Chapter 2Matters raised in evidence
2.1This chapter discusses evidence received by the committee on the bill. It first covers the general support expressed for the bill, before moving to concerns raised by stakeholders. Following this, this chapter also sets out the committee’s views and recommendations.
General support for the bill
2.2A large number of stakeholders supported the bill’s intent and general reforms, as they considered there is a need to strengthen Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) framework, as well as to comply with our international obligations through our membership of the Financial Action Task Force (FATF).
Strengthening our AML/CTF system
2.3Law enforcement agencies commended the reforms. For example, the Australian Federal Police (AFP) told the committee the bill would:
…provide tangible operational benefits for law enforcement. The reforms will protect and target-harden key industries from abuse and infiltration by criminal syndicates. Furthermore, the reforms will significantly enhance the AFP’s ability to detect, investigate and prosecute serious and organised criminals for money-laundering offences, and to confiscate associated proceeds, instruments and benefits of crime. The reforms may also improve our ability to identify other criminal offending, as ‘following the money’ frequently helps uncover predicate offending that generated those funds.
2.4The Australian Criminal Intelligence Commission (ACIC), which provides intelligence on transnational serious and organised crime, submitted:
The ACIC is supportive of the Australian Government’s proposed reforms to Australia’s AML/CTF regime (Tranche 2), which will expand the regime to include certain high-risk services provided by lawyers, accountants, trust and company service providers, real estate professionals and dealers in precious metals and stones. The ACIC notes these reforms seek to improve visibility of, and capability to, counter professional facilitators enabling money laundering.
2.5The intentions of the proposed reforms were also generally commended by business and industry (even while many also raised concerns on aspects of the bill, as discussed later in this chapter).
2.6For instance, the Australian Banking Association (ABA), the peak body for banks, submitted the bill was timely and significant:
Recognising that changing the complex, often arcane, and deeply self-referential structure of the AML/CTF Act and associated Rules is extraordinarily challenging, the ABA is of the view that the overall reform package [of the bill] goes a long way to meeting the ambitious goals for AML/CTF reform. Notably the proposed reforms address many of the industry pain points that have accumulated in the years since AML/CTF reform was last attempted.
2.7The Financial Services Council (FSC) noted that it:
…commends the hard work and effort that has gone into producing the Bill to amend the [AML/ CTF Act] and supports the underlying intent tosimplify and modernise Australia's AML/ CTF framework.
2.8The Self Managed Super Fund (SMSF) Association voiced its support, as:
…it is essential that Australia has in place a robust [AML/CTF] regime to effectively deter, detect and disrupt money laundering and terrorism financing, and ensure that Australia meets the international standards set by the Financial Action Task Force (FATF).
2.9Australian Payments Network (AusPayNet), which represents the Australian payments industry, was ‘generally supportive’ of the review and reform of the AML/CTF regime, while noting that consultations must be ongoing following the bill’s passage, including on the development of regulations.
2.10The Australian Retailers Association (ARA) noted that it:
…welcomes efforts to simplify and modernise Australia's AML/CTF regime, building on feedback from first and second round consultations. We believe the proposed Bill creates efficiencies and clarity on certain issues.
2.11Legal stakeholders expressed support for certain aspects of reform. For example, the Law Council of Australia (Law Council) voiced ‘in-principle’ support, while pointing out that some aspects of the current bill would be challenging for certain legal practitioners. Similarly, the New South Wales Bar Association (NSW Bar Association) shared these concerns, but submitted it was:
…supportive of the objects articulated in s3 of the AML/CTF Act, and supports amendments that provide for measures to detect, deter and disrupt money laundering, the financing of terrorism, and other serious financial crimes that are balanced and proportionate to the legal and economic interests of law-abiding Australians and are consistent with the fundamental obligations of the legal profession, and in particular barristers as independent practitioners with an important role to play in the administration of justice.
2.12KordaMetha, an independent advisory firm providing advice on a range of matters including on financial crime, welcomed the bill’s provisions:
…to modernise and simplify the existing regime, as well as to incorporate additional sectors into the regulatory framework recognising the need to comply with international standards and mitigate ML/TF risks to those entities considered ‘gatekeepers’.
2.13The property and real estate sector also expressed support for the intention of the reforms. For example, the Real Estate Institute of Queensland (REIQ) stated it:
…supports the Government’s commitment to protecting the integrity of the Australian financial system and improving Australia’s AML/CTF regime to ensure it is fit-for-purpose, responds to the evolving threat environment, and meets international standards set by the [FATF], the global financial crime watchdog and standard setter.
2.14Non-government organisations working to bring oversight to illegal international money laundering also supported the provisions of the bill. For example, while proposing certain measures could be strengthened, Transparency International ‘applaud[ed] the proposed changes’, noting that:
The reforms aim to make it harder for organised crime gangs, corrupt officials and criminals to launder their proceeds of crime in Australia and will extend the AML/CTF obligations to high-risk professions such as real estate professionals, professional service providers (such as lawyers, conveyancers, accountants, and trust and company service providers), and dealers in precious metals and precious stones.
FATF grey listing
2.15The Attorney-General’s Department (AGD) outlined the significant risk of FATF grey listing in its supplementary submission:
A prolonged lack of action puts Australia at significant risk of direct nomination [for grey listing]. As a result, it is critical that Australia address the areas of deficiency identified in the 2015 Mutual Evaluation to the greatest extent possible in order to avoid the serious consequences associated with potential grey-listing.
The FATF continues to highlight non-compliance with tranche two regulation, and has repeatedly urged Australia and other countries to take action. A report published by the FATF in July 2024 highlighted Australia as 0 per cent compliant with requirements to regulate tranche two professions, against an average of 74 per cent compliance for all FATF members.
2.16A number of submitters concurred with the need for Australia to expedite compliance with FATF standards. For example, the AFMA noted that:
Any prospect of Australia being grey-listed by the FATF would significantly hinder Australia as a location to conduct financial business and undermine confidence in Australia’s financial markets. AFMA supports the Government in undertaking legislative action that is necessary to ensure that grey-listing does not occur. On this basis, AFMA reiterates its support for Tranche Two entities being brought within regulatory scope.
2.17KordaMentha noted that Australia was one of only a few FATF members that did not require accountants, lawyers and real estate agents to be regulated by AML/CTF frameworks, and unpacked some of the consequences of grey listing:
The impacts of being grey listed are significant. An International Monetary Fund Working Paper published in May 2021 examined the impact FATF grey listing has on capital flows and suggests, on average, that a grey listed country experiences a decline of capital inflows equivalent to 7.6% of GDP and a decline in foreign investment equivalent to 3% of GDP. Further, overseas businesses, such as major global banks may shy away from working with domestic banks as well as impacting correspondent banking relationships and increased due diligence standards for Australian businesses.
