefits of the proposed legislation, there are
clearly benefits to be gained from preventing money laundering and terrorism
financing as outlined under Objectives above.
Establishing an accurate measure of the likely costs of the proposed AML/CTF
regime is also an extremely difficult task for several reasons:
The AML/CTF obligations are designed to apply flexibly according to the
affected business's assessment of risk. Several businesses will be entitled to
exemptions from some obligations under the Bill and many will offer products
the value of which will fall below applicable thresholds. Finally obligations
under the legislation will be implemented according to a phased program which
permits those obligations which are most costly for industry to be implemented
24 months after commencement. The degree of in built flexibility in the
regulatory regime makes it hard for firms to estimate up front the costs they will
face.
It is difficult to then aggregate and analyse survey results due to the wide variety
of firms that are affected by the proposals and the numerous different approaches
that firms might take to implementation. This variety again limits our ability to
audit responses. It also means that for any one type of firm there is a limited
amount of evidence about costs. This increases the level of uncertainty
surrounding them.
Some of the aspects of the proposed AML/CTF regime are already undertaken by
some entities as part of their obligations under the FTRA and/or as part of their
fraud protection measures. It is difficult to know whether estimated costs for the
proposed legislation include some costs otherwise attributable to pre-existing
measures.
5 Consultation
Who are the main affected parties?
The main affected parties are those that provide services identified in the tables 1, 2
and 3 of clause 6 of Part 1 of the AML/CTF Bill. The parties likely to be affected by
the Bill include the financial services industry, gambling service providers, bullion
dealers, and accountants and lawyers to the extent that they provide financial services.
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Consultation with affected parties has taken place over nearly three years through:
Issues papers - from 24 January 2004, the Attorney General's Department
progressively released five industry-specific issues papers outlining anti-money
laundering regulatory options. 46 submissions were received in response.
On 24 June 2004, the Minister for Justice and Customs released a paper outlining
the Australian Government's Policy Principles on implementing the FATF's new
anti-money laundering and counter-terrorism financing standards. The exposure
Bill and sample AML/CTF Rules released in December 2005 reflected the key
principles in the Policy Principles Paper.
Industry and public consultation in 2004 - From January 2004 until mid 2005 the
Department conducted a series of presentations to a wide range of industry
groups based on the Issues Papers and the Policy Principles. Dozens of bilateral
meetings took place and public consultation forums were held in Sydney and
Melbourne.
Roundtable meetings 2005 - the Minister for Justice and Customs, Senator the
Hon Chris Ellison, held a series of round table meetings with industry from July
to September 2005. Industry sectors involved in the round table meetings
included representatives of the financial services sector and the gambling sector
as well as the accounting and legal professions.
Ministerial Advisory Group - The Minister for Justice and Customs established a
Ministerial Advisory Group involving representatives of selected industry
associations for high level discussion of AML/CTF implementation options for
Australian industry as a whole and for each of the affected industry sectors. The
Group, which also included representatives from Treasury, the Australian
Transaction Reports and Analysis Centre (AUSTRAC) and the Office of Small
Business, met on 11 March, 24 June and 2 December 2004.
The Advisory Group was later reconstituted in January 2006 following the release
of the exposure draft Bill to include other affected sectors. The reconstituted
Advisory Group has since met on four more occasions.
Systems working groups - At the third meeting of the Ministerial Advisory Group
it was agreed that a Systems Working Group be established to examine key
implementation issues arising from proposed AML/CTF reforms. The work of
the Group informed preparation of the exposure Bill.
Additional and more specialised working groups were formed in January 2006
following the release of the exposure draft Bill to cover issues specific to the draft
legislation.
An exposure draft Bill was released for a period of four months consultation in
December 2005. A revised exposure draft Bill and draft Rules were released for
a further period of three weeks public consultation in July 2006. The two public
consultation periods resulted in over 200 submissions
14
Draft documents and explanatory information have also been publicly available
on the AGD website.
Senate Legal and Constitutional Committee the exposure draft Bill was referred
to the Committee in February 2006. Submissions were called for and public
hearings were held and a report handed down on 13 April 2006.
A continuous program of meetings between the Department, AUSTRAC and affected
industry sectors has taken place throughout the process to ensure that all views and
opinions have been given due consideration.
What are the views of those parties?
Submissions from industry illustrate that there is general agreement from industry
regarding:
The broader need for AML/CTF reform: numerous submissions recognised the
need for a robust anti-money laundering and counter-terrorism financing regime
and supported both FATF's Recommendations and the Australian government's
commitment to addressing money laundering and terrorism financing risks.
The risk-based framework of the legislation: several submissions noted that the
best way to address AML/CTF reforms was by incorporating a risk-based
approach, and supported the Government's commitment to ensuring that a risk-
based approach was reflected in the new laws.
The extent of the consultation process: the consultation process conducted by the
Minister for Justice and Customs, the Department and AUSTRAC has been
widely acknowledged and supported.
6 Conclusion and recommended option
Provide a brief summary of the assessment of each option
The do nothing option
The existing AML/CTF regime is incapable of addressing up to an estimated $11.5B
in money laundering per year in Australia. Equally, the existing FTRA (enacted in
1988) is now outdated and is not sufficiently robust and flexible to counter the threat
to national security caused by the financing of terrorism.
In October 2005 Australia was evaluated on its existing AML/CTF regime and was
found to be significantly non-compliant with approximately half of the FATF
Recommendations. Australia remains one of the least compliant countries assessed to
date in the current round of FATF evaluations. The system implemented by the
FTRA is clearly lagging behind international best practice and is at risk of
jeopardising Australia's financial market reputation.
The mutual evaluation process is enhanced by the FATF's policy for dealing with
members not in compliance with its recommendations. The measures contained in
15
this policy represent a graduated approach aimed at reinforcing peer pressure on
member governments to take action to tighten their anti-money laundering systems.
The policy starts by requiring the country to deliver a progress report at plenary
meetings and, as a final measure, the FATF membership of the country in question
can be suspended.
Failure to meet the international standards will be problematic for Australia's
financial services sector as the international financial services sector is obliged to take
into account adequacy of AML/CTF compliance when dealing with foreign
counterparts and jurisdictions. Failure of businesses to meet international standards
puts at risk international business relationships, as well as the reputation of individual
companies and the Australian financial market in general.
Retaining the existing anti-money laundering and counter-terrorism financing regime
is not a viable long-term solution.
New legislation option
The legislative package of the Bill, the Transitional Bill and the Rules implements a
new and robust AML/CTF system in Australia. The legislative package implements a
risk-based approach to AML/CTF regulation which achieves the regulatory objectives
with minimal burden and impact on affected sectors.
The proposed legislation replaces an outdated regime with a regulatory system more
attuned to a modern and dynamic financial market characterised by increased
electronic commerce and non-face-to-face transactions.
Importantly, the proposed legislation takes steps to improve Australia's compliance
with international standards and preserve Australia's financial market reputation.
What is the preferred option(s)?
Implementation of the regulatory system established by the legislative package
follows international best practice and generates the greatest net benefit for the
community taking into account all impacts.
Briefly outline the main assumptions that the conclusion rests upon
A risk based approach to regulation has been endorsed by the "Report of the
Taskforce on Reducing Regulatory Burdens on Business". The benefits from a more
risk based approach are as follows:
i. industry can focus on real risks allowing for better risk mitigation and better
cost benefit;
ii. industry have the flexibility to adapt to risks that change over time;
iii. there is less inconvenience to the majority of customers who are not
criminals;
iv. the purpose of AML/CFT tools is clearer which achieves more "buy-in" from
industry and staff;
v. there is no single blueprint for the criminal to discover and avoid;
vi. industry is required to engage with AML/CFT more thoughtfully and to bring
their expertise to bear on the issues
vii. recognises that industry is best place to assess their own individual exposure
to money laundering/terrorist finance risk
16
Why is this option preferred and others rejected?
The do nothing and update options were rejected as they would have been
ineffective in meeting international best practice. The existing system is based on
cash dealing and does not lend itself to extended coverage and the changing financial
market environment. The existing system is based on a prescriptive regulatory
framework making it difficult to tailor obligations to business efficiency.
The preferred option updates Australia's AML/CTF systems in line with international
best practice. The preferred option recognises industry's experience and knowledge
and builds on core business practice. It shifts the management of money laundering
and terrorism financing risk to the business sector and allows business to adapt the
obligations to the risks they face, thereby minimising costs and maximising
operational efficiency.
7 Implementation and review
How will the preferred option be implemented?
