Explanatory Statement – Amendment
of Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument
2007 (No. 1) and Anti-Money Laundering and Counter-Terrorism Financing
Rules Amendment Instrument 2007 (No.5)
1. Purpose and
operation of Anti-Money Laundering and Counter-Terrorism Financing Rules
(AML/CTF Rules) amending Chapter 11 and Chapter 19 of the AML/CTF Rules
Section 229 of the Anti-Money Laundering and
Counter-Terrorism Financing Act 2006 (AML/CTF Act) provides that the AUSTRAC Chief
Executive Officer (AUSTRAC CEO) may, by writing, make AML/CTF Rules prescribing
matters required or permitted by any other provision of the AML/CTF Act.
Amendments to Chapter 11
Section
47 (AML/CTF compliance reports) of the AML/CTF Act specifies that reporting
entities must give the AUSTRAC CEO a report relating to the reporting entity’s
compliance with the Act, regulations and AML/CTF Rules during the reporting
period. AML/CTF Rules may specify both the reporting period and the lodgment
period. It is noted that the AML/CTF Rules follow the spelling as used in
section 47 in respect to the word ‘lodgment’.
These
amendments specify that the compliance reporting period for 2010 is a calendar
year (1 January 2010 to 31 December 2010), and will continue as a calendar year
thereafter. In this manner Chapter 11 need not be amended each year, unless
there is a change from the calendar year requirement.
The
amendments also specify that the lodgment period is now the first business day
in January in the calendar year immediately following the reporting period and
ending on 31 March of that calendar year.
Amendments to Chapter 19
Division
3 of Part 3 of the AML/CTF Act deals with reports about threshold transactions.
A ‘threshold transaction’ is a transaction relating to the transfer of
physical currency, where the transfer is $10,000 or more, or a transaction
involving the transfer of money in the form of e-currency, where the total
amount of e-currency which is transferred is $10,000 or more.
Section
43 of the AML/CTF Act provides that if a reporting entity commences to provide,
or provides, a designated service to a customer that involves a threshold
transaction, the reporting entity must give the AUSTRAC CEO a report about the
transaction within 10 business days after the day of the transaction.
Chapter
19 (Reportable details for threshold transactions) of the AML/CTF Rules
specifies what details must be included in a threshold transaction report (TTR)
to the AUSTRAC CEO.
Chapter
19 was registered on 20 December 2007, and its commencement implemented in two
stages: those reportable details about the customer making the threshold
transaction commenced on 12 December 2008, while the reportable details
regarding a person conducting the transaction who is not the customer (the
‘agent reportable details’), are due to commence on 1 January 2011.
As
a result of consultation held with industry in 2009 – 10 in regard to Chapter
19, two substantive changes have been made to these AML/CTF Rules, comprising:
(a) amendments
relevant to the treatment of multiple signatories to an account,
and
(b) amendments
to the agent reportable details.
These
changes are discussed below:
(a) amendments
relevant to the treatment of multiple signatories to an account
Chapter
19 specifies the reportable details requirements for customers of a reporting
entity who are not individuals, such as companies, partnerships and trusts.
The Item 3 designated service (allowing a transaction to be conducted in
relation to an account) of table 1 of section 6(2) of the AML/CTF Act,
specifies that a ‘customer’ is both ‘the holder of the account’ and ‘each other
signatory to the account.’
AUSTRAC
has required that reporting entities when submitting a TTR in such circumstances,
should report both the ‘holder of the account’ and ‘each other signatory
to the account.’
Industry
has stated that this position presents difficulties for corporate account
holders who have many signatories to an account, some of which may number several
hundred and therefore should be reported in regard to any transaction conducted
by a signatory on such an account.
The
amendments ensure that a signatory conducting a transaction who is not the
account holder (that is, the person at the counter) is reported, but information on any other signatory is only reportable when
requested by AUSTRAC.