2.18The Property Council also recognised the importance of reform, especially regarding FATF grey listing:
The risk to Australia's economy and financial system as a result of being grey listed by the FATF outweigh any proposed increased regulatory cost on industry. The Property Council strongly encourages the Parliament to engage with this Bill from this important premise.
Avoiding a grey listing by the FATF should be a priority for the Parliament. Grey listing, whilst not as serious as black listing, still places Australia on the path to becoming a high-risk jurisdiction, causes significant damage to Australia as a destination for foreign investment as well as our ability to access international capital markets.
2.19Contrastingly, some submitters considered that the risks of FATF grey listing have been overstated. For example, Professor Louis de Koker of La Trobe University Law School pointed to low compliance levels on some measures, observing that:
It is worrying that there are government concerns that Australia may be greylisted if the current Bill is not adopted. The global community is still working towards compliance with the FATF standards and no country has yet been assessed as fully compliant.
Concerns and matters raised
2.20Evidence raised a number of concerns that this section will discuss in turn, including:
a lack of consultation on draft legislation and a too-short implementation timeframe;
potential duplication or conflict of regulatory requirements for financial reporting;
a more onerous customer due diligence (CDD) framework for industry;
potential capture of services;
suspicious matter reporting;
International Value Transfer Services (IVTS); and
civil penalty matters.
Consultation on draft bill and need for increased implementation time
2.21Some evidence raised concerns on engagement on the bill’s development, including a lack of an exposure draft for comment. Concerns were also raised about the timeframe for the development and consultations on AML/CTF Rules that will implement many of the bill’s provisions, as it may not be sufficient for industry adaptation to new requirements.
2.22A number of stakeholders noted no draft bill was circulated prior to its introduction into Parliament. For example, the ABA submitted that the lack of access to a draft bill was a significant ‘constraint in providing feedback’. Similarly, the Customer Owned Banking Association (COBA) noted that an exposure draft should have been released early, as the bill is complex:
…to ensure that industry could see the full picture and to provide informed and considered feedback on the design of the laws prior to its introduction into Parliament. The result is that industry has an incomplete picture of the impacts of this regime and, due to the limited time for consultation, can only provide limited feedback.
2.23The Law Council also commented on the lack of consultation on draft legislation, as well as the inclusion of proposals not canvassed previously:
The Bill has been presented without an exposure draft, and there has been a tight timeframe associated with submissions and the finalisation of the inquiry by the Senate. This has caused difficulties as the legislation is complex; and the impact on the legal profession in the proposed reforms is significant, far-reaching and will impose considerable compliance burdens.
2.24The ABA noted that the bill’s implementation would rely on redrafted AML/CTF Rules, and that:
The principles-based approach that is sought to be adopted as a key component of the reform process necessarily requires detailed elaboration of some aspects in the Rules. As these are not yet available for public consultation, much of the feedback on the Bill is necessarily limited to theoretical impacts.
2.25AFMA submitted that its ‘primary concern’ with the bill was the ‘timeframe for commencement’, including for any new Rules:
With the exception of the requirements for reporting value transfer instructions, the commencement for the changes in the Bill is 31 March 2026. This may be a little more than twelve months from the Bill attaining Royal Assent. For regulatory change of this magnitude, AFMA would expect an implementation timeframe of a minimum of eighteen months and hence, for existing reporting entities, the timeframe for commencement is insufficient.
This concern is exacerbated by the fact that much of the granularity in terms of reporting entity obligations will only be provided in the Rules and will be supplemented by AUSTRAC guidance.
2.26Similarly, the Association of Superannuation Funds of Australia (ASFA) submitted that draft AML/CTF rules should be released by AUSTRAC as soon as possible:
In order to be able to fully assess the effects of the changes reporting entities will need an opportunity to consider the proposed AML/CTF Rules, which will provide further detail about the expectations and requirements with respect to the implementation of the revised obligations...The scheduled commencement date for the reforms with respect to existing reporting entities is 31 March 2026. Member organisations are concerned that, by the time the AML/CTF Rules are finalised, the timeframe to fully assess the operational impacts and implement the necessary changes will not be sufficient.
2.27KordaMentha advocated for sufficient time to allow industry adaptation to the new regulatory framework:
The detail outlined in the Bill is not sufficient for existing regulated entities to resource for cost transformation programs or for new entities to understand the detail of what they are required to do to comply. If the AML/CTF Rules and guidance are finalised by the end of this calendar year, we believe the 18-month period would still allow sufficient time to meet FATF review deadlines.
2.28On consultation, the AGD provided an overview of its consultation in the development of the bill, and its ongoing work with affected sectors. This included two ‘extensive rounds’ of consultation between April 2023 and June 2024, with over 270 submissions received and 100 stakeholder meetings with government, legal and industry stakeholders.
2.29On deferred commencement of the bill, the AGD submitted:
The Bill contains a sufficient lead time and staggered commencement dates, to provide adequate time for reporting entities (including newly regulated entities) to understand and transition to their obligations.
For example, tranche two entities and new virtual asset services would not commence under the AML/CTF regime until 31 March 2026. The department heard very clearly from stakeholders that they wanted a considerable period of time to work through implementation, before commencement of obligations.
2.30On the implementation of the bill’s provisions, AUSTRAC undertook to provide support to industry, including newly regulated entities to understand and comply with the new regime. This would, it stated, incorporate:
only taking enforcement actions where there has been ‘serious and systematic breaches’, not for minor or technical non-compliance, where it works with entities to ‘enable them to respond and remediate issues’;
partnering with industry on awareness of obligations, and affording sufficient time for implementation, including providing education and outreach products co-designed with stakeholders; and
delivering a new AUSTRAC team to directly engage regulated industries, to simplify and improve support.
2.31AUSTRAC also committed to consult affected industries on the development of new Rules ‘by the end of 2024’, noting regulations:
…are developed in consultation with industry, government agencies and other stakeholders. AUSTRAC will commence consultation with industry on the draft AML/CTF Rules before the end of 2024, to ensure they are fit-for-purpose and align with the evolving operating environment for regulated businesses. AUSTRAC intends to undertake 2 rounds of public consultation, and engagement with specific sectors, before the AML/CTF Rules are promulgated.
