The Northern Trust Company and Chief Executive Officer, Australian Transaction Reports and Analysis Centre

The Northern Trust Company and Chief Executive Officer, Australian Transaction Reports and Analysis Centre [2020] AATA 3989 (8 October 2020)
Division:GENERAL DIVISION
File Number(s): 2019/2741
Re:The Northern Trust Company
APPLICANT

Chief Executive Officer, Australian Transaction Reports and Analysis CentreAnd
RESPONDENT

DECISION
Tribunal:Deputy President B W Rayment OAM QC
Date:8 October 2020
Place:Sydney

The decision under review is affirmed.
..................................[sgd].....................................
Deputy President B W Rayment OAM QC
CATCHWORDS
INDUSTRY CONTRIBUTION LEVY – whether grant of wavier of payment of levy appropriate – whether payment of levy to be paid would be inequitable – where levy based on back-capture of international fund transfer instruction reports in previous year – where applicant had not previously paid levy – where inequality or inequity built into the Minister’s Determination – where collection of levy based on risk is inappropriate – where impact of levy a cost of doing business – where evidence of hardship not provided – decision under review affirmed
LEGISLATION
Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) ss 3, 45, 210, 212, 248
Australian Transaction Reports and Analysis Centre Industry Contribution (Collection) Act 2011 (Cth) s 11
Australian Transaction Reports and Analysis Centre Industry Contribution Act 2011 (Cth) s 9
Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy (Collection) Amendment Act 2014 (Cth)
Legislation Act 2003 (Cth)
CASES
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27
CIC Insurance Ltd v Bankstown Football Club (1997) 187 CLR 384
Saeed v Minister for Immigration and Citizenship [2010] HCA 23; (2010) 241 CLR 252
SECONDARY MATERIALS
Australian Transaction Reports and Analysis Centre Industry Contribution Determination 2018 (No. 1)
Explanatory Memorandum, Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy Bill 2011 (Cth)
Explanatory Memorandum, Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy (Collection) Bill 2011 (Cth)
Explanatory Memorandum, Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy (Consequential Amendments) Bill 2011 (Cth)
Acacia CRE Pty Ltd, Review of the AUSTRAC Industry Contribution Levy Arrangements (18 April 2019)
REASONS FOR DECISION
Deputy President B W Rayment OAM QC
8 October 2020