The obligations of the legislation will be progressively phased in over a three year
period to reflect the complexity of, and resources required for, each part of the Bill.
Upon Royal Assent certain parts of the Bill will become active. Other parts will
become active at periods of six, 12 and 24 months after Royal Assent. The
implementation schedule has been negotiated and designed by industry
representatives and government agencies and incorporates the concept of a
prosecution-free period. The prosecution-free period affords businesses an
additional 12 months to become compliant with that active part of the legislation so
long as they are making best endeavours to comply.
The implementation schedule for the obligations of the Bill is as follows:
End of
Implementation
Obligation Part of the Bill prosecution-
Date free period
1 Jan 2007 Royal Assent (estimated)
1 Jan 2007 31 Dec 2007
Records of transactions, Parts 1, 4, 5, 6, 9,
records of funds transfer 10 (Div 2 & 4), 11
instructions, and various 17, 18 (except
administrative Parts s204A), and all
exemption
provisions
1 July 2007 30 June 2008
Reporting obligations of Parts 3 (Div 5), 8,
reporting entities, 10 (Div 5)
correspondent banking,
record-keeping requirements
1 Jan 2008 31 Dec 2008
Identification procedures, Parts 2 (except
AML/CTF Programs, record- Div 6), 7, 10 (Div
keeping requirements 3)
1 Jan 2009 31 Dec 2009
Identification procedures, Parts 2 (Div 6), 3
17
reporting obligations of (Div 2, 3, &4),
reporting entities s204A
Is the preferred option clear, consistent, comprehensible and accessible to users?
Yes. The legislative package will be enhanced and clarified through guidelines to be
issued by AUSTRAC. The guidelines will be developed with the assistance of
industry bodies and will assist industry to understand their obligations and provide
guidance on meeting the requirements of the legislation. An Explanatory
Memorandum to the Bill will also clarify the intent of the Bill.
The risk based regulatory approach implemented by the legislative package depends
on a strong partnership and ongoing dialogue between regulated sectors, AUSTRAC
and government policy makers which will be achieved through the continuation of
standing consultative bodies comprising stakeholder representatives.
The new AML/CTF regime will also be explained to the wider community through a
public education campaign.
Is it sufficiently flexible to adapt to various situations and circumstances?
Yes. The legislation is risk-based which allows all business (large or small, and
regardless of industry) to put in place systems that suit their business size and level of
money laundering and terrorism financing risk.
The framework of the legislation is established in the Bill, however the legislative
detail is set out in the Rules which can be amended to adapt to changing situations and
circumstances.
What is the impact on business, including small business, and how will
compliance and paper burden costs be minimised?
A number of steps have been taken to minimise the burden on legitimate business.
The risk-based framework of the proposed legislation is the primary means of
minimising this burden by providing business with the flexibility and opportunity to
structure their AML/CTF programs to the money laundering and terrorism financing
risked faced in their specific situation. Furthermore, business has played a direct role
in the development of the Rules which has helped to ensure that unnecessary
requirements have been avoided.
The implementation strategy negotiated and agreed with business should also
minimise the cost burden of the proposal. The staggered implementation means that
industry will be given more time to implement those elements of the legislation that
are more complex and resource intensive.
How will the effectiveness of the preferred option be assessed? How frequently?
The responsible Minister is required to cause a review of the operation of the
legislation within seven years of commencement. The effectiveness of the proposed
legislation will also be measured by the next mutual evaluation of Australia's
AML/CTF regime by FATF. This evaluation is not scheduled to take place for six to
eight years. However, it will be possible to self-assess Australia's compliance to
gauge improvements made under the proposed legislation.
18
Given the industry has a role in the development of the rules, at an operation level it is
reasonable to predict that the AML/CTF legislative package will undergo a period of
almost continual assessment, with changes made as the need arises.
The main intermediate, quantifiable benefits of the legislative package would be an
improvement in the intelligence available to law enforcement and prosecutors, with a
resultant increase in:
suspicious matter reports received from businesses newly included within the
regulated sector;
criminal convictions (for the predicate or money laundering offence) to which
these reports contributed;
the value of criminal assets confiscated and the cash forfeited to which these
reports contributed; and,
disruptions of criminal activity.
It is important to note that increases in the number of convictions and confiscation
orders against launderers or prosecution for breaches of the Regulations will not be
the strongest indicator of the proposals' success. The Government's objectives will
also be promoted by disrupting and deterring criminal activity, neither of which will
lead to convictions or confiscations. As with other law enforcement measures, it is
certainly not necessary that AML/CTF regulation be self-funding.
If the preferred option takes the form of regulation, is there a built-in provision
to review or revoke the regulation after it has been in place for a certain length
or time?
Yes. The responsible Minister is required to cause a review of the operation of the
legislation within 7 years of commencement. Given the nature of the problem, there
is no current intention to revoke the legislation at any time.
Abbreviations Used in the Explanatory Memorandum
AML Anti-Money Laundering
CTF Counter-Terrorism Financing
DNFBP Designated Non-Financial Business and Professions
FATF Financial Action Task Force
FTRA Financial Transaction Reports Act 1988
FATF SR (1-9) Refers to a Special Recommendation on Terrorist
Financing by the Financial Action Task Force. There
are Nine such recommendations, referenced by the
relevant number after the "FATF SR" abbreviation.
19
NOTES ON CLAUSES
Part 1--Introduction
Clause 1 Short title
This clause provides that the short title of the Act is the Anti-Money Laundering and
Counter-Terrorism Financing Act 2006.
Clause 2 Commencement
This clause provides the Commencement dates for particular provisions of the Bill.
Column 1 lists particular provisions either by reference to a Part or Division within a
Part, or in some instances, by reference to the clause numbers.
Column 2 provides the Commencement day for the relevant entry in Column 1. The
Commencement dates have been listed by reference to a period after the Bill receives
Royal Assent.
Column 3 has been inserted in order to allow for additional information, such as the
actual date of Commencement to be added at the appropriate time.
The approach taken in ordering commencement dates in items in the table in Clause 2
is to stagger commencement of respective Parts according to the degree of difficulty
in implementing the obligations imposed on reporting entities by particular Parts. On
the other hand Parts which provide powers and administrative framework for the
continuation of the Australian Transaction and Reports Analysis Centre (AUSTRAC)
will commence on Royal Assent so that appropriate arrangements with regard to them
can commence as soon as possible.
For example, the following Parts commence the day after the Bill receives Royal
Assent:
Part 1 Introduction
Part 4 - Reports about cross-border movements of physical currency and
bearer negotiable instruments
Part 5 - Electronic Funds Transfer Instructions
Part 6 - Register of Providers of Designated Remittance Services
Part 9 - Countermeasures
Part 10, Record-keeping requirements - Divisions 1, 2, 4 and 7
Part 11 - Secrecy and Access
Part 12 - Offences
Part 13 - Audit
Part 14 - Information gathering powers
Part 15 - Enforcement
Part 16 - Administration
Part 17 - Vicarious Liability
20
Part 18 - Miscellaneous
Schedule 1 - Alternative Constitutional Basis
The remaining provisions are to commence within 6 and 24 months of Royal Assent,
depending on the extent to which it is anticipated that business changes will be
required in order to achieve compliance with the Bill. Consultation between industry
and AUSTRAC has occurred to settle these Commencement times.
The following obligations are to commence 6 months from the day after Royal
Assent:
Part 3, Division 5 - Reporting obligations of reporting entities
Part 8 - Correspondent banking
Part 10, Division 6 Records about due diligence assessments of
corresponding banking relationships
The following obligations are to commence within 12 months of the day after Royal
Assent:
Part 2, excluding Division 6 Identification Procedures (excluding
requirements for ongoing customer due diligence)
Part 7 Anti-Money Laundering and Counter-Terrorism Financing programs
Part 10, Division 3 Record-keeping requirements (records of identification
procedures)
Part 10, Division 5 Records about anti-money laundering and counter-
terrorism financing programs
The following obligations are to commence within 24 months from the day after
Royal Assent to facilitate industry transition to the new requirements:
Part 2, Division 6 Ongoing Customer Due Diligence
Part 3, Divisions 1, 2, 3, 4 and 6 Reporting Obligations
Clause 3 Objects
This clause sets out the objects and purpose of the Bill and thereby indicates the
constitutional bases supporting the Bill. The objects of the Bill are to fulfil
Australia's international obligations and address matters of international concern
including the need to combat money laundering and terrorist financing.
Sub-clause 3(2) lists international Conventions and United Nations Security Council
Resolutions by which Australia is bound and which contain relevant international
obligations.
