Bills Digest no. 33 2008–09
Financial Transaction Reports Amendment (Transitional Arrangements)
Bill 2008
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Date introduced:
18 September 2008
House:
House of Representatives
Portfolio:
Home Affairs
Commencement:
Day of Royal Assent
Links: The relevant
links to the Bill, Explanatory Memorandum and second reading speech
can be accessed via BillsNet, which is at http://www.aph.gov.au/bills.
When Bills have been passed they can be found at ComLaw, which is at http://www.comlaw.gov.au/.
This Bill makes minor amendments to
the Financial Transactions Reports Act 1988 (‘the FTR Act’) to
ease the transition from the existing financial transactions reporting
arrangements under the FTR Act to the new arrangements under the Anti-Money
Laundering and Counter-Terrorism Financing Act 2006 (‘the AML/CTF
Act’).
Background and
basis of policy commitment
Until 2006 the principal anti-money
laundering legislation was the FTR Act. This is still in operation and
is administered by the Australian Transaction Reports and Analysis Centre
(AUSTRAC). That Act has as its principal
object the administration and enforcement of taxation laws.[1]
In 2006, the AML/CTF Act was passed. It is also administered
by AUSTRAC and manifests Australia’s attempt to comply with the recommendations
of the Financial
Action Task Force on Money Laundering (‘the FATF’). The FATF is international
organisation which promotes policies to combat money-laundering and the
implementation of those policies in domestic laws. Originally concerned
primarily with the impacts of money laundering on taxation revenue, it
has, more recently, made recommendations about the reporting of financial
transactions that might be linked to terrorist activity. The complex
history of this legislation is recorded in the Bills Digest
for the AML/CTF Bill 2006 and the Bills
Digest for the Anti-Money Laundering and Counter-Terrorism Financing
Amendment Bill 2007 that amended it in 2007. A wealth of background
information is on the anti-money
laundering section of the website of the Attorney-General’s Department.
Both of these Acts place obligations — principally obligations
to report certain kinds of transactions — on financial, bullion and gambling
services providers. Some conduct previously regulated under the FTR Act
will move to be regulated under the newer Act and transitional arrangements
have been put in place to facilitate certain aspects of this.[2] The arrangements for the transition from the
old to the new scheme are being implemented over the two year period that
began on 12 December 2006. Insofar as those arrangements affect cash
dealers and solicitors, those parties would — but for the amendments proposed
by this Bill — be regulated under the new arrangements from 12 December
2008. ‘Cash dealer’ is a defined broadly and at length in the FTR Act.[3]
However, the Explanatory Memorandum says that some cash
dealers, who would be expected to move to the new reporting regime on
12 December 2008, will not be fully compliant with the new obligations
by that time. This Bill proposes amendments which will give those parties
the option of continuing to report relevant under the existing FTR Act
scheme until they are compliant under the new scheme or until 11 March
2010, whichever is earliest.
At the date of this digest, the Bill has not been referred
to any committee.
The Explanatory Memorandum says that the amendments have
no financial impact on Government revenue.
Item 1 amends subparagraph 7(1)(f)(ii) of the
FTR Act. Section 7 requires cash dealers to give reports of significant
cash transactions to AUSTRAC, except in certain circumstances. A significant
cash transaction is one of $10,000 or more. One such circumstance is
if, amongst other things, the transaction occurred after the commencement
of Division 3 of Part 3 of the AML/CTF Act (at which point the latter
Act would apply). By amending this subparagraph, cash dealers will be
able report transactions to AUSTRAC under the existing FTR provision as
long as they take place before 11 March 2010, even if Division 3 of Part
3 of the AML/CTF Act has commenced.
The amendment made by item 2 complements the above
amendment by allowing the cash dealer to comply with either the old or
new reporting requirements. It provides that, if the cash dealer complies
with the new reporting requirements of section 43 of the AML/CTF Act (which
is in Division 3 Part 3 of that Act), the reporting requirement in section
7 of the FTR Act does not apply.