The applicant, The Northern Trust Company, is one of more than five hundred companies liable to pay a levy designed to recoup to the Commonwealth the amount of the annual appropriation for the Australian Transaction Reports and Analysis Centre (‘AUSTRAC’), a government agency having no separate legal identity from the Commonwealth itself. AUSTRAC consists of the Chief Executive Officer (‘CEO’) and staff of the agency, consultants, and other persons seconded to assist the CEO and staff of AUSTRAC. Its budget for the 2018–19 financial year, and the levy to recoup it, is the financial year relevant to these proceedings.
AUSTRAC has both regulatory and financial intelligence functions. It is this country’s anti‑money laundering and counter‑terrorism financing regulator and financial intelligence unit.
The statute concerned with the imposition of the levy on the population to which the applicant belongs, the Australian Transaction Reports and Analysis Centre Industry Contribution (Collection) Act 2011 (‘the Collection Act’), contains a provision authorising the respondent, the CEO of AUSTRAC, to waive the payment of the whole or a part of an amount of levy or late payment penalty that is payable by a person, if he or she considers it is appropriate to do so.
The applicant applied for a waiver of all or part of the amount of the payment for which it was invoiced, calculated in accordance with the relevant determination of the Minister. The application was refused, both by the CEO’s delegate, and on internal review. As it was entitled to do under the Collection Act, the applicant applied to this Tribunal for review of the decision to refuse the waiver. It is necessary first to discuss the background to the waiver application.
BACKGROUND TO THE WAIVER APPLICATION
AUSTRAC was first established in 1989. Since 2011, its main functions have been governed by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the AML/CTF Act). The objects of the AML/CTF Act are set out in s 3(1) in the following terms:
(1)The objects of this Act include:
(aa)to provide for measures to detect, deter and disrupt money laundering, the financing of terrorism, and other serious financial crimes; and
(ab)to provide relevant Australian government bodies and their international counterparts with the information they need to investigate and prosecute money laundering offences, offences constituted by the financing of terrorism, and other serious crimes; and
(ac)to support cooperation and collaboration among reporting entities, AUSTRAC and other government agencies, particularly law enforcement agencies, to detect, deter and disrupt money laundering, the financing of terrorism, and other serious crimes; and
(ad)to promote public confidence in the Australian financial system through the enactment and implementation of controls and powers to detect, deter and disrupt money laundering, the financing of terrorism, and other serious crimes; and
(a) to fulfil Australia’s international obligations, including:
(i)     Australia’s international obligations to combat money laundering; and
(ii)    Australia’s international obligations to combat financing of terrorism; and
(b)to address matters of international concern, including:
(i)     the need to combat money laundering; and
(ii)    the need to combat financing of terrorism; and
(c)by addressing those matters of international concern, to affect beneficially Australia’s relations with:
(i)     foreign countries; and
(ii)    international organisations.
Note 1:The objects of this Act are achieved by (among other things) requiring information to be given to the AUSTRAC CEO and by allowing certain other agencies to access information collected by the AUSTRAC CEO.
Note 2:The objects mentioned in paragraphs (1)(a), (b) and (c) relate to the external affairs power. Schedule 1 (alternative constitutional basis) contains provisions designed to attract other legislative powers (including the taxation power).
In accordance with s 210 of the AML/CTF Act, the staff of AUSTRAC have the function of assisting the CEO in the performance of his or her functions.
Section 212(1) of the AML/CTF Act sets out functions of the AUSTRAC CEO in the following terms:
(1)The functions of the AUSTRAC CEO are:
(a) to retain, compile, analyse and disseminate eligible collected information or AUSTRAC information; and
(aa)to provide access to, and to share, AUSTRAC information to support domestic and international efforts to combat money laundering and terrorism financing and other serious crimes; and
(b)to provide advice and assistance, in relation to AUSTRAC information, to the persons and agencies who are entitled or authorised to access AUSTRAC information under Part 11; and
(c)to advise and assist reporting entities in relation to their obligations under this Act, the regulations and the AML/CTF Rules; and
(d)to advise and assist the representatives of reporting entities in relation to compliance by reporting entities with this Act, the regulations and the AML/CTF Rules; and
(da)to facilitate gaining access on a timely basis to the financial, administrative and law enforcement information that the AUSTRAC CEO requires to properly undertake the AUSTRAC CEO’s financial intelligence functions; and
(e)to promote compliance with this Act, the regulations and the AML/CTF Rules; and
(f)such other functions as are conferred on the AUSTRAC CEO by or under:
(i)     this Act; or
(ii)    the regulations; or
(iii)   any other law of the Commonwealth; and
(g)to do anything that is incidental or conducive to the performance of a function referred to in a preceding paragraph.
Note:The AUSTRAC CEO’s other functions include:
(a)monitoring compliance with this Act, the regulations and the AML/CTF Rules (see section 190); and