Sub-clause 3(3) lists relevant international instruments which reflect international
concern about money laundering and terrorist financing.
The Bill, which is intended to give effect to the FATF 40 Recommendations on
Money Laundering and to the FATF Special Recommendations on Terrorist
Financing, is supported by the external affairs power. The external affairs power is a
21
general purposive head of power under the constitution and is not confined to the
implementation of treaty obligations. It will support laws that give effect to a matter
of international concern, reflected in the outcome of an international negotiation such
as has produced the FATF Recommendations. As a proportionate response to
achieving the objectives of the FATF Recommendations the Bill is supported by the
external affairs power.
However the objects clause does not itself give the Bill its character with respect to a
head of power under the constitution. The actual operation and effect of the Bill will
do that. An objects clause is relevant to the construction of a provision and is useful
where a purposive power, like the external affairs power, is being relied upon in
spelling out the intended purposive basis.
The Bill relies for its general operation on the broad purposive external affairs power
but in addition it also relies on the heads of power set out in Schedule 1. This
approach has been adopted to ensure that the Bill does not go beyond power in
reliance on the purposive head of power and to ensure that the other heads of power
set out in Schedule 1 may also be relied upon.
Clause 4 Simplified Outline
This clause includes a table setting out a simplified outline or scheme of the Bill. In
brief the scheme is that financial institutions, or other legal or natural persons who
provide a designated service listed in column one of the tables in sub-clause 6(2) of
the Bill, to the customers listed in column two of the tables will be reporting entities
who thereby acquire responsibilities under the Bill.
In general terms reporting entities must carry out a procedure to verify a customer's
identity before (or in some special cases, after) providing a designated service.
Existing customers of reporting entities and certain services which are considered to
pose a low risk of money laundering or terrorist financing have modified
identification procedures.
Reporting entities must report to the AUSTRAC CEO suspicious matters, transactions
which exceed a certain threshold and international funds transfer instructions.
Cross-border movements of currency above a threshold must be reported to the
AUSTRAC CEO or a customs or police officer. Where requested, a person must
report cross border movements of Bearer Negotiable Instruments.
Electronic funds transfer instructions must include customer originator information.
Providers of designated remittance services must be registered with the AUSTRAC
CEO. Reporting entities must develop anti-money laundering and counter terrorism
financing programmes. Financial institutions are subject to restrictions as to entry of
correspondent banking relationships. Reporting entities must comply with certain
record keeping obligations.
22
Clause 5 Definitions
account - this term is used in the tables of designated services in clause 6 especially
at item 1 in table 1 (opening an account - see also the explanatory memorandum on
the definition of the term opening ). It is included to ensure that a designated service
that involves operation of an account includes accounts where the holder's interest is
not recorded in dollar terms but in the form of unit holdings such as in a cash
management trust or other trust as prescribed by the AML/CFT Rules (see
explanatory memorandum on the definition of the term AML/CFT Rules)
account provider - this term is defined in relation to the term account which is
separately defined (see explanatory memorandum for account ) and means a person
with whom an account is held. This term is used in items 1 and 2 in Table 1 in
clause 6.
acquiring the definition leaves the term to be read according to its ordinary
meaning and the words is taken to be are intended to extend the ordinary meaning.
The definition also provides that the term includes anything that under the regulations
is taken to be acquiring for the purposes of the Bill. This will enable regulations to be
made to capture activity designed to circumvent obligations under the Bill.
ADI - this is an abbreviation for the term authorised deposit taking institution . The
term has the same meaning as in section 3 of the FTRA. It is used in items 1, 2, 3, 4,
5, 17 and 24 of Table 1. It is also relevant to the definition of the term owner-
managed branch in clauses 5 and 12, to the owner managed branch exception to the
tipping off provision in sub-clause 123(8), to electronic funds transfer obligations
under clauses 8 and 9, and to record retention obligations in clause 109 and clause
110.
AFP member - defined as a member or special member of the Australian Federal
Police, this term is relevant to definitions of investigating officer , police officer and
is used in the secrecy and access provisions in Part 11.
agency - this term enables a Department of the Commonwealth, a State or Territory
to be referred to as an agency thereby enabling such Departments to be included in the
definition of the term designated agency in clause 5 (see explanatory memorandum on
designated agency). The term is also used in the definition of non-designated
Commonwealth agency and is relevant to the definition of official and government
body. The term is used in clause 126 regarding AUSTRAC authorising access to a
designated agency, and throughout Part 11 (Secrecy and Access)
allowing a transaction - this phrase is used in item 3 of Table 1 and refers to
allowing a transaction to occur. The term means that, irrespective of whether the
person had a discretion to provide the service, the obligations under the Bill will still
apply when the reporting entity provides the designated service.
AML/CTF Rules an abbreviation of Anti-Money Laundering/Counter-Terrorism
Financing Rules, the AML/CTF Rules are those made by AUSTRAC under clause
229 (see explanatory memorandum for clause 229).
anti-money laundering and counter-terrorism financing program - includes a
standard, joint or special anti-money laundering and counter-terrorism financing
program as provided in clause 83 (see explanatory memorandum on clause 83).
23
applicable customer identification procedure - this phrase is relevant to meeting
obligations under Part 2 in accordance with the anti-money laundering and
counter-terrorism financing program which a reporting entity must adopt and comply
with in accordance with Part 7 (see explanatory memorandum on Part 7). This term
has the meaning ascertained in Part B of an anti-money laundering and
counter-terrorism financing program that applies to, and has been adopted by the
reporting entity. If the designated service is provided under item 54 of table 1 the term
has the meaning provided in the term special anti-money laundering and counter-
terrorism financing program which term is defined in clause 86 (see explanatory
memorandum on clause 86).
approved - this term is used to refer to an approval by the AUSTRAC CEO in the
following sub-clauses: 41(3)(a), 43(3)(a), 45(3)(a), 47(3)(a), 50(6)(a), 53(8)(a),
59(2)(a), 65(4)(a), 76(2), 146(2), 244(1)(b) and 244(2)(b)
approved deposit fund this term is defined to have the same meaning as in the
Superannuation Industry (Supervision) Act 1993 (SIS Act) which is a fund that:
(a) is an indefinitely continuing fund; and
(b) is maintained by:
(i) an approved trustee; or
(ii) an RSA licensee that is a constitutional corporation; and
(c) is maintained solely for approved purposes.
The SIS Act defines the term approved purposes as including specified purposes
under the Income Tax Assessment Act 1936, the Superannuation Guarantee
(Administration) Act 1992, purposes approved by the rules of the superannuation fund
or otherwise approved by Australian Prudential Regulation Authority (APRA).
approved third party bill payment system this term is only used in sub-clause 67(1)
which provides that Part 5 (electronic funds transfer instructions) does not apply to an
instruction arising from the use of an approved third-party bill payment system.
Approved systems will be those prescribed by the AML/CTF Rules (see explanatory
memorandum on AML/CFT Rules). An example of a system that could be approved
by the Rules is B Pay .
arrangement - this broad and inclusive definition of the term arrangement is
incorporated into the definition at clause 10 of the term designated remittance
arrangement. Designated remittance arrangements are designated financial services
at items 31 and 32 in table 1 of sub-clause 6(2). The term designated remittance
arrangement also appears at items 3 and 4 of the table in clause 46. This table lists
types of international funds transfer instructions and items 3 and 4 include such
instructions given by a transferor entity under a designated remittance arrangement.
The term arrangement also appears in clauses 12, 109, 110 and 245.
ASIO - is defined as the Australian Security Intelligence Organisation this term is
relevant to definitions in clause 5 of ASIO Minister, ASIO official and designated
agency and to the provisions in Part 11, Division 4 (access to AUSTRAC information
by agencies).
ASIO Minister - is defined as the Minister responsible for administering the
Australian Security Intelligence Organisation Act 1979 and is relevant to provisions
24
in Part 11, Division 4 at paragraph 128(19) (access to AUSTRAC information by
IGIS officials).
ASIO official - is defined as either the Director-General of Security, or, a person
employed under paragraph 84(a) or 84(b) of the Australian Security Intelligence
Organisation Act 1979 and is relevant to provisions in Part 11, Division 4 (access to
AUSTRAC information by agencies) at sub-clauses 128(13) and (14) and at sub-
clause 128(19).