(b) amendments
to the agent reportable details
Chapter
19 of the AML/CTF Rules due to come into effect on 1 January 2011, was
developed to capture details in regard to:
(a) a
person who is an individual and is conducting the transaction, but the
individual is not the customer;
(b) a
person who is conducting the transaction on behalf of a non- individual
entity (such as a business); and
(c) a
person who is conducting the transaction on behalf of a non- individual
entity acting on behalf of the customer (such as a courier business).
These
AML/CTF Rules therefore emphasise details regarding the non-individual entity
(business) rather than the individual conducting the transaction.
As
a result of an AUSTRAC review of the requirements of agencies which use AUSTRAC
information, the focus of the agent reportable details is now on the individual
in the context of three scenarios:
(a) where the
person is conducting the transaction as an individual;
(b) where the person is
conducting the transaction as an individual and that individual is
an employee acting on behalf of the customer, for example,
in circumstances where the individual may be depositing takings
on behalf of the customer; and
(c) where
the person conducting the transaction is an individual who is acting on behalf
of a non-individual entity which is not the customer.
In these scenarios the reportable details to be
provided in a TTR relate primarily to the individual conducting the
transaction, rather than any non-individual entity which they may be
representing.
Structure
of Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment
Instrument 2010 (No.3)
Anti-Money Laundering
and Counter-Terrorism Financing Rules Amendment Instrument 2010 (No.3) makes amendments to two
Instruments, Anti-Money Laundering and Counter-Terrorism Financing Rules
Instrument 2007 (No.1) which contains Chapter 11 and the Chapter 19 AML/CTF
Rules that relate to non-agent reportable details and which commenced on 12
December 2008, and Anti-Money Laundering and Counter-Terrorism Financing
Rules Amendment Instrument 2007 (No.5) which contains the version of
Chapter 19 that will come into effect on 1 January 2011.
Anti-Money
Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No.1) also contains the
version of Chapter 19 that will come into effect on 1 January 2011 but as a
‘Note’. Advice supplied to Rules by the Office of Legislative Drafting and
Publishing, stated that the ‘Note’ of Anti-Money Laundering and
Counter-Terrorism Financing Rules Amendment Instrument 2007 (No.1) cannot
be amended as it is not legally in force and is only included in that
instrument as a reference. As a result, to legally amend the version of
Chapter 19 due to come into effect on 1 January 2011, Anti-Money Laundering
and Counter-Terrorism Financing Rules Amendment Instrument 2007 (No.5) must
be amended.
Anti-Money
Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2010
(No.3)
(other than the machinery amendments to Chapter 11), therefore repeals
the Chapter 19 which is currently in force by amending Anti-Money Laundering
and Counter-Terrorism Financing Rules Instrument 2007 (No.1), and inserting
a new Chapter 19 which does not contain agent reportable details and which will
commence on the day after registration and continue in force until 30 September
2011. The Instrument then amends Anti-Money Laundering and
Counter-Terrorism Financing Rules Instrument 2007 (No.1) which repeals the
Chapter on 1 October 2011 and inserts on the same date, the version of Chapter
19 which, in addition to the customer details, will contain the agent
reportable details.
2. Notes on sections
Section
1
This
section sets out the name of the instrument, i.e. the Anti-Money Laundering
and Counter-Terrorism Financing Rules Amendment Instrument 2010 (No.3).
Section
2
This
section specifies that Schedule 1 and Schedule 2 of the Instrument commence on
the day after it is registered, while Schedule 3 commences on 1 October 2011.
Section
3
This
section contains the Schedules which amend Anti-Money Laundering and
Counter-Terrorism Financing Rules Instrument 2007 (No.1) and Anti-Money
Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2007 (No.5)
as follows:
Schedule
1
This schedule amends
Chapter 11, repeals Chapter 19 and inserts a new Chapter 19 which specifies the
customer reportable details that must be supplied by a reporting entity. This
Chapter 19 does not specify the agent reportable details requirements which
will commence on 1 October 2011.