(b)making AML/CTF Rules (see section 229).
The levy under the Collection Act is not a fee for services rendered to reporting entities or to those among their number who pay a levy. The functions mentioned in s 212(1), other than sub-paragraphs (c) and (d), do not refer to reporting entities. Rather, the levy is calculated to defray all of AUSTRAC’s budget and is not calculated by reference to any services provided by AUSTRAC to the levied population.
The levy was once paid by a large number of reporting entities. From 2014, it has not been payable by small businesses. That had the effect that in 2018, less than 600 entities were liable to contribute to the levy, and thousands of small businesses were no longer required to do so. At the same time, AUSTRAC was given additional financial intelligence functions under sub-paragraphs (aa) and (da) of s 212(1) of the AML/CTF Act.
To be a reporting entity, an entity has to offer a designated service, an expression defined in the AML/CTF Act quite expansively. The definition comprehends 54 categories of institutions, including banks, building societies and credit unions, stockbrokers and those providing certain financial services, providers of custodial services, bullion dealers, providers of gambling services, and many other categories of institutions. The reporting function extends to international funds transfers and suspicious transactions.
The Minister for Home Affairs (‘the Minister’) is responsible for AUSTRAC. The Minister has power to give directions to AUSTRAC about policies, which AUSTRAC is required to put in place. The Minister also has power to determine the integers of the levy that the leviable population must pay. He did so under s 9 of the Australian Transaction Reports and Analysis Centre Industry Contribution Act 2011 (‘the Contribution Act’) for the 2018–19 financial year. Subsections 9(1), (2) and (3) of the Contribution Act provide as follows:
(1)The Minister may, by legislative instrument, determine the amount of an instalment of levy payable by a leviable entity for a financial year.
(2)However:
(a)the Minister must make at least one determination under subsection (1) for a financial year; and
(b)the sum of all amounts of all instalments of levy payable by all leviable entities for a financial year must not exceed the statutory limit for that year.
(3)A determination made for the purposes of subsection (1) may do one or more of the following:
(a)specify an amount or a method for determining an amount;
(b)specify different amounts or methods for different classes of leviable entities;
(c)specify a nil amount or a method resulting in a nil amount;
(d)specify methods that refer to acts done or circumstances existing before either the commencement of the determination or the commencement of this Act, or both.
Legislative instruments are required to be tabled in Parliament and are subject to disallowance in accordance with the Legislation Act 2003. The Minister made the determination relevant to these proceedings on 13 September 2018 (‘the 2018 Ministerial Determination’). The levy had two components, an earnings component and a transaction reporting component. The earnings component was not relevant to the applicant, because its earnings were less than the threshold amount of $100,000,000. The transaction reporting component was dealt with in item 6 of the 2018 Ministerial Determination, which was in the following terms:
(1)Subitem (2) has effect subject to subitem (3).
(2)The transaction reporting component for a leviable entity is to be calculated in accordance with the following formula:
(a)if the total value of the leviable reports that the entity gave in the 2017 calendar year was less than $15 billion:
1.2 cents for each  0.00094705 per cent of the value of
plus
leviable report   the leviable report
or
(b)if the total value of the leviable reports that the entity gave in the 2017 calendar year was $15 billion or more:
1.2 cents for each  0.00112194 per cent of the value of
plus
leviable report   the leviable report
(3)If a leviable report of the type referred to in paragraph (b) or (c) of the definition of leviable report is used in the calculation of a leviable entity’s transaction reporting component, the same report cannot be used in the calculation of any other leviable entity’s transaction reporting component.
(4)In this item, a reference to a value of a leviable report is a reference to the value of the transaction to which the leviable report relates.
As the open affidavit of Mr Richard Walters, the former Chief Financial Officer of AUSTRAC, states at [62], the AUSTRAC budget for the 2018–19 financial year was slightly in excess of $76 million, of which $14.7 million was to be paid from leviable entities liable to pay the earnings component. The transaction report component produced $61.3 million, which is divided into a volume element totalling less than $1.47 million and a value element of slightly less than $59.9 million. The transaction report component is the largest component of the levy payable by leviable entities related to the value component.
As will be evident, it was the leviable transaction reports made by the applicant in the 2017 calendar year which determined the levy payable under the 2018 Ministerial Determination. The value of the leviable reports filed by the applicant in that year totalled more than $15 billion, so the higher rate was payable by the applicant.
The expression ‘leviable report’ in the 2018 Ministerial Determination was defined as follows:
leviable report, in relation to a leviable entity, means one of the following
reports given to the AUSTRAC CEO during the calendar year beginning on 1
January 2017:
(a)a report given by the leviable entity under subsections 43(2) or 45(2) of the AML/CTF Act (including a report given by the leviable entity in the form required for subsections 43(2) or 45(2), whether or not such a report was required to be given under either of those subsections); or
(b)a report of the type referred to in paragraph (a) that was given by another leviable entity that, as at the time the report was given, was a remittance affiliate of the leviable entity; or
(c)a report of the type referred to in paragraph (a) that was given by another leviable entity that, prior to the census day, was acquired by the leviable entity.
The reports in issue in these proceedings were international funds transfer instructions (‘IFTIs’) that are required to be reported to the AUSTRAC CEO under s 45(2) of the AML/CTF Act. As mentioned below, in order to rectify earlier failures by the applicant, its IFTIs made in the 2017 calendar year included reports which ought to have been made in earlier years. It seems, by tacit, express agreement or arrangement between the parties, they were reported in 2017, after the applicant learned of its past failures and were treated by the respondent in the same way as reports filed in due time under the AML/CTF Act. That procedure was described as a “back-capture” of the reports filed late. Such an arrangement had been made by AUSTRAC with other reporting entities in the same position of default as the applicant. The applicant did not seek a waiver of any amount by reason of the procedure adopted in relation to the back-capture.
The effect of the legislative instrument was that the largest component of the levy, which had no cap, was the value of the IFTI reports.
It appears at T6 of the s 37 documents, that the application for a waiver made by the applicant is the first time such an application has been made to the respondent, in an attempt to alleviate or reduce the impost imposed by reason of the value of IFTI reports.
THE POWER TO WAIVE
Section 11 of the Collection Act is in the following terms:
(1)The AUSTRAC CEO may, on behalf of the Commonwealth, if the AUSTRAC CEO considers it is appropriate to do so, waive the payment of the whole or a part of an amount of levy or late payment penalty (or both) that is payable by a person.
(2)The AUSTRAC CEO may do so on his or her own initiative or on written application by a person.
The overall scope and purpose of the statutory scheme would inform the discretion. The choice of the integers of the levy is a matter for the Minister, and ultimately for the Parliament, which may disallow the legislative instrument. A power of waiver is given to the CEO against that background. The CEO may waive payment of the whole or part of the amount of the levy or a late payment penalty, if the circumstances satisfy the CEO that they are appropriate.
All the relevant circumstances known to the CEO which might bear on the desirability or undesirability of the proposed waiver should be taken into account. The grounds on which the applicant seeks a waiver should be engaged with by the decision-maker.
The discretion of the CEO, when considering a waiver to be appropriate, is not expressed to be subject to any particular conditions or limits. The word ‘appropriate’ is not limited to any particular circumstance. A waiver has been thought by the CEO to be appropriate in relation to the earnings component of the levy if the leviable entity had only a very small part of its earnings derived from designated services. That was thought to be a good reason to exercise the power of waiver and involved, in my opinion, no error on the part of the CEO.
In the Explanatory Memorandum to the Bill introducing the wavier power (‘the Collection Explanatory Memorandum’), it was stated that ‘the circumstances in which the AUSTRAC CEO may consider it appropriate to waive the debt include where recovery would be inequitable or cause ongoing hardship.’ Those statements neither compel a waiver in the circumstances referred to, nor limit the discretion of the CEO to the circumstances mentioned. The remarks in the Collection Explanatory Memorandum do not control the exercise of the discretion conferred on the CEO, and their language will not be substituted for the statutory language which requires satisfaction that the waiver is appropriate.
The applicant submitted that the Collection Explanatory Memorandum is a statement of government policy, to which the decision-maker should have regard to in applying s 11 of the Collection Act. The Collection Explanatory Memorandum is not expressed as a statement of policy, because it is inclusive, rather than exhaustive. It is expressed in tentative terms as to what the CEO may do. The Minister has a power to direct AUSTRAC to policies which it ought to follow in performing its functions, but the Collection Explanatory Memorandum is not such a document.
More importantly, the High Court has made it clear that the task of statutory construction must begin with the text itself: see CIC Insurance Ltd v Bankstown Football Club (1997) 187 CLR 384, 408; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 at [4] per French CJ and [47] per Hayne, Heydon, Crennan and Kiefel JJ. In Saeed v Minister for Immigration and Citizenship [2010] HCA 23; (2010) 241 CLR 252 (‘Saeed’) at [31] French CJ, Gummow, Hayne, Crennan and Kiefel JJ said:
As Gummow J observed in Wik Peoples v Queensland, it is necessary to keep in mind that when it is said the legislative “intention” is to be ascertained, “what is involved is the ‘intention manifested’ by the legislation”. Statements as to legislative intention made in explanatory memoranda or by Ministers, however clear or emphatic, cannot overcome the need to carefully consider the words of the statute to ascertain its meaning.
(citations omitted)