AUSTRAC is an acronym for Australian Transaction Reports and Analysis Centre
which is an agency continued under clause 209 (see explanatory memorandum for
clause 209). The definition is relevant to the definition of AUSTRAC CEO and
AUSTRAC information as well as to provisions in Parts 3, 4, 5, 6, 8, 11, 12, 13, 15, 16
and 18.
AUSTRAC CEO - is defined as the Chef Executive Office of AUSTRAC who is
appointed under Part 16, Division 3. This definition is relevant to definitions of
AUSTRAC , authorised officer and eligible collected information . The definition is
also relevant to provisions in Parts 3, 4, 5, 6, 8, 11, 12, 13, 14, 15, 16 and 18.
AUSTRAC information this definition is used mainly in Part 11 (Secrecy and
Access). This includes, but is broader than the term FTR information in the FTRA,
and includes not only all information received by the AUSTRAC CEO under this Bill
(including information obtained by an authorised officer see explanatory
memorandum on authorised officer ) or any other Commonwealth law or under a law
of a State or Territory but also information received from Commonwealth, State,
Territory and foreign governments or their agencies or authorities (as per the
definition in clause 5 of the term eligible collected information -see explanatory
memorandum on eligible collected information ) but also AUSTRAC's compilation
and analysis of any information received by it. It is not intended that public
information or information from public sources received by AUSTRAC becomes
subject to secrecy under the Bill but rather that the analysis made by AUSTRAC of
such information is subject to secrecy.
Australia this definition includes, when used in a geographical sense, the external
Territories of Australia, and is relevant to the definition of Australian Account and to
provisions in all Parts of the Bill.
Australian account this term is defined to mean an account held in Australia and
relates to the definition of Australia in this Part.
Australian Commission for Law Enforcement Integrity officer - this term is defined
to mean a member of staff of the Commission and is included because the
Commission is a designated agency (see explanatory memorandum for designated
agency )
Australian financial services licence the term is defined to have the same meaning
as in Chapter 7 of the Corporations Act 2001. The term is used in item 54 of table 1
in clause 6 (see explanatory memorandum for this item) and in Division 3 of Part 7
(AML/CTF programs).
Australian government body this term is defined as either the Commonwealth, a
State or a Territory, or an agency or authority of the Commonwealth, a State or a
25
Territory and is relevant to clause 123 (offence of tipping off) and clause 190(2)
(monitoring of compliance).
authorised officer the term is defined to mean the AUSTRAC CEO or a person
appointed by the AUSTRAC CEO under clause 145 of the Bill. Authorised officers
have powers under Parts 13, 14 and 15 of the Bill.
batched electronic funds transfer instruction - this phrase is relevant to clause 70
regarding required transfer information in relation to electronic funds transfer
instructions. The phrase enables several individual electronic transfer instructions
which have been accepted by an ADI or bank to be dispatched together in a single file
such that the complete payer information (see explanatory memorandum for this term
in clause 5 and clause 71) only needs to apply to the batch as a whole rather than to
each individual instruction (see explanatory memorandum for clause 70))
bearer negotiable instrument - the term is defined in clause 17 (see explanatory
memorandum on clause 17). It is defined in clause 17 in the singular and paragraph
23(b) of the Acts Interpretation Act 1901 provides that the singular includes the plural
beneficiary institution - this term is relevant to the provisions in Part 5 and is
explained in clauses 8 and 9 in terms of the different scenarios in which a funds
transfer instruction may be sent that is, a multiple-institution-person-to-person
electronic funds transfer instruction, a same institution person-to-person electronic
funds transfer instruction, a multiple -institution same-person electronic funds
transfer instruction, or a same-institution same person electronic funds transfer
instruction (see explanatory memorandum for clause 8 and 9).
bet - this term is used in items 1 - 4 of table 3 in clause 6
bill of exchange the term is defined to have the same meaning as in section 51(xvi)
of the Constitution but does not include a cheque. The reference to the constitutional
meaning is a mechanism to enable the meaning of the term to incorporate continuing
judicial interpretations of the term. When used in the Bill the term can be understood
to include an unconditional order in writing addressed by one person to another,
signed by the person giving it, requiring the person to whom it is addressed to pay on
demand or at a fixed or determinable future time a sum certain in money to or to the
order of a specified person or to bearer.
borrow - this term has its ordinary meaning corresponding with loan.
building society the definition of this term includes a society registered or
incorporated as a co-operative housing society or similar under either State or
Territory law, or, the law of a foreign country or part of a foreign country. This
definition is relevant to the definition of financial institution and also to clauses 6 to
10 inclusive.
bullion the definition states that bullion includes anything, that under the
regulations, is taken to be bullion for the purposes of the Bill. The term bullion
therefore has its ordinary meaning and the words is taken to be are intended to extend
the ordinary meaning. The definition is not affected by any other definition in the
Bill.
26
business the definition is intended to ensure that when the term is used in the Bill
that it will be given a broad interpretation for example when it is used in the phrase (in
the course of carrying on a business) (see various items in the tables of designated
services in clause 6 of the Bill for example items 6 to 13 inclusive.
business day this term is defined because numerous clauses in the Bill require
certain actions to take place within a certain number of business days from the
happening of a particular event.
civil penalty order the term means an order under clause 175 whereby the Federal
Court may order a person to pay the Commonwealth a pecuniary penalty (see
explanatory memorandum on clause 175).
civil penalty provision the term means a provision declared by the Bill to be a civil
penalty provision. Division 2 of Part 15 contains provisions dealing with the operation
of civil penalty provisions. There are civil penalty provisions contained throughout
the Bill.
commence to provide a designated service this definition covers instances in which
a service is provided over a period of time (eg holding an account for a customer), as
well as those provided at a point in time (eg facilitating a one-off transaction for a
customer). Reporting entities pick up obligations under Parts 2, 3, 7 and 10 when they
commence to provide , or provide a designated service (see explanatory
memorandum on provide , designated service and reporting entity ).
Steps taken preparatory to the provision of a designated service are not considered to
be part of commencing to provide the service.
commercial goods carrier this term is defined as a person who, in the normal
course of business carries goods or mail for reward. This definition is relevant to
clause 53 (reports about the movements of physical currency into or out of Australia
see explanatory memorandum for clause 53).
commercial passenger carrier this term is defined as a person who, in the normal
course of business carries passengers for reward. This definition is relevant to clause
53 (reports about the movements of physical currency into or out of Australia see
explanatory memorandum for clause 53).
Commonwealth place this term is defined as either a Commonwealth place as
defined by the Commonwealth Places (Application of Laws) Act 1970, or, a place in a
Territory which is owned by the Commonwealth. This definition is relevant to
Schedule 1 of the Bill (alternative constitutional basis). Commonwealth place is
defined in the Commonwealth Places (Application of Laws) Act 1970 to mean a place
(not being the seat of government) with respect to which the Parliament, by virtue of
section 52 of the Constitution, has, subject to the Constitution, exclusive power to
make laws for the peace, order, and good government of the Commonwealth.
Commonwealth Royal Commission this term is has the same meaning as defined
under the Royal Commissions Act 1902. The Royal Commissions Act defines this
term as, any commission of inquiry issued by the Governor-General by Letters of
Patent in the pursuance of this Act or of any other power, and includes the members
of the commission, or a quorum thereof, or the sole Commissioner, sitting for the
27
purposes of the inquiry. This definition is relevant to the definition of designated
agency clause 22 of the Bill (officials of designated agencies).
company has the same meaning as in the Income Tax Assessment Act 1997 which
provides that it means a body corporate, or any other unincorporated association or
body of persons, but does not include a partnership or a non-entity joint venture.
complete payer information this term is defined to have the meaning in clause 71
(see explanatory memorandum for clause 71).
compliance record - a compliance record is one that relates to the obligations of the
reporting entity under this Bill, the regulations or the AML/CTF Rules as well as any
record, copy or extract retained under Part 10 by the reporting entity. The term is used
in clause 148 in relation to the search powers of an authorised officer.
