This Bill amends the Anti‑Money Laundering and Counter‑Terrorism Financing Act 2006 (AML/CTF Act), the Australian Federal Police Act 1979 (AFP Act), the Criminal Code Act 1995 (Criminal Code), the Inspector General of Intelligence and Security Act 1986, the Proceeds of Crime Act 2002, and the Surveillance Devices Act 2004.
The Bill implements a second phase of reforms arising from the recommendations of the Report on the Statutory Review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and Associated Rules and Regulations (the Statutory Review Report), tabled in Parliament on 29 April 2016.
The Bill will also address some of the deficiencies identified by the Financial Action Task Force (FATF) in its mutual evaluation report on Australia's anti‑money laundering and counter terrorism financing (AML/CTF) regime in 2015. It is crucial to note, however, that the Bill does not address all of these deficiencies. Australia's AML/CTF regulatory framework will remain non‑compliant or only partially compliant with many of the recommendations made by the FATF in its 2015 mutual evaluation report.
The Bill contains a range of measures to address money laundering and terrorism financing risks, with the aim to:
expand the circumstances in which reporting entities may rely on customer identification and verification procedures undertaken by a third party
reform cross-border reporting requirements so that, in addition to travellers declaring $10,000 or more of physical currency, travellers will now have to declare bearer negotiable instruments, such as travellers cheques
physical currency, bearer negotiable instruments, such as travellers cheques, must also be declared at the border where the combined amount is $10,000 or more
strengthen protections on correspondent banking by:
prohibiting financial institutions from entering into a correspondent banking relationship with another financial institution that permits its accounts to be used by a shell bank, and
requiring banks to conduct due diligence assessments before entering, and during, all correspondent banking relationships
simplify secrecy provisions to make it clearer for the prohibitions on tipping off to permit reporting entities to share suspicious matter reports (SMRs) and related information with external auditors, and foreign members of corporate and designated business groups
provide a simplified and flexible framework for the use and disclosure of financial intelligence to better support combatting money laundering, terrorism financing and other serious crimes
create a single reporting requirement for the cross-border movement of monetary instruments
address barriers to the successful prosecution of money laundering offences by:
clarifying that the existence of one Commonwealth constitutional connector is sufficient to establish an instrument of crime offence, and
deeming money or property provided by undercover law enforcement as part of a controlled operation to be the proceeds of crime for the purposes of prosecution.
Labor Senators note the Senate Standing Committee for the Scrutiny of Bills report into the Bill which noted that the Bill includes several offence-specific defences to existing or proposed offences in the AML/CTF Act.
The Committee recognised that the defendant will bear only an evidential rather than a legal burden in relation to those defences. However, it stated that it expected any reversal of the burden of proof to be justified (which had not been done in this instance) and questioned whether these defences met the criteria for offence-specific defences set out in the Government's Guide to Framing Commonwealth Offences. Accordingly, the Committee requested the Minister's advice as to why offence-specific defences are proposed (as opposed to including the matters as elements of the relevant offences).
The Minister's response stated, in part:
The offence-specific defences in the Bill allow Australian Transaction and Reports Analysis Centre information to be recorded, disclosed or otherwise used for specific purposes. The purpose of a defendant in recording, disclosing or otherwise using this information is a matter that is peculiarly within their knowledge. While external circumstances may be used as evidence of the existence of this underlying purpose, the defendant is the only person who can state with certainty their purpose in recording, disclosing or using that information.
Noting this, it would be significantly more difficult and costly for the prosecution to prove that the defendant did not record, disclose or otherwise use the information for a permitted purpose, than it would be for the defendant to point to the permitted purpose underpinning their conduct.
The Minister undertook to table an Addendum to the Explanatory Memorandum to address the Committee's concerns, but an Addendum had not been tabled at the time of writing this report.
Labor Senators note that despite their broad support for the bill a number of submitters have raised a number of concerns which need to be considered by Government.
The Australian Financial Markets Association (AFMA) stated in their submission that opportunities for consultation and clarification were cut short by the government entering into caretaker mode and with the introduction of the bill into parliament:
The Bill is the culmination of a significant process, commencing with the review of the AML/CTF Act conducted by the Attorney-General's Department in 2014 and 2015 and subsequent consultation with the Department of Home Affairs in 2018 and 2019. This consultation continued up until the commencement of the caretaker period prior to the May 2019 Federal Election, with the caretaker conventions preventing additional consultation with industry on further refinements to the Bill. Accordingly, the review of the Bill being undertaken by the Committee represents the only opportunity for AFMA to either obtain clarity or to seek legislative amendment prior to the Bill being enacted. The specific comments below should be read in this light.
Both the AMFA and the Financial Services Council (FSC) have raised concerns that there are some definitional deficiencies in the current bill which needs to be addressed:
Firstly, given that the proposed Rule will relate to opening an account, we request that the term "opening an account" be specifically defined in the AML/CTF Act to ensure consistency of approach across reporting entities. There is some ambiguity as to when an account is actually opened, such that a designated service is provided.
We note that the amended section 32 under the Bill does not materially change the current obligations to carry out an Applicable Customer Identification Procedure (ACIP) prior to the provision of a designated service. However, it is suggested that the term "opening an account" needs to be specifically defined in the AML/CTF Act to ensure consistency of approach by all reporting entities. Also, in this regard, the FSC notes that AUSTRAC intends to issue Rules under section 33 to stipulate special circumstances where a designated service can be provided prior to ACIP being completed. Similarly, it is suggested that such Rule changes need to be made carefully to ensure consistency of approach overall, including with Section 32.
Labor Senators note that a vast amount of detail for this Bill lies in the Explanatory Memorandum and also note concerns raised by the AMFA that some elements of the Explanatory Memorandum need to be placed in the legislation:
Proposed Section 37A allows for a reporting entity to enter into a written agreement with "another person" but does not appear to stipulate that this person is either a reporting entity or otherwise subject to appropriate AML/CTF regulation and supervision. This stipulation exists only in the Explanatory Memorandum and we submit should ideally be reflected in the legislation.
Proposed Section 37A allows for two entities to enter into a CDD Arrangement that allows for a second entity to rely on the customer identification procedure undertaken by the first entity. Proposed Subsection 37A(2)(d) requires that the second entity obtain information from the first entity regarding the identity of the customer but does not impose any requirements or restrictions as to the currency of that information. If the intention is to Anti-Money Laundering and Counter‑Terrorism Financing and Other Legislation Amendment Bill 2019 [Provisions] impose such a restriction, such as a timeframe for how old that information can be, we submit that this should be reflected in the legislation.
We note the proposed amendment to Section 104 that removes the seven‑year requirement for maintenance of records of applicable customer identification information to requiring records to be retained (both in respect of the customer identification information and also the CDD arrangements) for an unspecified period. To the extent that there is a timeframe for the records to be retained, our view is that this should be specified in the legislation.
Labor Senators remain concerned that there appears to be much detail in the explanatory memorandum as well as outstanding definitional deficiencies which could undermine Australia's anti-money laundering and counter terrorism financing laws in the future.
Labor Senators recommend that the Government notes and considers the concerns raised by industry and that the Bill be passed.
Senator the Hon Kim Carr
Senator Anthony Chisholm
Labor Senator for Queensland