At [33] in Saeed, their Honours said that it is erroneous to look at extrinsic materials before exhausting the application of the ordinary rules of statutory construction.
An exercise of discretion is required to be not legally unreasonable. The fact that the waiver may be granted on application or on the motion of the CEO is consistent with the CEO being able to extend to others in a similar position to a successful applicant a similar waiver of his own motion. Treating leviable entities equally is consistent with the dictates of good government. In the Standard Operating Procedure of AUSTRAC, which is dated after the reviewable decision in this case, it is suggested that one consideration in relation to a waiver is the precedent created and the consequences that such a precedent might create. I agree with that view. Consistency in decision-making is usually desirable and denying the financial benefit of a waiver to one leviable entity and not to another in the same circumstances lacks fairness.
The practicalities of the administrative burden on AUSTRAC, if a waiver were granted, may make the grant of such a waiver inappropriate.
Two other matters should be mentioned. First, the Collection Act provided for an independent review of the operation of the levy as soon as possible after the fourth anniversary of the commencement of the Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy (Collection) Amendment Act 2014. Acacia CRE Pty Ltd conducted the review, which was dated 18 April 2019 (‘the Acacia Review’). The applicant made a confidential submission to the review. The Acacia Review made a number of recommendations. Its conclusions included that the levy arrangements established by the Collection and Contribution Acts in their current form generally provide an appropriate legislative framework for the industry contribution levy in the immediate future. The Acacia Review noted that:
the stakeholders did not provide any substantial data or anecdotal evidence that would have allowed for a proper assessment of the costs of compliance with the [industry contribution] levy or of the impacts on those costs of any changes to the current arrangements.
The Acacia Review also commented that ‘the 2014 amendments explicitly moved the basis for the levy from cost recovery to an industry contribution model’ and that ‘the risk level of entities is irrelevant’ to the industry contribution model.
In the second place, the Minister’s determination is made annually, following the publication by AUSTRAC of a consultation paper, and consultation with industry in relation to the proposed AUSTRAC budget expenditure in the relevant year and in relation to the proposed levy formula. A draft of the proposed ministerial determination is included in the consultation paper for each relevant year.
THE CIRCUMSTANCES OF THE APPLICANT
The applicant is a multi-national organisation with offices within 20 US States and Washington DC, Canada, Europe, including London, the Middle East and the Asia‑Pacific region, including Australia. I heard evidence from Mr Calvitto, a Senior Vice President within the applicant corporation and the Managing Director, Country Executive (Australia) of the applicant since June 2018. Among his previous employments, he worked for a company identified as a competitor of the applicant, State Street, in Melbourne and London. Mr Calvitto described the applicant’s core business in Australia as the ‘provision of custodial, investment administration and investment operations outsourcing services to a small number of large wholesale and institutional customers.’ Its net profits before tax, depreciation and amortisation, for the purposes of the 2018 Ministerial Determination, was $60 million.
In 2016, the applicant’s London office drew attention to the failure of the applicant to enrol with AUSTRAC as a reporting entity (a failure since 2008), its failure to lodge IFTI reports (also since 2008) and its failure to pay industry levy (since the inception of the duty to do so in 2011). In late 2016, the applicant self-reported its failure to act in accordance with the statutory regime, and after discussions with AUSTRAC, its reports in the 2017 calendar year included the back-capture of all IFTI reports which ought to have been made in earlier years, together with its 2017 reports. It has not been suggested in these proceedings that the earlier failures of the applicant were deliberate.
Thus, the applicant began to make its industry contributions at a time when the appropriation for AUSTRAC was higher than it had been in earlier years. The levy invoiced to the applicant related to the value of all the IFTIs reported in 2017.
The back-capture of the applicant amounted to approximately 125,000 transaction reports with a report value totalling $492 billion. Its IFTIs reported for international transfers made in 2017 numbered 27,532 and had a value of $72.3 billion.
The Future Fund has been, and remains to be, the applicant’s largest customer, accounting for some 60% of its revenue and the IFTIs it reports. In November 2017, the applicant made an application for the Future Fund to be exempted under s 248 of the AML/CTF Act. If granted, it would have had the effect that the IFTIs made on behalf of the Future Fund would not have to be reported to AUSTRAC and that the levy invoiced to the applicant in the following financial year and thereafter, would have been substantially reduced. In August 2018 the exemption was declined. There is no right of review of such a decision in this Tribunal.
Many or all of the contracts of the applicant with its customers are long-term contracts, some of five years. One consequence of that fact is that the applicant has no capacity to pass on the burden of the levy to its customers at least for so long as the pre-2017 contracts subsist.
Another consequence of the applicant’s failure to pay the levy since 2011 is that the levies payable by other leviable entities (including small businesses before 2014) in earlier years were greater than they would otherwise have been. Correspondingly, the levies payable by other leviable entities in the 2018–19 financial year were reduced from what they otherwise would have been if the applicant’s back-capture had not occurred in 2017.
The applicant was invoiced for levy according to integers specified in the 2018 Ministerial Determination on 10 October 2018. For 152,582 reports at 0.012 cents each, it was charged $1,830.98. For the report value element, it was charged $6,331,449.93. For the earnings component it was charged nil. Its total invoice was $6,333,280.91. It paid the invoice on 16 November 2018, and on the same day it made its application for waiver.