Constitutional corporation this term means a corporation to which paragraph
51(xx) of the Australian Constitution applies. This definition is relevant to Schedule
1 of the Bill.
contribution - this term is defined in the Retirement Savings Accounts Act 1997
(RSA Act - in relation to retirement savings accounts) to include a deposit into an
account held at an authorised deposit-taking institution or a prescribed financial
institution and a payment of a premium to a life insurance company. The definition
extends the ordinary meaning of the word contribution in relation to the RSA Act but
where the word contribution is used elsewhere in the Bill not in relation to the RSA
Act it has its ordinary meaning.
controller - this term is defined in clause 13. It is relevant to item 5 and 10 in table 3.
control test - the control test is used to determine whether an individual is in control
of a company, or trust. This provision is relevant to determining whether a company
or trust is a resident of a particular country in accordance with clause 14. The control
test is also used to assess whether a corporation is affiliated with another corporation
for the purpose of determining whether it is a shell bank in accordance with clause 15.
correspondent banking this term is relevant to Part 8 of the Bill and only relates to
obligations of reporting entities within table 1 of sub-clause 6(2) (table 1 deals with
designated services provided by financial institutions). The term is defined to mean a
relationship for the provision of banking services by one financial institution to
another where the financial institutions are in different countries. AML/CTF Rules
may specify the types of relationships not covered by the definition and may also
specify services which are or are not banking services. For example, AML/CTF
Rules may specify that exchange of SWIFT keys are not banking services, or that
certain wholesale banking services may be excluded from the definition of
correspondent banking relationship.
country this term is defined to include both Australia and any foreign country, and
is relevant to all Parts of the Bill.
credit card This terms is defined to have the same meaning as section 63A of the
Trade Practices Act 1974 which defines credit card as an article that is of a kind
described in one or more of the following paragraphs:
28
(a) an article of a kind commonly known as a credit card;
(b) a similar article intended for use in obtaining cash, goods or services on
credit;
(c) an article of a kind that persons carrying on business commonly issue to
their customers or prospective customers for use in obtaining goods or services
from those persons on credit;
(b) or an article that may be used as an article referred to in paragraph (a), (b) or
(c).
custodial or depository service - see explanatory memorandum for providing a
custodial or depository service. This term is used in item 46 of table 1.
customer clause 6 provides that the customer is the person to whom the designated
service is provided by the reporting entity. The customer is specified in column 2 for
every entry in column 1 of the tables in clause 6. The definition further clarifies that
the term explicitly includes a prospective customer. This definition is relevant to the
definition of applicable customer identification procedure , non-reportable
transaction and receives a designated service , as well as provisions throughout the
Bill.
Customs officer means either a Chief Executive Officer of Customs, or, an officer
of customs as defined under the Customs Act 1901. The Customs Act defines this as a
person:
(a) employed in the Customs; or
(b) authorised in writing by the CEO under this Act to perform all of the functions of an
officer of Customs; or
(ba) who from time to time holds, occupies, or performs the duties of an office or position
(whether or not in or for the Commonwealth) specified in writing by the CEO under
this Act for the purposes of this paragraph, even if the office or position does not
come into existence until after the CEO has specified it;
and includes:
(c) in relation to a provision of a Customs Act--a person:
(i) authorised in writing by the CEO under this Act to perform the functions
of an officer of Customs under that provision; or
(ii) who from time to time holds, occupies, or performs the duties of an office
or position (whether or not in or for the Commonwealth) specified in
writing by the CEO under this Act in relation to that provision, even if the
office or position does not come into existence until after the CEO has
specified it; or
(d) in relation to a power conferred by a provision of a Customs Act--a person:
(i) authorised in writing by the CEO under this Act to perform the functions
of an officer of Customs in relation to the exercise of that power; or
(ii) who from time to time holds, occupies, or performs the duties of an office
or position (whether or not in or for the Commonwealth) specified in
writing by the CEO under this Act in relation to the exercise of that
power, even if the office or position does not come into existence until
after the CEO has specified it.
This definition is relevant to the definition of investigating officer as well as the
provisions of Parts 4, 11, 12, 15 and 18.
29
damage this term is defined in relation to the damage of data and includes damages
by erasure of the addition of data. This definition is relevant to the provisions at
clause 156 of the Bill regarding compensation for damage of electronic equipment.
See the explanatory memorandum for clause 26 and also for the clause 5 definition of
data.
data - this term is defined to mean information in any form or any program and is
relevant to the definition of data storage device and the monitoring warrant
provisions of Part 13. It is also relevant to the definition of damage in clause 5.
data storage device - this term is relevant to the monitoring warrant provisions of Part
13. See also explanatory memorandum for data.
debit card This terms is defined to have the same meaning as section 63A of the
Trade Practices Act 1974 which defines a debit card as:
(a) an article intended for use by a person in obtaining access to an account that is
held by the person for the purpose of withdrawing or depositing cash or
obtaining goods or services; or
(b) an article that may be used as an article referred to in paragraph (a).
debit card account - this term is relevant to clause 50 regarding a request to obtain
information about the identity of holders of foreign credit cards and foreign debit
cards.
derivative is defined to have the same meaning as in section 761D of the
Corporations Act 2001 which is an arrangement with the following conditions:
(a) under the arrangement, a party to the arrangement must, or may be required
to, provide at some future time consideration of a particular kind or kinds to
someone; and
(b) that future time is not less than the number of days, prescribed by regulations
made for the purposes of this paragraph, after the day on which the
arrangement is entered into; and
(c) the amount of the consideration, or the value of the arrangement, is ultimately
determined, derived from or varies by reference to (wholly or in part) the
value or amount of something else (of any nature whatsoever and whether or
not deliverable), including, for example, one or more of the following:
(i) an asset;
(ii) rate (including an interest rate or exchange rate);
(iii) an index;
(iv) a commodity.
designated agency this term is used in Part 11 which deals with access by agencies
to AUSTRAC information. The definition lists certain Federal, State and Territory
agencies which will thereby have access to AUSTRAC information under Part 11.
The definition also enables regulations to be made prescribing additional agencies to
be designated agencies. The list of agencies includes all those agencies which
currently have access under the FTRA as well as some additional agencies where
ministers responsible for particular pieces of legislation have indicated that access to
AUSTRAC information would enhance the administration of that particular
legislation (these include APRA, the Division of Treasury responsible for the
30
administration of the Foreign Takeovers and Acquisitions Act 1975 and the
Immigration Department). The 2005 FATF report of the evaluation of Australia's
compliance with the FATF Recommendation 31 commented that there is scope to
improve co-operation/co-ordination between AUSTRAC, ASIC and APRA also to
enhance co-operation at the policy level.
designated business group This term is used to enable associated business entities to
share customer identity information, have a joint AML/CTF program in clause 85,
allow a member of the designated business group to lodge group compliance reports
in clause 47, and for a member of the designated business group to discharge various
record keeping obligations in Part 10. The term is used in sub-clause 207(3) to exempt
a disclosure made to another member of a designated business groups from tipping off
provisions. A member of a designated business group does not have to be a reporting
entity. Sub-clause 161(6) prohibits a member of a designated business group being
appointed an external auditor.
designated remittance arrangement - this term has the meaning given in clause 10
(see explanatory memorandum for clause 10). This term is used in items 32 and 33 of
table 1.
designated service - the definition of this term is in clause 6 and the designated
services are those listed in the items in the tables in clause 6. It is relevant to the
definition of reporting entity (see explanatory memorandum for clause 6).
Director-General of Security - this means the Director-General of Security holding
office under the Australian Security Intelligence Organisation Act 1979. The term is
used in the Secrecy and Access provisions within Part 11.
disclose - this term means divulge or communicate and is used in Part 11.
disposing of - the definition leaves the term to be read according to its ordinary
meaning. The definition also provides that the term includes anything that under the
regulations is taken to be disposing of for the purposes of the Bill. This will enable
regulations to be made to capture activity designed to circumvent obligations under
the Bill. The term disposing of has its ordinary meaning and the words is taken to be
are intended to extend the ordinary meaning. This term is used in items 33 and 34 of
table 1.
e-currency - this term, which is broadly defined, is used in clause 5 in the definitions
of money and threshold transaction , and in clause 19 with regard to the conversion of
e-currency for the purposes of threshold transaction reporting. Regulations and
AML/CTF Rules can be made extending the definition in order to keep pace with
future technology and commercial developments.
electronic communication this term is defined to have the same meaning as in the
Criminal Code. Section 476.1 of the Criminal Code defines electronic
communication to mean a communication of information in any form by means of
guided or unguided electromagnetic energy.
31
electronic funds transfer instruction - this term is used in Part 5, and in the record
keeping provisions in Division 4, Part 10. The phrase is defined to include the four
types of electronic funds transfer instruction, a multiple-institution person-to-person
electronic funds transfer instruction a same-institution person-to-person electronic
funds transfer instruction, a multiple-institution same-person electronic funds transfer
instruction or a same-institution same-person electronic funds transfer instruction.