AUSTRAC’s engagement on the draft AML/CTF Rules will build upon the consultation process undertaken by the Attorney-General’s Department on the proposed reforms, and allow industry to assist in developing obligations that are flexible, practical and calibrated towards a larger range of sectors and regulated entities.
2.32The AGD committed to engage with government and industry stakeholders on any necessary preparation for the FATF mutual evaluation, through a range of 'existing forums at senior and working levels, as well as establishing specific governance structures to provide oversight and strategic guidance on the preparations.
Schedule 3 of the Bill, which deals with tranche two entities, contains transitional provisions for these newly regulated entities. These transitional provisions allow tranche two entities that provide new designated services under Schedule 3 to enrol as reporting entities with AUSTRAC from 31 March 2026, but other regulatory obligations under the AML/CTF Act would not apply until 1 July 2026.
2.33The AGD also observed that Australia’s FATF mutual evaluation commences in 2026. If the bill was to be deferred, it argued, reporting entities would not have sufficient time to prepare for new regulatory obligations that must be in place prior to the evaluation.
Duplication of regulatory requirements and potential conflict of laws
2.34Some stakeholders were concerned that the obligations imposed by the bill would create duplication or disjuncture between Australian and foreign AML/CTF frameworks, and so create a burden for reporting entities with foreign branches or subsidiaries.
2.35The potential consequences of this were outlined by the ABA
In effect, this provision creates an obligation on Australian banks seeking to provide service offshore to maintain constant surveillance of changes in the minutiae of offshore AML/CTF requirements and determine comparability with Australian provisions.
This is an extraordinarily high due diligence obligation that goes well beyond the relevant FATF obligations. In order to circumvent this risk, Australian banks would likely implement duplicative processes intended to comply with both Australian and foreign country obligations resulting in a hopelessly fragmented customer experience and significant competitive disadvantage versus banks from other jurisdictions.
2.36AFMA commented that, whereas the intention of the bill was to simplify the AML/CTF system, the bill’s provisions would actually add complexity and duplication that would ‘undermine the competitiveness of the overseas branch or subsidiary’. It recommended:
A defence should be available where the laws of the foreign jurisdiction give substantive effect to the relevant Australian requirements.
AFMA supports the retention of the current exemption that allows the provision of a designated service through an offshore branch or subsidiary without reference to the majority of the Australia requirements (in particular CDD requirements), in circumstances where the offshore jurisdiction is not materially deficient from a FATF perspective.
2.37In response to these concerns, the AGD submitted that:
The Bill would set out high-level principles for all reporting entities that are aligned with the international FATF standards. Most FATF members’ AML/CTF legal frameworks meet the FATF standards for customer due diligence.It will not be necessary for reporting entities to assess foreign laws—the provisions have been drafted specifically to remove this need by avoiding concepts of ‘equivalence’ or ‘strictness’ of foreign laws. The Bill removes the current concept of ‘comparable’ laws which reporting entities are currently required to assess…
The Bill focuses instead on what occurs in practice, i.e. reporting entities simply need to ensure that their own customer due diligence (CDD) measures as set out in their own AML/CTF policies meet an objective standard of establishing the identity of the customer etc. This is both a basic and universal requirement of AML/CTF regulation, and good business practice.
2.38Moreover, the AGD stated that:
Through this deliberate drafting, foreign branches and subsidiaries of reporting entities will be provided flexibility in how they meet these high-level obligations, with the ability to leverage the policies, procedures, systems and controls that are already in place to provide designated services in the host country.
Further, the AML/CTF Rules that will be developed to clarify CDD obligations will not be apply to foreign branches and subsidiaries, except in circumstances such as recognising CDD undertaken in another country for the purposes of providing designated services in Australia (known as ‘passporting’)…This will prevent any duplication of existing policies, procedures, systems and controls and would provide maximum flexibility for these reporting entities.
More onerous customer due diligence (CDD) framework
2.39The committee received some evidence that argued the new CDD framework introduced by the bill could be more prescriptive and onerous that the current approach. This included noting that the timing of the new framework being implemented would be difficult and inconsistent with best business practice.
2.40For example, the ABA submitted that it was supportive of the policy intent of these changes, but:
…our assessment of the provisions as currently drafted is that they are likely to require significant change in existing customer-facing processes that will substantially disrupt customer experiences including account opening and ongoing operation. These changes are estimated to require substantial systems investments at significant cost yet are unlikely to make any meaningful impact on AML/CTF outcomes. Notably, the proposed change in the timing of various elements of customer data collection and due diligence measures… during the customer onboarding process would require a fundamental redesign of IT systems at great cost and no identifiable benefit.
2.41Similarly, stakeholders from the real estate sector, although supportive of the bill generally, saw some these reforms as increasing the compliance burden on its members, for no tangible benefit for AML/CTF monitoring. The REIQ commented:
We do not agree that it is appropriate for agents to conduct [CDD] on buyers of real property, unless the agent is engaged contractually by the buyer to perform property services for that buyer to locate and purchase property on their behalf (an acting buyer’s agent). Extending AML/CTF obligations to buyers would significantly increase the compliance burden on real estate professionals. This could complicate the transaction process, increase costs, and delay transactions without a proportionate benefit in terms of detecting and preventing illegal activities.
2.42Others considered that the timeframe for implementation was too short. TheNational Australia Bank (NAB) submitted:
The Bill proposes amendments to take effect on 31 March 2026, which would require substantial updates to existing processes and technology solutions to enable compliance with the amended CDD obligations. The changes would require extensive planning, design and testing prior to deployment, potentially causing disruptions to operations and NAB’s ability to provide critical services to our customers. NAB considers it will be extremely challenging to undertake the necessary change activity prior to the proposed commencement date.
2.43The AGD addressed these concerns in its supplementary submission. This included outlining that where the current system has a procedural focus on ‘how’ CDD obligations are fulfilled, the new approach is concentrated ‘on outcomes (businesses knowing their customer), rather than prescribed processes (the steps or procedures businesses take to know their customer)’. The AGD continued that this is in line with the expectations of the FATF, as well as the goal of hardening Australia against criminal exploitation.
2.44Moreover, the AGD stated:
Under the Bill, reporting entities are empowered to flexibly undertake CDD in a way that is commensurate to the customer’s money laundering and terrorism financing risk. For example, reporting entities would be given flexibility about:
the type of ‘Know Your Customer’ (KYC) information they collect about a customer
which of the KYC information collected the reporting entity will verify, and
flexibility about how they verify that KYC information,
so long as it is appropriately based on the customer’s money laundering and terrorism financing risk.