In summary, the applicant submitted that a waiver should be granted for the following reasons:
a.the power to grant a waiver pursuant to section 11 of the Collection Act is broad and flexible; all that is required by section 11 is that the decision-maker considers a waiver to be “appropriate”. Government policy confirms that the circumstances in which a waiver may be appropriate include where the recovery would be inequitable;
b.the levy pays no regard to the desirability of taking a risk-based approach, competition and competitive neutrality (being mandatory matters identified in section 212(3) of the AML/CTF Act), which is all the more reason why those matters ought be given particular attention in considering a waiver;
c.TNTC poses relatively low ML/TF risk and imposes a relatively low regulatory burden on AUSTRAC (accepting that TNTC’s historical non-reporting involved some compliance burden and that the operations of all regulated entities can be expected to create genuine risks that must be taken seriously by those entities and by AUSTRAC);
d.the levy operates incoherently on TNTC and its competitors, in circumstances where several entities in that sector are outliers and where TNTC is in a special position among them; and
e.the levy paid by TNTC is inequitable when assessed by a range of different metrics, each of which would be an appropriate basis to assess inequity. Even if the Tribunal was not satisfied that TNTC creates relatively low ML/TF risk, or was not satisfied that ML/TF risk was a relevant consideration in assessing inequity, the Tribunal would still be satisfied that TNTC’s waiver is inequitable having regard to those metrics.
Insofar as the summary rests upon the use of the word ‘inequitable’ in the Collection Explanatory Memorandum, I have already commented upon the undesirability of departing from the statutory language in s 11 of the Collection Act. The word is capable of distracting attention from the critical question under the section. In one sense, inequality or inequity is built into the integers of the 2018 Ministerial Determination itself. For example, those with less than $100 million in earnings, and those with IFTIs with a value of less than $15 billion are treated more favourably when considered relative to those who exceed the thresholds. The CEO could not give effect to such a view when granting a waiver, because the power is only to waive payment of a levy or late payment penalty, not a power to impose levy on those who do not pay it. By contrast, such a view could be urged on the reviewer of the operation of the levy. For example, the Australian Bankers Association did suggest to the Acacia Review that the $100 million threshold should be lowered.
I would therefore test each of the other various claims of the applicant according to the statutory test of whether the waiver is appropriate in the circumstances.
Claims (b) and (c)
Claims (b) and (c) of the applicant’s case relate to the integers included and not included in the 2018 Ministerial Determination. As was mentioned in the Acacia Review, a risk-based assessment of the population of leviable entities might be worth consideration under the former cost recovery model, which did not, in 2011, seek to recover the costs of AUSTRAC’S financial intelligence unit but instead recovered AUSTRAC’s costs of regulating the leviable population. However, it is foreign to the industry contribution model introduced in 2014. The industry contribution model does not seek to capture a fee for service. Rather, it is designed to recoup the whole of AUSTRAC’s appropriation from a leviable population smaller than the population liable to pay a levy under the earlier model.
It is also to recoup the costs of many of the functions of AUSTRAC (including its financial intelligence unit), which involves no regulatory service to the leviable population, but rather to the nation as a whole. AUSTRAC’s financial intelligence unit collects and analyses financial data and provides this financial intelligence to state, territory and Australian law enforcement, security, social justice and revenue agencies, and some international counterparts.
The recoupment based on the earnings component is a capped amount for companies earning more than $5 billion, which in practice, is paid by the large banks. On the volume element and mainly on the value element of IFTIs reported by the leviable population, that levy is scaled but uncapped. The levy is not at all based upon risk, either of the persons to whom designated services are provided, or of particular members of the leviable population.
To use relative risk as a basis for waiver would disturb the whole, or a substantial part of, the levy itself. It would also require AUSTRAC to devote resources, that it does not have under its 2018 appropriation, to the assessment of the relative risk of the applicant and other leviable entities. One feature of the relevant levy determination is that it is objectively ascertainable. Risk assessment may well be debatable and could lead to disputes, both about the risk assessment of the leviable entity itself, and about the relative risk assessment of other leviable entities, and dispute resolution could delay the levy itself.
The practice of industry consultations prior to the Minister’s determinations would make the introduction of such a change to the basis of the levy impracticable to do retrospectively.
The self-report of the applicant that it is low risk does not seem to me to be an appropriate reason to grant the applicant a waiver of its levied amount. I discuss below a further submission made by the applicant in support of its ‘risk’ submission arising from submissions made about s 212 of the AML/CTF Act, which, as will appear, I have rejected on legal grounds.
In any event, as Mr Walters, pointed out in evidence, if the levy was collected according to risk, it could not be reliably based upon self-reports and AUSTRAC does not have resources to ascertain the relative risks of the leviable population. The resources available to AUSTRAC can properly be taken into account in considering whether to grant a waiver.
Mr Williams SC, who appeared with Ms Mansted for AUSTRAC, cross-examined Mr Calvitto about the applicant’s assertion that it was a low risk leviable entity. AUSTRAC says that it does not know the relative risks of the less than 600 leviable entities including the applicant. Some customers of the applicant are not low risk, and I have insufficient evidence to satisfy me either that the applicant is low risk, or that it or all of its customers pose less risk than other leviable entities or their customers.