Chapter
11
1. This
item inserts a new heading for Chapter 11.
3. Notes
on paragraphs
Paragraph
11.2
This
paragraph has been amended to specify that the reporting period is now a
calendar year on an ongoing basis. The paragraph has also been amended to
remove the inadvertent placing of the ‘privacy notice’ in this paragraph.
Paragraph
11.3
This
paragraph specifies that the lodgment period is the period beginning on the
first business day in January in the calendar year immediately following the
reporting period and ending on 31 March of that calendar year.
Paragraph
11.4
This
paragraph inserts a definition of ‘the first business day in January’.
Chapter
19
4. Notes on paragraphs
Paragraph 19.1
This
paragraph specifies that these AML/CTF Rules have been made under section 229
of the AML/CTF Act for the purposes of paragraph 43(3) of that Act.
Paragraph 19.2
This
paragraph specifies the reportable details that must be supplied by a reporting
entity to the AUSTRAC CEO regarding a customer making a threshold transaction.
The paragraph covers individuals, non-individuals and signatories who may be
undertaking a transaction but who are not the account holder. In the case of
signatories, only the details of the signatory conducting the transaction are
required.
Amendments
have been made to the cheque reporting provisions to allow reporting entities
to report the sum total of a cheque, bank cheque and bank draft, where the
individual amounts cannot be ascertained (19.2(7)(f)).
Amendments
have been made to the e-currency provisions to more closely align these
provisions with the definition of ‘e-currency’ in the AML/CTF Act (19.2(8)(b)(i)
and (ii)).
Paragraph
19.3
This
paragraph relates to subparagraph 19.2(2) which specifies the details which
must be reported in regard to the signatory who is conducting the transaction.
Paragraph 19.3 specifies that in these circumstances the AUSTRAC CEO may
request further details of any other signatories to the account and also
specifies that persons other than the AUSTRAC CEO may request further
information in regard to an individual transaction that involves signatories.
Paragraph
19.4
This
paragraph specifies the contact details that must be contained in a threshold
transaction report regarding the person who made that report.
Schedule
2
This
Schedule repeals section 2(c) of Anti-Money Laundering and Counter-Terrorism
Financing Rules Amendment Instrument 2007 (No.5).
Schedule
3
This schedule repeals
Chapter 19 and inserts a new Chapter 19 which specifies the agent reportable
details requirements, in addition to the customer reportable details that must
be supplied by a reporting entity.
Paragraph
19.1
This
paragraph specifies that the Chapter commences on 1 October 2011.
Paragraph 19.2
This
paragraph specifies that these AML/CTF Rules have been made under section 229
of the AML/CTF Act for the purposes of paragraph 43(3)(b) of that Act.
Paragraph 19.3
This
paragraph specifies the reportable details that must be supplied by a reporting
entity to the AUSTRAC CEO regarding a customer making a threshold transaction.
The paragraph covers individuals, non-individuals and signatories who may be
undertaking a transaction but who are not the account holder. In the case of
signatories, only the details of the signatory conducting the transaction are
required.
Amendments
have been made to the cheque reporting provisions to allow reporting entities
to report the sum total of a cheque, bank cheque and bank draft, where the
individual amounts cannot be ascertained (19.3(7)(f)).
Amendments
have been made to the e-currency provisions, to more closely align these
provisions with the definition of ‘e-currency’ in the AML/CTF Act
(19.3(8)(b)(i) and (ii)).
The
agent reportable details are specified at 19.3(15). They apply in the following
circumstances:
(a) a
person who is an individual and is conducting the transaction, but the
individual is not the customer (19.3(15)(a));
(b) where the person is
conducting the transaction as an individual and that individual is
an employee acting on behalf of the customer, for example,
in circumstances where the individual may be depositing takings
on behalf of the customer (19.3(15)(b)); and
(c) a
person who is conducting the transaction on behalf of a non- individual
entity which is not the customer (19.3(15)(c)).