Identification of politically exposed persons (PEP)
2.45Some submissions noted that the identification of PEP or persons designated for targeted financial sanction is complex, and may be difficult to undertake while onboarding new customers. Several advocated for the adoption of a more flexible risk-based approach.
2.46For example, the ABA and COBA advocated for a risk-based approach to be considered. Both noted that the bill’s changes to the methodology and timing of customer risk assessments would necessitate a fundamental redesign of IT systems and onboarding processes, which would disrupt business, and lead to poor customer outcomes.
2.47The CBA commented on what this would mean for the banking sector:
At present, the process banks undertake to establish a 'business relationship' occurs over a period of several days for most customers, starting with identification and verification of a customer. However, due to the nature and scale of CBA operations, politically exposed person (PEP) screening, sanctions screening, and a customer risk assessment is undertaken after this initial identification process for the majority of customers. If banks move to completing this screening and risk assessment process prior to the provision of a designated service, it may result in delays to the provision of services to customers such as opening an account and conducting transactions and require substantial changes to the origination and on-boarding processes.
2.48Stakeholders from the property and real estate sector concurred. For example, the Property Council argued ‘PEP screening should not be mandatory’, as:
For entities who deal with a high volume of low-risk transactions, the regulatory cost of conducting PEP screenings outweighs the benefit of regulation. Of course, where a reporting entity identifies a customer as medium or high risk, or requiring enhanced CDD, or who could potentially be a foreign or international organisation politically exposed person, then a PEP screening is appropriate.
2.49The FSC recommended that there should be a clarification on determination whether a customer is a PEP in the Explanatory Memorandum, given the new requirements:
Current requirements are that reporting entities must reasonably determine whether a customer or the customer's beneficial owner are politically exposed persons (PEPs). Section 28(2) now requires reporting to establish whether anyone acting on behalf of the customer is a PEP.
This could be a wide range of people that may be assisting a customer in receiving a designated service, including a person acting under a power of attorney or any other form of agent. These parties may not necessarily be 'beneficial owners' of the customer. This appears therefore to be an expansion of existing requirements, with screening system implications for reporting entities.
In view of this change, the FSC recommends that the EM include an additional brief paragraph clarifying these points.
2.50In response, the AGD noted:
The requirement to determine whether a customer is a PEP or a person designated for targeted financial sanctions prior to receiving a designated service is a FATF requirement. This requirement is underpinned by the inherently higher money laundering and terrorism financing risk these customers may pose, as they often hold positions that can be abused for money laundering, particularly related to corruption offences.
FATF Recommendation 10 also requires that reporting entities ‘should be required to adopt risk management procedures concerning the conditions under which a customer may utilise the business relationship prior to verification’.
Responding to stakeholder feedback and the FATF standards, new section 29 would provide the power for the AUSTRAC CEO to make rules that would facilitate delayed verification. This could include delayed verification of the customer’s status as a PEP or person designated for targeted financial sanction, where essential to avoid interrupting the ordinary course of business, it is appropriate to the money laundering and terrorism financing risk of the customer, and the additional risk from delay is low, managed and mitigated. To make such an assessment, reporting entities may need to obtain further information to ensure they comply with the risk-based systems and controls outlined their AML/CTF program.
Keep open notices
2.51As outlined earlier in this report, the bill requires reporting entities to assess whether their CDD compliance obligations would or could reasonably be expected to ‘tip off’ a customer. A ‘keep open notice’ allows a reporting entity to refrain from undertaking some CDD obligations, if they reasonably believe this would alert the customer to the existence of a criminal investigation.
2.52The ABA raised concerns that this new provision would:
require ‘the reporting entity to make subjective assessments as to whether or not the conduct of certain activities would or could reasonably be expected to alert the customer to the existence of a criminal investigation is an unreasonably burdensome obligation’; and
mean that the ‘lower threshold for a serious offence and reduced coverage in exemptions (see above) creates higher risks for banks in retaining more customers subject to Keep Open Notices including the effective mitigation and management of risk’.
2.53AFMA noted its concerns as follows:
We have previously expressed concern regarding the removal of AUSTRAC approval in relation to keep open notices, due to significant concerns from our members that this will result in a considerably higher number of notices being issued to our members, thereby exacerbating compliance costs.
To this extent, AFMA suggests an amendment to the definition of ‘serious offence’ in proposed Section 39B to an offence that is punishable by imprisonment for 3 years or more, together with the removal of foreign offences under proposed Section 39B(2)(b). These amendments should reduce the operational burden and compliance risk associated with the proposed changes.
AFMA also is of the view that the exemption in proposed Section 39D(2), that is, the ability for the reporting entity to continue to conduct initial, ongoing and enhanced due diligence and to continue to apply AML/CTF policies, should be broader to align with the current exemption in Chapter 75 of the Rules.
2.54The Law Council advised there should be an exemption for legal services:
The legal profession should not be asked to facilitate or support the policing arm of the executive branch of government. Accordingly, in our view, there should be no ability to issue keep open notices to legal practitioners.
2.55The AGD addressed these concerns, outlining that the drafting of this measure ‘addresses inconsistencies with FATF standards and applies best practice’. Noting current arrangements of Chapter 75 exemptions are too broad and do not meet FATF standards, the AGD stated:
…the Bill specifies that a reporting entity is permitted to not undertake certain CDD obligations in relation to the provision of a designated service, if they receive a ‘keep open notice’ and reasonably believe that compliance with those obligations would or could reasonably be expected to alert the customer to the existence of a criminal investigation. CDD obligations that can be carried out without alerting the customer, such as transaction monitoring, must still be undertaken.
Importantly, reporting entities will retain the discretion to choose whether to continue to provide a designated service to a customer after receipt of a keep open notice. The Bill does not require reporting entities to keep providing designated services. Instead, the Bill would create a safe harbour from liability from the relevant provisions of the[AML/CTF Act] for a reporting entity that continues to provide a customer with designated services so long as it conforms with the requirements of the AML/CTF Act, AML/CTF Rules and the details in the keep open notice.
2.56On the definition of ‘serious offence’, the AGD confirmed that the definition in the bill aligns with current AML/CTF Rules (Chapter 75), as does the two-year threshold with the Crimes Act 1914. It commented:
…increasing the threshold would lower the availability of keep open notices, which may result in more exposure to legal risk for reporting entities. As above, keep open notices would provide a safe harbour from liability—reporting entities retain the discretion to choose whether to continue to provide a designated service after receipt of a keep open notice.
Narrowing the scope of the tipping off offence.