These terms are defined in clause 8 and 9.
eligible collected information - the term is defined to mean information obtained by
AUSTRAC CEO under the Bill or under other Commonwealth, State or Territory
laws or as a result of requests by AUSTRAC to a government body or obtained by
AUSTRAC under Part 13, 14 or 15. Eligible collected information is a smaller class
of information than AUSTRAC information (see explanatory memorandum on the
term AUSTRAC information); but it is included within the definition of AUSTRAC
information . The definition of the latter term also includes AUSTRAC's analysis and
compilation of eligible collected information. Apart from its inclusion in the
definition of AUSTRAC information the term is also used in clauses 208 and 212
which sets out AUSTRAC's functions.
eligible gaming machine venue - this term has the same meaning provided in
clause 13 (see explanatory memorandum for clause 13).
eligible place - The term eligible place is defined to include places appointed for
examination of goods on landing, licensed warehouses and appointed ports, airports,
wharfs or boarding stations (where the appointment and licensing is pursuant to the
Customs Act 1901). This term is used in sub-clause 199(9) (see explanatory
memorandum on sub-clause 199(9) which provides that police or customs officers
may enter eligible places to determine whether there is any currency for which a
report under clause 53 is required (clause 53 deals with reports about movements of
physical currency into or out of Australia see explanatory memorandum on clause
53).
embarkation area the term is defined to mean a section 234AA place within the
meaning of the Customs Act 1901. Section 234AA provides that the CEO of the
Australian Customs Service may designate places which may be used by Customs
officers for the purpose of exercising Customs Act powers of questioning, examining
and holding embarking or disembarking passengers. The term is used to define the
point at which a person is taken to have moved physical currency out of Australia in
sub-clause 57(3). This is relevant to the clause 53 requirement that a person must not
move an amount of Australian currency which is not less than $10,000 into or out of
Australia without lodging a report in respect of the movement. The term is also used
in clause 199 in relation to the questioning and search powers of customs and police
officers, and in clause 200 to require a person who is in an embarkation area for the
purpose of leaving Australia to declare (where requested by a police or customs
office) whether he or she is holding Australian or foreign currency and has given a
clause 53 report etc.
engage in conduct the term is defined in exactly the same words as in clause 4.1 of
the Criminal Code, which is contained within Chapter 2 of the Criminal Code.
32
(Chapter 2 contains the General Principles of Criminal Responsibility applying to all
Commonwealth criminal offences).
evidential burden - the definition of this term is that given by sub-section 13.3(6) of
the Criminal Code which is contained in Chapter 2 of the Criminal Code (Chapter 2
contains the general principles of criminal responsibility which apply to all
commonwealth criminal offences). The term appears in sub-clause 53(7) in relation
to exemptions from the clause 53 requirement and in sub-clause 82(5) in relation to
the exceptions to the requirement in clause 82. The term is also used in notes located
after various clauses which contain offences together with exceptions to the offences
(for example the note following paragraph 237) states "Note: a defendant bears an
evidential burden in relation to a matter in sub-clause (4) (see subsection 13.3(3) of
the Criminal Code)."
examiner of the Australian Crime Commission - this term has the meaning it has in
the Australian Crime Commission Act 2002. That Act provides that examiner means
a person appointed under subsection 46B(1) of that Act. Subsection 46B(1) provides
that an examiner is to be appointed by the Governor-General by written instrument.
The term is used in clause 22 which provides that, amongst other things, the term
official of a designated agency or non-designated Commonwealth agency includes a
person who is an examiner of the Australian Crime Commission.
exempt financial market operator issue this term is used where the operator of a
financial market makes available a security or derivative in the course of operating the
financial market and it has the meaning given by Chapter 7 of the Corporations Act
2001. The term is used in item 35 of table1.
exempt legal practitioner service - this is defined as a service that under the
AML/CTF Rules will be exempt for the purposes of this Bill. This definition is
relevant to items 46 and 47 of table 1 (the tables in clause 6 list activities that are
designated services).
external auditor - this term refers to a person authorised under clause 164 to be an
external auditor. The term is relevant to provisions in Part 13, Division 7.
factoring the definition leaves the term to be read according to its ordinary
meaning. The definition also provides that the term includes anything that under the
regulations is taken to be factoring for the purposes of the Bill. This will enable
regulations to be made to capture activity designed to circumvent obligations under
the Bill. The words is taken to be are intended to extend the ordinary meaning. The
definition is not affected by any other definition in the Bill. The term refers to the
practice whereby a `person' (a legal or a natural person), the factor, advances money
to another person in exchange for taking on that person's debts.
false customer name this term is defined to mean any name by which a person is
not commonly known. A person may be commonly known by more than one name.
The term is used in clauses 139 and 140.
FATF Recommendations this term is an abbreviation of the Financial Action Task
Force Recommendations and is defined as including the Recommendations and
Special Recommendations (or the amendments thereof) as adopted by the Financial
Action Task Force on Money Laundering (FATF) at its plenary and special plenary
33
meetings on 20 June 2003, 31 October 2001 and 20-22 October 2004. These
Recommendations are referred to in the objects of the Bill in clause 3.
Federal Court this term is defined as the Federal Court of Australia. Enforcement
proceedings under Part 15 of the Bill are to be conducted in the Federal Court. The
Federal Court is also given jurisdiction to determine damages under sub- clause
156(3) (see explanatory memorandum for clause 156).
financial institution - the term is defined to include an ADI (see explanatory
memorandum on definition of ADI ), bank, building society or credit union and any
person specified in AML/CTF Rules. Allowing the rules to specify additional persons
as financial institutions allow flexibility to encompass any new institution that may
provide similar services to a financial institution.
financing of terrorism offence is defined as an offence against section 102.6
(Getting funds to, from or for a terrorist organisation) and Division 103 (Financing
terrorism) of the Criminal Code, an offence against sections 20 (dealing with freezable
assets) and 21 (giving an asset to a proscribed person or entity) of the Charter of the
United Nations Act 1945 (CotUNA) and offences in a State, Territory or foreign
country which correspond to those offences.
foreign country this definition extends the meaning of the term foreign country to
include parts of countries, colonies, territories, protectorates, regions under protection,
jurisdiction or control of a foreign country or a region whose international relations
are the responsibility of a foreign country.
foreign exchange contract this term is defined to include any contract involving
the sale, purchase or exchange of currency. The contract can relate to any currency.
foreign intelligence agency this term is defined as any government body
responsible for intelligence gathering for a foreign country or security in a foreign
country. This term is related to the provisions in clause 133 regarding the
communication of AUSTRAC information to a foreign intelligence agency.
foreign law enforcement agency this term is defined as any government body
responsible for law enforcement in a foreign country, or part of a foreign country.
This term is related to the provisions in clause 132 of the Bill regarding the
communication of AUSTRAC information to a foreign country.
funds transfer chain - this term is defined in sub-clause 64(2) (see explanatory
memorandum for clause 64). The phrase is relevant to obligations in Part 5
(Electronic funds transfer instructions).
game - this term is used in items 5, 6, 9 and 10 in table 3 of clause 6 and is also
relevant to items 11, 12, 13 and 14 in table 3 in clause 6. It is also used in the
definitions of gaming chip or token and gaming machine in this Part. The term has its
general meaning and is specifically defined to include an electronic game but not to
include a lottery. This will mean that activities similar in nature to lotteries will also
not be included, for example Keno and instant lottery tickets are regarded as covered
by the term lottery and therefore not captured by the definition of game. Other similar
activities would likewise not be captured by the definition.
gaming chip or token - these terms are relevant to items 7 and 8 of table 3 in clause 6.
34
gaming machine - this term is used in items 5, 6, 9, and 10 and in table 3 of clause 6
and relevant to items 11, 12, 13 and 14 in table 3 in clause 6. It is also relevant to
clause 13 (Eligible gaming machine venues).
government body - the term includes the government of a country, or part of a
country, or an agency or authority of a country, or part of a country. This term is used
in clause 5 in the definitions of e-currency, and eligible collected information, as well
as foreign intelligence agency, foreign law enforcement agency and public official.
The term also appears in paragraph 123(9) in relation to exceptions to tipping off, and
in clause 190 regarding the circumstances in which the AUSTRAC CEO is
empowered to provide an AUSTRAC compliance report to another government body.
guarantee the term has its ordinary meaning and includes anything that under the
regulations is taken to be a guarantee for the purposes of the Bill. This will enable
regulations to be made to capture activity designed to circumvent obligations under
the Bill.
IGIS this term is an abbreviation of Inspector-General of Intelligence and Security
and the term includes both the Inspector-General and APS employees assisting him.
The term is included because IGIS is a designated agency (see explanatory
memorandum on the term designated agency ).