The applicant also submitted that the rationale advanced by the government in 2011 for the imposition of the cost recovery levy at that time was expressed as follows:
Reporting entities provide services that are vulnerable to exploitation for money laundering and terrorism financing purposes, creating the need for regulation by AUSTRAC. It is appropriate that industry meet the costs of regulatory systems that ensure the integrity of their operating environment.
That remark was made in the introduction to the Explanatory Memorandum for the 2011 legislation when the government sought to recover or recoup that part of AUSTRAC’s appropriation for regulating leviable entities, and not its other functions. In any event, the rationale in question was not made the basis of the legislative instruments by which the Minister determined levy under the cost recovery regime. Relative risk would have been all the more difficult to assess with the large leviable population then involved.
By contrast, the Explanatory Memorandum for the 2014 legislation made it clear that the cost recovery model was abandoned and that an industry contribution model would be substituted.
Claims (d) and (e)
Claims(d) and (e) of the case made by the applicant should be read together.
It should be noticed that again, that those paragraphs attack the levy determination of the Minister. The power of granting a waiver is a power to make exceptions to the requirements of the levy in particular cases rather than a power to change the levy criteria.
As the respondent submits, government policy is involved in the ministerial determination, and it is open to a decision-maker to have regard to it. The CEO is entitled to respect it, and because of its status as a legislative instrument, the CEO and this Tribunal should do so. The power of waiver would properly be exercised so as to create a precedent for similar cases, and an exercise of the power of waiver to effectively modify the integers of the levy itself is a large step which should not be taken without good reason. The fact that a ministerial determination is made following industry consultation is a further factor to be considered in regard to the respect which should be given to the ministerial determination.
The applicant also put submissions to the effect that in considering s 11 of the Collection Act, the CEO must take into account certain mandatory considerations.
The applicant referred to s 212(3) of the AML/CTF Act, which provides as follows:
In performing the AUSTRAC CEO’s functions under this Act, the AUSTRAC CEO must have regard to the following:
(a)the integrity of the financial system;
(b)crime reduction;
(c)the desirability of ensuring that regulatory considerations are addressed in a way that does not impose unnecessary financial and administrative burdens on reporting entities;
(d)the desirability of adopting a risk‑based approach;
(e)competitive neutrality;
(f)competition;
(g)economic efficiency;
(h)privacy;
(i)such other matters (if any) as the AUSTRAC CEO considers relevant.
The respondent submitted that the words ‘under this Act’ make the provision inapplicable to the power in s 11 of the Collection Act. Many functions are conferred upon the CEO by the AML/CTF Act, which are distinct from powers conferred by s 11 of the Collection Act.
The applicant responds that the function conferred by s 11 of the Collection Act is picked up as a function under the AML/CTF Act by s 212(1)(f)(iii) of the AML/CTF Act reproduced at [‎7] above.
The applicant’s submissions about risk, referred to above, would have some support in s 212 of the AML/CTF Act if the submission of the applicant presently under consideration were correct because of s 212(3)(d).
I do not read the words ‘under this Act’ in s 212(3) of the AML/CTF Act in the way suggested by the applicant. In the first place, s 212(1)(f)(iii) is not required to impose functions under other Acts. The other Acts will achieve that result. In the second place, the words ‘under this Act’ in s 212(3), if they were intended to catch all functions conferred on the CEO by other Acts would naturally do so expressly. I read s 212(1)(f)(iii) as making it clear that s 212 is not an exhaustive statement of the functions conferred on the CEO. If the legislative intention were otherwise, one would expect that s 11 of the Collection Act would have a note drawing attention to s 212(3), or otherwise repeat the terms of s 212(3) as part of the Collection Act itself.
The metrics which the applicant sought to call in aid for its submissions were summarised at [79] of its submissions filed before the hearing as follows:
TNTC submits that the levy imposed on it by the [2018 Ministerial Determination] is inequitable or otherwise appropriate to be waived, having regard to the levy paid by TNTC compared to the following (taken separately and in combination):
a.other entities below the Earnings Component threshold;
b.the levy paid by all entities required to pay a levy by the [2018 Ministerial Determination];
c.entities which pay the Earnings Component;
d.entities which process low-value reports;
e.entities which offer custodial banking services as part of a diversified business; and
f.entities which pose a significantly higher ML/TF risk than TNTC.
Mr Walters’ evidence shows that under the 2018 Ministerial Determination, the industry contribution levy was payable by 561 reporting entities. Among those entities, 50 groups were involved, and 136 non-group entities were involved.
Twenty-five entities or groups of entities paid an earnings component only. Ninety-one (including the applicant) paid a transaction reporting component only, and no earnings component. The total levy payable by those 91 entities or groups was $12,190,752.48 or some 16% of the total amount collected. Twenty entities or groups paid both an earnings component and a transaction reporting component.
The back-capture by the applicant of the IFTIs from 2011 to 2016 meant that the applicant paid about half of the sum of $12,190,752.48 or about 8% of the total amount collected.
The applicant took for its comparator the levy which it would have paid in 2018 but for the back-capture (described as the ‘normalised levy’). The applicant sought to compare its position with others having regard to the normalised levy.
Thus, it said that it paid the fifth highest normalised levy of entities below the earnings component threshold of $100 million. Yet, it said it is 39th amongst entities below the earnings threshold by number of leviable reports lodged.