2.57Evidence generally supported reforms to tipping off provisions, as it would allow reporting entities to share information with related entities, and so improve identification of financial crime.
2.58However, amendments were proposed by some stakeholders. For example, AFMA recommended:
The Bill should expressly permit the sharing of information with both internal and external auditors that may not be part of the reporting/business group, such as through clarifying that such sharing would not reasonably be expected to prejudice an investigation. This is consistent with FATF recommendations and should expressly be permitted in the enabling legislation; [and]
Coupled with amendments to the definition of ‘reporting group’ as suggested below, the Bill should expressly permit the sharing of SMR information with offshore entities, particularly given that such entities may have a role to play in the Australian reporting entity complying with AML/CTF obligations. This approach would be consistent with FATF Recommendation 18. The Rules would be able to stipulate any jurisdictional limitations associated with the sharing of the information.
2.59The ABA had a number of concerns over new tipping off provisions, including that the bill be amended to ensure:
‘Reporting entities should be given clarity that disclosure can occur if required or permitted by a law of the Commonwealth, State or Territory’; [and]
‘Disclosures should be permitted between all members of a reporting group’ – which the bill’s current clause 123(5) may inappropriately limit.
2.60Similarly, AusPayNet supported the new approach, but recommended:
…the amendments to the tipping-off offence effectively enable appropriate private-to-private and private-to-public information sharing across the payments ecosystem, not just within business groups…’
2.61Some called for further clarification of the way the new provisions would operate. For example, the Law Council suggested that there was not sufficient clarity on the scope of the new tipping off provisions, and submitted:
The Law Council considers that the notion of what would or could reasonably be expected to prejudice an investigation to be uncertain in its scope. We suggest that this matter is so important that relevant examples should be included in the legislation itself.
2.62The AGD commented that:
...re-introducing exceptions to the tipping off offence does not meet the reform’s intent to simplify the AML/CTF regime. Adding specific exceptions would cast doubt on the generality of the ‘would or could reasonably prejudice an investigation’ standard, which could lead to a chilling effect in those circumstances where no specific exception applies which would undermine the intent of the reform. The current reliance on exceptions to the tipping off offence is also time-intensive for industry stakeholders and AUSTRAC.
2.63The AGD also noted that the Explanatory Memorandum sets out a range of disclosures that would not constitute tipping off, and that AUSTRAC would issue further industry guidance on tipping off, including common scenarios that stakeholders may face.
2.64The ABA also submitted that the bill’s ‘commencement date of 31 March 2026 for tipping off provisions should be aligned to Royal Assent’, as:
There is no clear rationale as to why the commencement date for this provision is not aligned with Royal Assent or another earlier date.
The current flaws in the tipping off offense are such that an earlier commencement date for the reformed provision is worthwhile for all stakeholders. It will also remove/minimise the need for reporting entities to reapply for current exemptions in the interval between Royal Assent and the commencement date of these provisions.
Suspicious matter reporting (SMR)
2.65Evidence to the committee argued that the requirements of the bill for SMR for some professions could potentially be incompatible with other aspects of their work. For example, the Law Council suggested that ‘legal practitioners should be specifically exempted’ from SMR requirements, as:
…informing on a client in the manner envisaged by the Bill—about something which may be relevant to an investigation which may not have even commenced about a wide array of potential offences—is repugnant to the duty owed by legal practitioners to the courts and to the duty owed by legal practitioners to their client.
Further, being required to breach a duty of confidentiality to make a report of something suspicious, to what may potentially be a prosecuting authority, undermines the ability of legal practitioners to provide full and frank advice, especially when it the SMR provision is read in conjunction with the tipping off provision in s 123. We also note that the SMR provisions must be read in conjunction with the reformulation of privilege set out in Schedule 4.
2.66The Law Council proposed amendments to the bill so that legal practitioners ‘should not be obliged to file suspicious matter reports at all (as is the position in Canada) or answer s49 or 49B Notices relating to their client’s affairs by reason of their paramount duty owed to the court and their fiduciary obligations owed to their clients’.
2.67Dr Marcus Zirnsak, a Senior Social Justice Advocate for the Uniting Church, told the committee that this was ‘deeply disturbing’, as:
The Canadian regime is described as self-regulatory, and the law societies there enforce it. Lawyers are not required at all to make suspicious activity reports around the terrorism and sanctions regime, unless they are required to do so under the Criminal Code of Canada. There's no restriction on lawyers tipping off their clients in that…The FATF analysis of Canada criticised Canada for failing to regulate lawyers and for not requiring them to make suspicious activity reports…In addition, the Canadian financial intelligence unit report from 2022…found that there were 92 cases in which legal professionals were found to have been involved in professional money-laundering schemes. In Canada, lawyers use legal professional privilege to set up shell companies and trust accounts to facilitate money laundering…
2.68Some stakeholders noted there were potential loopholes that should be tightened regarding lawyers and their clients. For example, Transparency International and the Uniting Church in Australia both expressed disappointment in the carve out for legal professional privilege (LPP) in the bill. This, Transparency International claimed:
…creates a major hole in the bill and allows not only lawyers, but also any reporting entity, to not submit suspicious matter reports to AUSTRAC, as the financial intelligence unit, if they hold a ‘reasonable belief’ that content within is privileged. Our understanding is that there is no provision made for such a belief to be tested other than in the courts in an appropriate case well after the event.
2.69In response to these concerns, the AGD acknowledged that ‘where suspicions arise about a client, the intersection with a legal professional’s fiduciary or other duties may be complex, but the responsibilities are not irreconcilable’. Additionally:
The Bill and the AML/CTF Act provide a clear legislative basis for the obligation to report suspicious matters about their client under the AML/CTF regime. This legislative requirement supersedes a fiduciary duty to a client. Exempting legal practitioners from reporting obligations under the AML/CTF regime would not be compliant with the FATF Standards.
In addition, experiences in common law jurisdictions demonstrate that suspicions may more frequently arise in relation to other parties or a counterparty in a matter. In such circumstances, the obligation to report the suspicion would not interact with a legal practitioner’s fiduciary duties.
2.70Moreover, the AGD noted lawyers in similar jurisdictions to Australia were required to report on suspicious matters, either to a financial intelligence unit or relevant regulator, and that the timeframes in these jurisdictions were similar to ones proposed in the bill.
2.71AGD also submitted that the Explanatory Memorandum sets out a ‘range of disclosures that would not constitute tipping off—this includes disclosure to a legal or professional regulator’. Moreover, it noted that AUSTRAC were willing to collaborate with industry to develop suitable guidance on suspicious matter reporting obligations and tipping off offence.