IGIS official this term is an abbreviation of Inspector-General of Intelligence and
Security Official. This is defined as meaning either an Inspector-General of
Intelligence and Security holding office under the Inspector-General of Intelligence
and Security Act 1986 and APS employees assisting him. This term is used in
sub-clause 128(19) which relates to disclosure of AUSTRAC information by IGIS
officials.
Immigration Department - this term means the Department responsible for the
administration of the Migration Act 1958. The term is included because the
Immigration Department is a designated agency (see explanatory memorandum on the
term designated agency ).
incorporated the definition provides that incorporated includes formed so as to
ensure that a company is covered irrespective of the method by which a company is
incorporated, formed or otherwise created. To remove any potential ambiguity the
definition expressly states that the definition does not apply to the expression
unincorporated .
information obtained - this term is defined to ensure that it includes information
obtained as a result of the production of a document.
infringement notice - this refers to the infringement notice which may be issued by a
customs or police officer under clause 184 for suspected contravention of sub-clauses
53(3) or 59(4) (see explanatory memorandum on clauses 53 and 59). Provisions
regarding the matters to be included in such a notice, the amount of the penalty etc are
found in Part 15, Division 3 (see explanatory memorandum on Division 3 of Part 15).
Inter-Governmental Committee this definition refers to the Inter-Governmental
Committee established by section 8 of the Australian Crime Commission Act 2002.
The term is used in sub-clause 128(14) of the Bill (see explanatory memorandum on
sub-clause 128(14)).
35
international funds transfer instruction - this phrase has the meaning provided in
clause 43 which includes a table defining the term international funds transfer
instruction (see explanatory memorandum for clause 46).
investigating officer this definition lists persons who are an investigating officer
for the purposes of the Bill. That is, a taxation officer, an AFP member, a Customs
officer, or, an examiner or member of staff of the Australian Crime Commission.
This definition relates to clauses 49 and 122 of the Bill.
involves this definition clarifies that the term involves includes matter or matters
that relate to the subject matter.
issue the definition provides that, in relation to a security or derivative issue
includes grant or otherwise make available. The time when a derivative is issued is to
be worked out under subsection 761E(3) Corporations Act 2001 which provides that
the relevant time is when the person enters into the legal relationship that constitutes
the derivative.
joint anti-money laundering and counter-terrorism financing program - this term
has the meaning given by sub-clause 85(1) (see explanatory memorandum on
sub-clause 85(1)).
lease - this definition clarifies that when this term is used in relation to goods, it
includes hire. This term is used in item 10 of table 1 in clause 6 in relation to the
definition of designated services (see explanatory memorandum on item 10).
Life Insurance Actuarial Standard 4.02 this term is defined to mean Actuarial
Standard 4.02 made under section 101 of the Life Insurance Act 1995. The term is
used in the definition of life policy (see explanatory memorandum on life policy).
life policy the term is defined to have the same meaning as in sub-section 9(1)the
Life Insurance Act 1995 which provides that a life policy is:
(a) a contract of insurance that provides for the payment of money on the death of
a person or on the happening of a contingency dependent on the termination or
continuance of human life;
(b) a contract of insurance that is subject to payment of premiums for a term
dependent on the termination or continuance of human life;
(c) a contract of insurance that provides for the payment of an annuity for a term
dependent on the continuance of human life;
(d) a contract that provides for the payment of an annuity for a term not dependent
on the continuance of human life but exceeding the term prescribed by the
regulations for the purposes of this paragraph;
(e) a continuous disability policy;
(f) a contract (whether or not it is a contract of insurance) that constitutes an
investment account contract;
(g) a contract (whether or not it is a contract of insurance) that constitutes an
investment-linked contract.
Sub-section 9(2) of the Life Insurance Act 1995 specifically provides that a contract
that provides for the payment of money on the death of a person is not a life policy if
by the terms of the contract, the duration of the contract is to be not more than one
36
year and payment is only to be made in the event of death by accident; or death
resulting from a specified sickness.
However the definition of the term life policy in the Bill provides that it means a life
policy within the meaning of the Life Insurance Act 1995 except that it does not
include policies of no prescribed minimum surrender value or regular premium
policies with premiums less than $1,500 per annum or a greater amount specified in
the AML/CTF Rules or a single premium policy where the premium is not more than
$3000 or a greater amount specified in the AML/CTF Rules or a contract of consumer
credit insurance within the meaning of the Insurance Contracts Act 1984. The
prescribed minimum surrender value is to be determined by the Life Insurance
Actuarial Standard 4.02 as in force from time to time (see explanatory memorandum
on Life Insurance Actuarial Standard 4.02).
loan the definition is inclusive. In addition to its ordinary meaning the definition
makes it clear that any advance of money, provision of credit, satisfaction of another
person's debt or any transaction which in substance is a loan of money is covered by
the definition. However the definition specifically exempts goods sold or services
provided on credit within the meaning of the Trade Practices Act 1974 (in other
words the definition excludes goods or services sold or provided on trade credit). The
definition also enables AML/CTF Rules to be made exempting things from being a
loan for the purpose of the Bill. The term is used in item 6 of table 1 in sub-clause
6(2) (see explanatory memorandum on item 6).
make available - defined to include reducing the balance of a loan account. The
words made available and making available are used in paragraph 65(1)(d) and
sub-clauses 65(6) and 65(7) in the context of a beneficiary institution "making
available" funds to a customer in accordance with an international electronic funds
transfer instruction (see explanatory memorandum for international electronic funds
transfer instruction ).
member of the staff of the Australian Crime Commission - this phrase has the same
meaning as in the Australian Crime Commission Act 2002, and is used in clause
sub-paragraph 122(3)(f)(ii) and sub-clauses 128(14) and 132(7) (see explanatory
memoranda on these provisions).
modifications - The term includes additions, omissions and substitutions. This term is
relevant to sub-clause 155(8) and clause 248 (see explanatory memoranda on these
provisions).
money this broad inclusive definition of money removes any doubt that the term
not only includes physical currency but also money held in an account or on deposit,
irrespective of the currency denomination and includes e-currency (see explanatory
memorandum for e-currency).
money laundering the term is defined to mean conduct that amounts to offences
against Division 400 of the Criminal Code or corresponding State or Territory or
foreign country offences.
money laundering and terrorism financing risk assessment - this term is defined in
sub-clause 165(6) (see explanatory memorandum for clause 165).
37
monitoring powers - this term has the meaning provided in clause 148 (see
explanatory memorandum for clause 148). The term is used in Part 13.
monitoring warrant this term is defined as a warrant issued under clause 159 (see
explanatory memorandum for clause 159) of the Bill. The term is used in Part 13.
move physical currency into Australia this phrase has the meaning given by clause
58 (see explanatory memorandum for clause 58) and is used in clause 53.
move physical currency out of Australia - this phrase has the meaning given by
clause 57 (see explanatory memorandum for clause 57) and is used in clause 53.
multiple institution person-to-person funds transfer instruction this term has the
meaning provided in sub-clause 8(1) (see explanatory memorandum for clause 8) and
is used in Part 5.
multiple institution same-person funds transfer instruction - this term has the
meaning provided in sub-clause 9(1) (see explanatory memorandum for clause 9) and
is used in Part 5.
non-designated Commonwealth agency this is defined as an authority or agency of
the Commonwealth that is not a designated agency (see explanatory memorandum on
designated agency in clause 5). It is relevant to clause 129 (Access by non-designated
Commonwealth agencies to AUSTRAC information see explanatory memorandum
on clause 129). The definition is also relevant to clause 22 (Officials of designated
agencies etc see explanatory memorandum on clause 22).
non-reportable cross-border movement of physical currency - this term is defined as
a movement of physical currency into or out of Australia for which a report under
clause 53 (see explanatory memorandum on clause 53) is not required. This phrase is
relevant to the offence provision in clause 143 (conducting transfers so as to avoid
reporting requirements relating to cross-border movements of physical currency - see
explanatory memorandum on clause 143).
non-reportable transaction this is defined to be provision of a designated service
which is not a threshold transaction (see explanatory memorandum for threshold
transaction in clause 5) and is used in clause 142 (conducting transactions so as to
avoid reporting requirements relating to threshold transactions - see explanatory
memorandum on clause 142).
offence this definition is included to remove any doubt that the ancillary criminal
offence of being an accessory after the fact (which is provided for in section 6 Crimes
Act 1914) is included amongst the range of ancillary offences that apply to the
criminal offences contained in the Bill. The note following the definition of the term
offence indicates that the other ancillary offences contained in section 11.6 of Chapter
2 of the Criminal Code apply to the criminal offences in the Bill (Chapter 2 sets out
the General Principles of Criminal Responsibility which apply to all Commonwealth
criminal offences).
officer this definition clarifies that for the purposes of the Bill, a director of a
company, a partner of a partnership, and a trustee of a trust, are taken to be an officer.