19.3(17)
specifies the details which must be reported by a reporting entity in
circumstances where:
(a) the
transaction involves a deposit carried out in non-face to face circumstances,
or
(b) where
the person carries out a transaction relevant to the item 51 (collecting
physical currency) or item 53 (delivering physical currency) designated
services.
In
respect to (a), this provision has been inserted into Chapter 19 in order to
accommodate situations where a reporting entity may not know who conducted the
transaction. Relevant situations include the use of an automated teller machine
or night or express deposit facility.
In
respect to (b), the intention is that reporting entities do not need to collect
the details of the individual conducting the transaction when they are acting
on behalf of a business such as a cash carrier.
Where
these circumstances apply, the reporting entity must supply AUSTRAC with a
statement stating that one or the other is applicable in respect to the
transaction. However, there is still an obligation to supply the customer
details under 19.3(1)-(14) in addition to the statement that 19.3(17)(a)(i) or
(ii) is applicable. Where a reporting entity is unable to ascertain whether
the circumstances in 19.3(15) apply, the reporting entity can assume that the
transaction was carried out by the customer.
Paragraph
19.4
This
paragraph relates to subparagraph 19.3(2) which specifies the details which
must be reported in regard to the signatory who is conducting the transaction.
Paragraph 19.4 specifies that in these circumstances the AUSTRAC CEO may
request further details of any other signatories to the account and also
specifies that persons other than the AUSTRAC CEO may request further
information in regard to an individual transaction that involves signatories.
Paragraph
19.5
This
paragraph specifies the contact details that must be contained in a threshold
transaction report regarding the person who made that report.
Paragraph
19.6
This
paragraph supplies the definition of ‘non-face to face circumstances’ as used
in subparagraph 19.3(17).
5. Legislative instruments
These
AML/CTF Rules are legislative instruments as defined in section 5 of the Legislative
Instruments Act 2003.
6. Likely
impact
These
AML/CTF Rules will have an impact on any reporting entity that is required to submit
a compliance report or provides a designated service that involves a threshold
transaction to a customer.
7. Assessment
of benefits
Chapter 11
These amendments provide certainty to industry
in regard to the reporting and lodgment periods which reporting entities must
observe.
Chapter 19
Division 3 of Part 3 of the AML/CTF Act provides for a
reporting system in relation to threshold transactions. This system implements
the requirements of the Financial Action Task Force, Recommendation 19 which provides
that countries should consider the feasibility and utility of a system where
banks and other financial institutions and intermediaries would report to a
central agency all domestic and international currency transactions above a
fixed amount. Reports about threshold transactions will result in improved
financial intelligence which will help Australian law enforcement agencies
combat money laundering and the financing of terrorism. Increased financial
intelligence will also help the Australian Taxation Office to detect tax
evasion and Centrelink to detect welfare fraud.
8. Consultation
Chapter 11
As
the amendments to Chapter 11 are machinery in nature, consultation has not been
undertaken, as has been the case with previous amendments to Chapter 11.
Chapter 19
AUSTRAC
has consulted with the Office of the Privacy Commissioner, the Australian Customs and Border Protection Service,
the Australian Federal Police, the Australian Taxation Office and the
Australian Crime Commission, in relation to these AML/CTF Rules.
AUSTRAC
published a draft of each of these AML/CTF Rules on its website for public
comment on four separate occasions – once in 2009 and three times in 2010 and
held a consultative forum with industry in May 2010.
Chapter
19 was originally registered on 20 December 2007 and AUSTRAC consulted with the
same government agencies as detailed above. In addition, the AML/CTF Rules were
also published on the AUSTRAC website in 2007 for public consultation.
9. Ongoing
consultation
AUSTRAC
will conduct ongoing consultation with stakeholders on the operation of these
AML/CTF Rules.