Capture of designated services
2.72As noted earlier in this report, the bill would extend the AML/CTF scheme to ‘tranche 2 entities’ that provide certain higher-risk services. Some stakeholders raised concerns about the capture of particular elements their sectors, particularly from the legal and financial advice professions.
Barristers and some other legal professionals
2.73Concerns were widely raised that the bill would capture barristers, as well as some other legal professionals under the professional service provider designated services listed in Schedule 3.
2.74For example, the Law Council submitted that the bill should be amended to exclude services provided by a barrister as designated services. More comprehensively, it stated that:
…the Law Council does not support the inclusion of all barristers whos practices include advisory work or advocacy connected with transactions as reporting entities under the AML/CTF legislation. For example, it makes no sense at all for a barrister, when instructed by a solicitor, to be required to undertake a client risk assessment, duplicate client due diligence undertaken by the solicitor, undertake PEP or sanctions screening or comply with reporting or record keeping provisions when the relationship with the client is likely to reside with the solicitor. That would result in a waste of money; it is, in any event, unworkable and the ML/TF risk must be low.
Further, if some classes of barristers’ services are such as to require them to enter the regulatory system as reporting entities, the associated economic costs and regulatory burdens will be a strong disincentive to the provision of that class of services. To the extent that barristers respond by excluding such services from their practice, the access of ordinary and perfectly innocent clients to legal advice and representation by barristers will be impeded, to the detriment of society and the economy.
2.75At a hearing, Ms Fiona McLeod AO SC of the Victorian Bar set out the reasoning for this to the committee:
The current draft does capture barristers' work when we consider broad definitions of designated services. I want to restate very briefly why barristers' work should not be covered. First, barristers are not gatekeepers. We do not and are not permitted to handle client money and conduct transactions or do any other relevant thing. We present low to zero risk. It is ludicrous to say we might and so we should be regulated just as it is ludicrous to suggest that people who publish real estate advertisements should also be regulated. No case study identified in the AUSTRAC report or previously identified by government agencies to the Law Council involves a barrister. I haven't come across another FATF common law country where a member of an independent bar or barristers' work is considered anything other than low risk. That is reflected in the Bar of England and Wales guidance note to its members, repeating the fact of that low risk in multiple places. To regulate barristers is inconsistent with the stated methodology of applying a risk assessment approach.
Secondly, as has been noted, barristers, like solicitors, are officers of the court. Our role is fundamental to the proper administration of justice. Unlike other professionals and unlike many other lawyers across FATF countries around the world, we are already caught by oaths upon admission to practice, certified ongoing fitness of good standing, duties of honesty and our overarching obligation to courts, our codes of conduct, show cause processes, ethical oversight and regulation. So there is simply no need for further regulation.
2.76The Victorian Legal Services Board and the Victorian Legal Services Commissioner (VLB+C) supported the proposal to extend the AML/CTF regime to lawyers providing designated services, but recommended the development of specific guidance on compliance:
The regime is particularly pertinent to legal practitioners, because individuals engaged in activities requiring the 'washing' of large amounts of cash are likely to require the services of a lawyer. That said, we are also cognisant that the application of the regime to lawyers will increase regulatory burden on the profession. To minimise that burden, we strongly recommend the development of legal profession-specific and detailed guidance to assist law practices to understand how to comply with the regime, in particular key obligations 3 and 4, i.e. reporting certain matters to AUSTRAC and developing and maintaining an AML/CTF program.
2.77In addition, the Law Council raised concerns on the potential inclusion of custodial services in the AML/CTF framework. It submitted that the repeal of the current definition of ‘exempt legal practitioner’ would:
…mean that any law practice providing a custodial or depository service or a safe deposit box or similar facility in the ordinary course carrying on a legal practice (for example, holding original wills, title deeds, contracts) would be providing a designated service. The Law Council considers this to be an undesirable and unnecessary outcome if it is unconnected to any other designated service and there should be a clear exemption for this.
2.78The AGD’s supplementary submission informed the committee that, as acknowledged by many stakeholders, the policy intent of the bill was not to capture barristers instructed by a solicitor. If barristers performed the designated services then ‘they would, and should, be captured by the AML/CTF scheme’, and that this ‘is the intended operation of the Bill, and reflects illicit financing risk of the designated services’. This would bring Australia into line with FATF standards:
…which require designated non-financial businesses and profession to conduct AML/CTF obligations when they prepare for, or carry out, transactions for their client.
Where the designated services refer to ‘assisting a person’, the designated services are triggered when the professional service provider prepares for, or carries out, transactions for a client, and requires an underlying or proposed transfer or transaction. Barristers’ advocacy and litigation work (including through alternative dispute resolution mechanisms), would not be expected to trigger the designated services.
2.79The AGD continued:
The Explanatory Memorandum provides examples around activities which would be captured by the planning and execution stages of a transaction (capturing planning activities is important as red flag indicators of suspicious activity may arise during planning stages). In most instances, the department expects these planning and execution activities to be done by a solicitor, not a barrister.
The designated services also provide a carve out for transfers of real estate or body corporates which are pursuant to, or resulting from, an order of a court or tribunal. Court orders would generally flow from barristers’ litigation work, and would not be captured by the AML/CTF regime.
Financial advisers
2.80The Financial Advice Association of Australia (FAAA) supported the intent of proposed changes to the AML/CTF framework, but expressed concern on the ‘ramifications for entities that provide item 54 designated services if they are unintentionally caught by the new designated services putting their exemptions at risk’.
2.81Noting that the Explanatory Memorandum outlines the retention of exemptions for reporting entities that provide item 54 designated services only, the FAAA expressed concern that:
We note that item 8 of the Bill will introduce a new definition of ‘governing body’ into s5 of the Act. However, s26T exempts reporting entities that provide item 54 designated services only from the governing body obligations in s26H. The application of s26P(2) to these reporting entities will likely cause some confusion, therefore increasing the risk of unintentional breach. This is concerning given s26P is a civil penalty provision.
2.82The FAAA recommended that:
…reporting entities that provide item 54 designated services only should be exempt from s26P(2) of the Bill as they are exempt from the obligation to have a governing body.
International Value Transfer Services reporting
2.83Some stakeholders raised concerns over the bill’s proposed International Value Transfer Services (IVTS), which would replace the current International Funds Transfer Instructions (IFTI) framework.
2.84Some were concerned about the implementation timeframe. Others proposed that, given some lack of certainty on these provisions, that this matter may be more appropriately dealt with in AML/CTF Rules, as this would allow for increased flexibility and more consultation with industry.