This term is related to all Parts of the Bill.
38
official this definition clarifies that an official of a designated or non-designated
Commonwealth agency is defined in clause 22 (see explanatory memorandum on
clause 22). This term is used in Part 11 (secrecy and access).
opening - this term is defined in relation to an account and means creating the
account. It is immaterial whether the account number has been given to the holder of
the account or whether the person is able to conduct a transaction in relation to the
account. It is relevant to item 1 of table 1 and item 11 of table 3 (see explanatory
memoranda on these items).
ordering institution - this phrase is defined in terms of the four types of electronic
funds transfer instructions described in clauses 8 and 9 - multiple-institution
person-to-person electronic funds transfer instruction, a same-institution
person-to-person electronic funds transfer instruction, a multiple-institution
same-person electronic funds transfer instruction, or a same-institution same-person
electronic funds transfer instruction. See explanatory memorandum for clauses 8 and
9. See also explanatory memorandum for beneficiary institution and electronic funds
transfer instruction. This term is relevant to the requirements in Part 5.
owner-managed branch - this phrase has the meaning provided in clause 12 (see
explanatory memorandum for clause 12).
partnership the term is defined to have the same meaning as in the Income Tax
Assessment Act 1997 (ITAA). The definition in section 995-1 ITAA is as follows:
(a) an association of persons (other than a company or a limited partnership)
carrying on business as partners or in receipt of ordinary income or statutory
income jointly; or
(b) a limited partnership.
payee this phrase is defined in terms of the four types of electronic funds transfer
instructions described in clauses 8 and 9 - multiple-institution person-to-person
electronic funds transfer instruction a same-institution person-to-person electronic
funds transfer instruction a multiple-institution same-person electronic funds transfer
instruction or a same-institution same-person electronic funds transfer instruction. .
See explanatory memorandum for clauses 8 and 9. See also explanatory memorandum
for beneficiary institution and electronic funds transfer instruction. This term is
relevant to the requirements in Part 5.
payer - this phrase is defined in terms of the four types of electronic funds transfer
instructions described in clauses 8 and 9 - multiple-institution person-to-person
electronic funds transfer instruction, a same-institution person-to-person electronic
funds transfer instruction, a multiple-institution same-person electronic funds transfer
instruction, or a same-institution same-person electronic funds transfer instruction.
See explanatory memorandum for clauses 8 and 9. See also explanatory memorandum
for beneficiary institution and electronic funds transfer instruction. This term is
relevant to the requirements in Part 5.
penalty unit a penalty unit under section 4AA Crimes Act 1914 is currently worth
$110.
permanent establishment - this term has the meaning provided in clause 21 (see
explanatory memorandum for clause 21), and is used in sub-clause 6(6), clauses 36,
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39, 42, 44, all the items in the clause 43 table, 64, 65, 66, 70, 80, 84, 100, 102 115,
118, 161, 202 and Schedule 1 paragraph 2(j)(ii) (see explanatory memoranda for these
provisions).
person - The term person is defined in clause 5 of the Bill to be an individual, a
company, a trust, a partnership, a corporate sole or a body politic. The term body
politic is included to make it clear that governments will be persons under the Bill.
The Bill places obligations on reporting entities which are defined as persons who
provide a designated service. This definition ensures that the specified entities are
persons for the purposes of the Bill.
physical currency this term is defined to mean all coins and printed money that are
designated as legal tender and circulate as and are customarily used and accepted as a
medium of exchange in the country of issue. Under this definition, this term refers to
both the currency of Australia or of a foreign country. This term is related to the
definitions of move physical currency into Australia, move physical currency out of
Australia, non-reportable cross-border movement of physical currency, send stored
value card, and threshold transaction (see explanatory memoranda for these
provisions). This term is included in Items 51-53 of Table 1 at clause 6 relating to the
definition of designated services. This term is also related to the provisions of Part 4
regarding reports about cross-border movements of physical currency and bearer
negotiable instruments and Part 15 which provides the enforcement provisions.
police officer the definition clarifies that the term includes both members of the
AFP or members of the police force or service of a State of Territory. This definition
is related to the definitions of AFP member and investigating officer. This term is
also related to the provisions in Part 4 regarding reports about cross-border
movements of physical currency and bearer negotiable instruments and Part 15 which
provides the enforcement provisions, as well as the miscellaneous provisions in
Part 18.
precious metal the definition lists those metals and alloys of them that are precious
metals for the purposes of the Bill. The term precious metal is only used once in the
Bill, namely in the definition of e-currency (see explanatory memoranda for
e-currency)
prescribed foreign country - this definition clarifies that the term means a foreign
country which is prescribed as such for the purposes of the Bill under the regulations.
The term is used in clause 102 (countermeasures - see explanatory memoranda for
clause 102).
printed money the term is defined as money in the form of a note made on any
material and is used in the definition of physical currency (see explanatory
memoranda for the definition of physical currency).
produce the definition of this term clarifies that in addition to its ordinary meaning
it also means permits access to the material or other item. This is to ensure that where
an item cannot be physically produced it is sufficient to permit access to it. An
example of its application would be where a document that a reporting entity was
required to produce was only available electronically. In this situation the obligation
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to produce the document could be met by granting access to the electronic version of
it.
promissory note the term is defined to have the same meaning as in section 51(xvi)
of the Constitution which is a mechanism to enable incorporation of continuing
judicial interpretations of the term. The term is generally considered to mean an
unconditional promise in writing made by one person to another, signed by the maker,
engaging to pay on demand or at a fixed or determinable future time a sum certain in
money to or to the order of a specified person or to bearer.
property this term is broadly defined as any legal or equitable estate or interest in
real or personal property. For clarity the definition specifically includes a contingent
or prospective interest. Money is specifically excluded from this definition, as this is
specifically provided for under the definition of physical currency. This term is
related to the definition of threshold transaction and designated remittance
arrangement), as well as to the provisions in clause 46 (international funds transfer
instruction) and clause 142 (conducting transactions so as to avoid reporting
requirements relating to threshold transactions) (see explanatory memoranda for these
provisions).
provide the definition of this term clarifies that in addition to its ordinary meaning
it also means this includes supply, grant or confer. The term provide is relevant to
triggering requirements for reporting entities. Reporting entities pick up obligations
when they commence to provide, or provide a designated service (see explanatory
memorandum on provide, designated service and reporting entity).
providing a custodial or depository service - this phrase includes engaging in
conduct that under sub-section 766E(1) of the Corporations Act 2001, constitutes
providing a custodial or depository service within the meaning of Chapter 7 of that
Act. The conduct does not include that covered by sub-section 776E(3) of that Act, or
conduct specified in the AML/CTF Rules.
Sub-section 776E(1) states:
For the purposes of this Chapter, a person (the provider) provides a custodial or
depository service to another person (the client) if, under an arrangement between
the provider and the client, or between the provider and another person with whom
the client has an arrangement, (whether or not there are also other parties to any
such arrangement), a financial product, or a beneficial interest in a financial
product, is held by the provider in trust for, or on behalf of, the client or another
person nominated by the client.
Sub-section 776E(3) states:
However, the following conduct does not constitute providing a custodial or
depository service:
(a) the operation of a clearing and settlement facility;
(b) the operation of a registered scheme, or the holding of the assets of a
registered scheme;
(c) the operation of a regulated superannuation fund, an approved deposit fund
or a pooled superannuation trust (within the meaning of the Superannuation
Industry (Supervision) Act 1993) by the trustees of that fund or trust;
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(ca) the operation of a statutory fund by a life company (within the meaning of
the Life Insurance Act 1995);
(d) the provision of services to a related body corporate;
(e) any other conduct of a kind prescribed by regulations made for the purposes
of this paragraph.
public official this definition provides the categories of person who are classed
under the Bill as public officials and is used in clause 121 regarding secrecy of
AUSTRAC information and AUSTRAC documents.
qualified accountant - the term is defined to mean a person who is a member of
CPA Australia, the Institute of Chartered Accountants in Australia or any body
specified in the AML/CTF Rules.
receives a designated service a customer of a designated service (as defined in
paragraph 6(1)(b) (see explanatory memorandum for clause 6), receives a designated
service when a