Some transactions or classes of transaction are eligible
for exemption and need not be reported to AUSTRAC. Under section 11 of
the FTR Act, these must be entered in an exemption register. An exception
to this registration requirement is if the transaction takes place after
the commencement of Division 1 of Part 3 the AML/CTF Act where similar
recording requirements are found (provided the cash dealer is also a ‘reporting
entity’ under that Act). As some financial institutions are not ready
to move to the new regime for recording exempt transactions, item 3
amends the recording exception by allowing financial institutions to continue
to use the FTR exemption register until 11 March 2010 regardless of whether
Division 1 of Part 3 the AML/CTF Act has come into operation.
Items 4, 5 and 6 deal with the reporting obligations
of solicitors. These amendments are similar in nature to those made by
Items 1 and 2 except that these amendments concern solicitors and not
cash dealers. Currently, solicitors have reporting obligations under
section 15A of the FTR Act until 12 December 2008 and similar obligations
under the AML/CTF Act from that date. As some solicitors are expected
to be non-compliant with the new rules by 12 December 2008, item 5
amends section 15A to allow them to continue to report significant non-exempt
transactions under the FTR Act rather than the AML/CTF Act. However,
if they are compliant with the new arrangements, there is no need to also
comply with the FTR Act obligations (item 6).
Items 7, 8 and 9 deal with the obligations under
the FTR Act on cash dealers to report ‘suspect transactions’. Suspect
transactions are those that may or may not be ‘significant transactions’
(and therefore already reportable) which raise a suspicion of certain
kinds of wrongdoing. The changes made here mirror those made to the reporting
obligations of cash dealers for ‘significant transactions’ (items 1
and 2) and those made to the reporting obligations of solicitors (Items
4,5 and 6). That is, there is currently an obligation to report such
transactions under section 16 of the FTR unless the transaction takes
place after Division 1 of Part 3 the AML/CTF Act has come into operation.
As some cash dealers are expected not to be compliant with the new reporting
arrangements, the amendment made by item 8 to subsection 16(4A)
allows them to continue to report under the FTR Act until 11 March 2010.
However, if they are compliant with the new arrangements, there is no
need or requirement to also comply with the FTR Act obligations (item
9).
Items 10 and 11 deal with the obligations on cash
dealers to report international funds transfer instructions (IFTIs).
Until 12 December 2008, cash dealers have reporting obligations under
the FTR Act but, from that date, these obligations will be replaced with
obligations under the AML/CTF Act. As some cash dealers are expected
to be non compliant on that date, amendments are proposed to section 17B
by items 10 and 11 to allow cash dealers to continue to
report IFTIs under the FTR Act rules until 12 March 2010 (item
10). However, if they are compliant with the new arrangements, there
is no obligation to also comply with the FTR Act obligations (item
11).
Concluding comments
In the absence of any express allegations of mismanagement
of the existing transition process — either by the regulated parties,
the administrator of the scheme or anyone else — the Bill appears to be
uncontroversial. This Bill anticipates that certain
cash dealers and solicitors may not be prepared for the commencement of
the AML/CTF rules and obligations that commence later in 2008. The AML/CTF
regime has significant compliance rules and it was not intended that those
groups be penalised if they were not prepared for the changeover by December
2008. It is worth noting that when the AML/CTF Act was enacted and the
government noted its intention to repeal the FTR Act once the AML/CTF
Act was in full operation. This Bill simply allows more time to those
moving into the new arrangements.
Jonathan Chowns
24 September 2008
Bills Digest Service
Parliamentary Library
© Commonwealth of Australia
This work is copyright. Except to the extent of uses permitted by the
Copyright Act 1968, no person may reproduce or transmit any part of this
work by any process without the prior written consent of the Parliamentary
Librarian. This requirement does not apply to members of the Parliament
of Australia acting in the course of their official duties.
This work has been prepared to support the work of the Australian Parliament
using information available at the time of production. The views expressed
do not reflect an official position of the Parliamentary Library, nor
do they constitute professional legal opinion.
Feedback is welcome and may be provided to: web.library@aph.gov.au.
Any concerns or complaints should be directed to the Parliamentary Librarian.
Parliamentary Library staff are available to discuss the contents of publications
with Senators and Members and their staff. To access this service, clients
may contact the author or the Library’s Central Entry Point for
referral.
|