2.85The AFP outlined the positive reforms contained in the bill:
The AFP acknowledges the benefits of reforms which streamline and strengthen IFTI requirements and remove ambiguity. In the AFP’s experience, the process of off-setting used by Australian registered money remitters to transfer value on behalf of clients based in other countries relies upon access to funds in Australia. Those funds can often represent the profits generated from the activities of organised crime.
2.86However, some advocated for the implementation timeframe for IVTS changes to be reconsidered, including as it would: give longer times for financial institutions: to understand and implement transition strategies; allow definitions to be tightened in the bill or supporting material; and allow more consultation with industry to be undertaken.
2.87For example, the AFMA commented:
Given the complexity of the proposed changes in relation to value transfers and the fact that much of the detail will be included in Rules and associated schema, AFMA’s view is that the timing for commencement of Schedule 8 of the Bill should reflect the commencement of the new IVTS reporting framework, which is when reporting entities and AUSTRAC are able to update or implement required system changes.
2.88The ABA commented that the bill does not contain enough information on reporting obligations, which could particularly affect smaller institutions that draw on intermediaries. Moreover, it commented that the broader scope of the bill’s IVTS provisions:
…could capture products which were not previously included [in] the IFTI reporting regime (due to removal of the control requirement). This could mean that trade-based transactions, and credit card transaction could be captured.
2.89Some stakeholders proposed that the criteria for IVTS should be reconsidered and further consultation with industry undertaken. For example, the NAB argued that the ‘determination by an institution of the role it plays compared with other institutions involved in a value transfer chain against a descending order of priority is a new concept’, which is not adequately articulated in the bill or Explanatory Memorandum. Similarly, it found:
The ‘incidental value transfer’ exemption has not been fully explained in the Explanatory Memorandum – or example, whether online marketplaces and payment solution companies that are involved in a value transfer chain are in scope of the exemption, or to what extent their activity can be exempted. The ambiguity in applying this exemption could further complicate the determination of roles and responsibilities for supplying the required information.
2.90The NAB recommended that the proposed amendments on the Travel Rule and IVTS be removed, and called for further consultation with industry. The NAB explained that:
Obligations imposed in connection with value transfers should be clear and capable of being actioned in close to real-time given the nature of modern banking and customer needs. The concepts as drafted are ambiguous and risk impairing financial institutions' ability to facilitate payments efficiently. The proposed amendments create different concepts than those articulated in the FATF recommendation. Specifically, the definitions of ‘ordering institution’ and ‘beneficiary institutions’ are not aligned to the current FATF definitions.
2.91The ABA expressed similar concerns, and called for the bill to provide high level principles and for prescriptive criteria (including definitions) to be placed in the AML/CTF rules. The ABA submitted that:
The process of developing the Rules should be grounded in a deep understanding of the capabilities and limitations of Australia’s payments systems and our overall national payments system strategy. The desired AML/CTF process outcomes should be assessed against those capabilities and a full understanding of the costs of implementation and implications for the overall operation of the payments system developed. Any appropriate trade offs should be considered and agreed as part of the overall national payments strategy.
2.92On timing concerns, the AGD submitted:
In considering the timing for the commencement of the new IVTS reporting provisions, the department and AUSTRAC have considered factors that may make it more difficult for reporting entities to comply with the revised provisions, such as updating their software used in this reporting. The department has also discussed with industry and accounted for the decommissioning of the Bulk Electronic Clearing System (BECS), and the transition of financial institutions to the New Payments Platform (NPP) as a result.
Civil penalty matters
2.93Concerns in evidence raised several matters relating to civil penalties, regarding: the imposition of the legal burden of proof on reporting entities; and ongoing civil penalties following compliance.
2.94On legal burden of proof, submitters commented that its imposition, particularly in 26F(12), put too-high standards on reporting entities. For instance, the ABA argued that this imposed an ‘unreasonably high standard that is inappropriate to the nature of the exception’ and recommended it be replaced with an ‘evidentiary burden rather than a legal burden on the reporting entity’. It continued:
Implementation of this provision would lead to significant disruption to customers including potentially lengthy delays in opening a new account and unnecessary interruption of payment flows. It would also limit the ability to meet expectations regarding faster payments processing.
The changed legal test would require a significant and costly change to existing and well established customer onboarding processes and systems without any beneficial impact on AML/CTF outcomes.
2.95In response to these concerns, the AGD submitted that:
…it is reasonable that the reporting entity bear the legal burden of proof …[including] where reporting entities are relying on defences or exemptions. The information to give effect to these defences or exemptions will be particularly in the knowledge of the reporting entity, and it would be extremely difficult and overly burdensome for AUSTRAC to prove the matters in question.
2.96The Law Society of NSW noted that the civil penalties outlined in the bill ‘are disproportionately high’ for small practices. It argued that the bill should make clear ‘that the incorporated status if a reporting entity is not the primary consideration when determining the amount of a penalty payable’.
2.97Some evidence raised concerns that penalties should not be ongoing once a contravention had been remediated. For example, the ABA recommended that ‘Reporting entities should not be exposed to ongoing civil penalties once non-compliance…has been rectified’. Similarly, the NAB submitted that:
…the reforms dealing with non-compliance (for example, Cl28 and Cl29), which suggest that a reporting entity would continue to be exposed to civil penalties notwithstanding that the reporting entity has cured any non-compliance. This would mean the only remedy a reporting entity could take to avoid ongoing civil penalties would be to terminate its relationship (de-bank) with any customer onboarded outside of the prescriptive approach set out in the Bill.
2.98The ABA also submitted that:
A contravention should arise on providing a designated service to the customer in respect of whom there has been a due diligence failure only [and recommended that the bill be amended]…to provide for a contravention in respect of each designated service that the reporting entity provides to the customer (not a customer).
2.99On penalties, the Law Council suggested that it:
…is probable that, in future, under the approach proposed in the Bill, a reporting entity will be exposed to large civil penalties for minor low-level errors in the application of AML/CTF Policies, and this exposure could [be] out of proportion to the consequences of the failure. That aspect is of particular concern if prosecutions and penalties are subsequently used as a measure of the ‘success’ of the AML/CTF model.
2.100The AGD confirmed that penalties were not intended to continue after remediation, and that:
The Federal Court determines the pecuniary penalty that would apply for a contravention of a civil penalty provision. The AML/CTF Act sets out that the Federal Court must have regard to all relevant matters, including the nature and extent of the contravention, and the circumstances in which the contravention took place.