That is merely a consequence of the fact that the applicant lodges a smaller number of high value reports. The 2018 Ministerial Determination makes the value of reports lodged the larger integer in the levy, as pointed out above.
The applicant sought to distinguish between specialist custodian banks (such as itself) and banks which offer custodian services as part of a wider business model. However, both kinds of banks offer designated services.
The metric, sought by the Applicant, is not an appropriate basis to claim a waiver, because it attacks the integers of the levy in the 2018 Ministerial Determination. The number of reports was leviable at 1.2 cents per report, producing total revenue for the government of $X and the value of reports was leviable at $Y per dollar of value or $Z per dollar of value if the total value were greater than $15 billion.
For the reasons already given, there is no good reason to reform the levy itself by the means of granting a waiver. On the contrary, it seems to me that the exercise of discretion that the applicant seeks would do violence to the legislative scheme implicit in the Collection Act, which enables the Minister to determine the integers relevant to the levy.
Next, the applicant submitted that the average levy paid per leviable report was $0.63 whereas the average levy paid by the applicant was $32.47 per report. That was because the applicant lodged a smaller number of high value reports. If many customers of a retail institution sent small sums overseas, the average amount of the large transfers by the applicant per report would inevitably be higher, both because of the total value involved in the applicant’s transfers, and because of the low leviable impost based on the number of reports made.
The applicant also sought to compare the levy it paid with the levy paid by all entities that paid the earnings component. Some 20 of those entities paid no report levy, but the applicant did not exclude those entities. It submitted that the applicant’s levy was higher than 39 of the 49 entities which pay the earnings component. Again, that is simply a consequence of the terms of the 2018 Ministerial Determination.
The applicant compared itself with entities which process low-value reports. It submitted that these entities benefit from the fact that the levy places little weight on the reporting volume component. That is also simply a consequence of the integers of the levy from the 2018 Ministerial Determination.
The applicant sought to compare itself with entities that offer custodial services as part of a diversified business, such as NAB. The applicant says that such a body can pass on the levy to its clients more easily and at a lower unit cost than the applicant. It was elicited from Mr Calvitto that the applicant has long-term contracts on foot. As those contracts come to be renewed, the applicant will be able to negotiate to pass on any anticipated future levy directly or indirectly. Its failure to do so with existing contracts, entered into some years ago, is in no doubt due to its belief, until 2016, that it was not liable to pay the levy. Mr Calvitto suggests that the applicant’s customers expect the applicant include the levy in the transaction costs it already charges, and so the applicant believes that it cannot pass the levy on. He said that he does not believe that the applicant’s competitors pass on the levy. If that is so, the levy is one cost of doing business. Presumably the contracts, when renegotiated, will seek to set transaction costs with the levy in mind. The fact that the applicant’s business is smaller than that of a major bank, and that a diversified business, which is highly profitable, may be more able to absorb a cost than a smaller business, is a consequence not of the levy but of the size of the leviable entity in question. The applicant also gave evidence that it could not precisely calculate future levy amounts. Nevertheless, it could estimate the likely impost.
Moreover, in order to make such a claim satisfy the CEO or the Tribunal that some kind of waiver were appropriate on this ground, some detailed evidence of hardship would be required. The applicant has not put such evidence before the Tribunal.
The inability of a smaller enterprise to absorb costs by comparison with larger enterprises, does not seem to be a circumstance where it is appropriate to grant a waiver. In any event, the applicant’s suggested basis for this waiver is inconsistent with the 2018 Ministerial Determination, which does not allow for differences between those liable to pay levy on the value of IFTIs, except by reference to a scale depending on whether the total value does or does not exceed $15 billion.
Finally, the metric relied upon by the applicant relates to the relative risk which the applicant self-assesses, and I have already dealt with that question above.
DECISION
In short, I see no good reason why, under s 11 of the Collection Act, any waiver should be granted to the applicant. The reviewable decision will be affirmed.

I certify that the preceding 79 (seventy-nine) paragraphs are a true copy of the reasons for the decision herein of Deputy President B W Rayment OAM QC

....................................[sgd]....................................
Associate
Dated: 8 October 2020

Date(s) of hearing: 29 & 30 June 2020

Date final submissions received: 20 July 2020

Counsel for the Applicant: Mr J Emmett SC

Solicitors for the Applicant: Corrs Chambers Westgarth

Counsel for the Respondent: Mr N Williams SC with Ms R Mansted

Solicitors for the Respondent: Australian Government Solicitor

[2020] AATA 3989

8 October 2020

Key Legal Topics

Areas of Law

Administrative Law

Statutory Interpretation

Legal Concepts

Judicial Review

Jurisdiction

Standing

Statutory Construction

Remedies

Date(s) of hearing:	29 & 30 June 2020
Date final submissions received:	20 July 2020
Counsel for the Applicant:	Mr J Emmett SC
Solicitors for the Applicant:	Corrs Chambers Westgarth
Counsel for the Respondent:	Mr N Williams SC with Ms R Mansted
Solicitors for the Respondent:	Australian Government Solicitor