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
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