Committee view
2.101The bill would make significant reforms to Australia’s AML/CTF regime, which combats and protects us against money laundering, terrorism financing and other serious financial crime. It will reduce complexity and close regulatory gaps in the current regime, to ensure that Australia has an effective system to deter, detect and disrupt illegal flows of money internationally, and protect Australian businesses from exploitation by criminals.
2.102Moreover, the amendments proposed by this bill, if implemented, would bring Australia into line with the FATF standards. This is particularly important as we look ahead to our next mutual assessment of our AML/CTF regime over 2026-27, and given the considerable economic cost of being placed on FATF’s grey list if found deficient.
2.103The committee notes that these reforms are a timely fulfilment of long-awaited reform. As the Attorney-General, the Hon Mark Dreyfus MP, observed in his second reading speech introducing this bill to parliament, the initial 2006 AML/CTF Act was accompanied by a commitment from the then-Coalition government to introduce tranche 2 reforms. Almost a decade later, the government recommitted to these reforms following the last FATF mutual obligation in 2015.
2.104The committee considers that this bill is a necessary and timely reform. In bringing legislation forward in 2024, the government is finally addressing a long-overdue oversight, and modernising our current AML/CTF regime, strengthening its protections, and making it more effective.
2.105The committee thanks all the participants in this inquiry that made submissions and appeared at the public hearing. It notes that evidence was generally positive about the intent and provisions of the bill, as well as its contribution to reforming the AML/CTF framework.
2.106However, the committee acknowledges that this system necessitates the participation and partnership of industry to make it effective, and notes the concerns raised by stakeholders about certain aspects of the bill. The committee has carefully considered each of these concerns.
Consultation on AML/CTF Rules
2.107A wide range of stakeholders highlighted the need for government to undertake consultation with industry stakeholders on the AML/CTF Rules and guidance on implementation requirements.
2.108It was widely recognised that there is a need to pass the bills soon, so as to have as much time as possible for the AGD and AUSTRAC to undertake consultation with industry as the rules are developed and drafted.
2.109The committee is heartened by AUSTRAC’s commitment to undertake consultation on Rules ‘by the end of 2024’, and by the AGD’s assurance that it will work with industry to implement new requirements as Australia prepares for FATF mutual assessment over 2026-27.
Tipping off provisions
2.110Evidence focussed on two aspects of the new tipping off provisions: maintaining exceptions; and the commencement date for the new offence.
2.111On exceptions, the committee notes the advice of the AGD, which argued that maintaining exemptions would not be aligned with the intent of the bill to simplify the AML/CTF regime. As the AGD’s supplementary submission stated:
Adding specific exceptions would cast doubt on the generality of the ‘would or could reasonably prejudice an investigation’ standard, which could lead to a chilling effect in those circumstances where no specific exception applies which would undermine the intent of the reform
2.112The bill currently provides for a commencement date of 31 March 2026. Some parts of industry indicated that this should be sooner.
2.113The committee considers that this proposal would give some certainty for all stakeholders, including by removing or minimising the risk for reporting entities to reapply for current exemptions in the transition period between Royal Assent and the commencement date.
2.114The committee recommends that the bill be amended to move the commencement of the ‘tipping off’ offence to 31 March 2025.
Clarifying capture of designated services
2.115The committee received evidence on clarifying the nature and extent of designated services captured or exempted from the bill’s reforms.
2.116Evidence from the legal sector expressed concerns on the potential capture of barristers by the bill’s reforms to designated services. In response, the AGD provided evidence that:
Where the designated services refer to ‘assisting a person’, the designated services are triggered when the professional service provider prepares for, or carries out, transactions for a client, and requires an underlying or proposed transfer or transaction. Barristers’ advocacy and litigation work (including through alternative dispute resolution mechanisms), would not be expected to trigger the designated services.Barristers acting on instructions from a solicitor on behalf of a client are not intended to be captured.
2.117The committee considers that it would be appropriate for the bill to be amended to make it clear that the legislation does not capture barristers acting on the instructions of a solicitor.
2.118The committee recommends that the bill be amended to include a note that reflects the policy intent for the AML/CTF regime to not capture barristers acting on the instructions of a solicitor.
2.119The Law Council also raised concerns on the potential unintentional capture of entities providing custodial, depository or safe deposit box services without associated transaction elements. The committee considers that this matter should be clarified in the bill.
2.120The committee recommends the bill be amended to ensure entities providing custodial, depository or safe deposit box services without associated transaction elements are not unintentionally captured by the AML/CTF regime.
2.121The committee recognises the FAAA’s concerns on potential capture of reporting entities delivering item 54 designated services, in regards to the new definition of ‘governing body’ being introduced into the Act, and currently conflicting provisions. The committee recommends that this be clarified in the bill.
2.122The committee recommends that the bill be amended to ensure uniform exemptions for item 54 entities from governing body requirements.
International Value Transfer Services reporting
2.123Evidence to the committee expressed concern on the new IVTS provisions contained in the bill, including that its implementation timeframe would be difficult for industry to meet, especially given the need to develop and consult on related AML/CTF Rules.
2.124The committee sees some merit in amending the criteria for moving ordering institutions and beneficiary institutions from the bill to the AML/CTF Rules. This will allow government further time to consult with industry, and to develop Rules that are aligned both with industry needs and FATF requirements.
2.125The committee recommends that the bill be amended to move the criteria for ordering institutions and beneficiary institutions to the AML/CTF Rules to increase flexibility and allow for further consultation with industry.
Civil penalties
2.126The committee recognises valid concerns have been raised by stakeholders on where the bill could be made clearer regarding provisions relating to civil penalties.
2.127This includes concerns raised by the ABA. First, that the bill should be amended to establish a clear connection to the customer that should have been subject to CDD, where a civil penalty provision is being considered. Second, amendments should be considered to ensure that, in cases where a reporting entity has remedied a previously defective delayed verification service, it can then provide a designated service to a customer once any non-compliance has been remedied.
2.128The committee recommends that the bill be amended to ensure that where a civil penalty is being considered, there is a clear connection to the customer that should have been subject to customer due diligence, by amending s28 and s30 to read ‘the customer’ instead of ‘a customer’.
2.129The committee recommends the bill be amended to ensure that where a reporting entity has previously provided delayed verification in a defective way, it can provide a designated service to a customer once any non-compliance has been remedied.
2.130In conclusion the committee considers that this bill is a necessary and timely reform to Australia’s AML/CTF framework, and should be passed subject to the above amendments.
2.131The committee recommends the bill be passed, subject to the above amendments.
Senator Nita Green
Chair