Explanatory Statement – Anti-Money Laundering and Counter-Terrorism Financing Rules for thresholds for certain designated services
Section 229 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) provides that the AUSTRAC Chief Executive Officer (CEO) may, by writing, make AML/CTF Rules prescribing matters required or permitted by any other provision of the Act to be prescribed by the AML/CTF Rules.
Table 1 in section 6 of the AML/CTF Act sets out financial service types of designated services and table 3 sets out gambling service types of designated services.
This explanatory statement concerns the AML/CTF Rules which relate to subsection 39(4) of the AML/CTF Act and specify threshold amounts for certain types of designated services in tables 1 and 3 of section 6 (see below) for the purposes of Division 4 of Part 2 of the AML/CTF Act.
The AML/CTF Rules are registered in the form of numbered chapters and are legislative instruments as defined in section 5 of the Legislative Instruments Act 2003.
Chapter 12
Subsection 39(4) of the AML/CTF Act provides that the AUSTRAC CEO may provide through the AML/CTF Rules that a specified provision of Part 2 does not apply to a designated service.
Chapter 12 of the AML/CTF Rules specifies certain threshold amounts for the specified designated service items in tables 1 and 3 of section 6 of the AML/CTF Act. Division 4 of Part 2 of the AML/CTF Act does not apply to designated services described in the items below where they are less than the relevant specified threshold amounts:
(a) items 17, 25, 26 and 50 of table 1
(b) item 14 of table 3.
Anticipated impact
These AML/CTF Rules provide a positive impact for reporting entities as they reduce the compliance burden in relation to certain designated services in tables 1 and 3 of section 6 of the AML/CTF Act.
These AML/CTF Rules have the effect of limiting the application of the customer identification requirements, which certain reporting entities would otherwise have been required to apply, until relevant threshold amounts are reached.
A regulatory impact statement in respect of the AML/CTF Act was prepared prior to the passage of that Act. These AML/CTF Rules relate to Division 4 of Part 2 of the AML/CTF Act.
Benefits arising from the AML/CTF Rules
The requirements set out in the Chapter 12 AML/CTF Rules will result in lower or reduced compliance costs as reporting entities are not required to carry out the customer identification procedure where they provide certain types of designated services that fall under relevant thresholds set out in the Rules.
Consultation
AUSTRAC has consulted with the Office of the Privacy Commissioner, the Australian Customs Service, the Australian Federal Police, the Australian Taxation Office and the Australian Crime Commission in relation to these AML/CTF Rules.
AUSTRAC also published a draft of these AML/CTF Rules on its website for public comment. Industry was consulted extensively in the development of these AML/CTF Rules and AUSTRAC considered all comments which were made.
Ongoing consultation
AUSTRAC will continue to consult with stakeholders on the operation of these AML/CTF Rules.
Overview
The Anti-Money Laundering and Counter-Terrorism Financing Rules for thresholds for certain designated services, gazetted as F2007L04255, were introduced to streamline compliance requirements for reporting entities under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). Enacted by the Australian Parliament, this legislative instrument aims to reduce the compliance burden for entities by specifying threshold amounts for certain designated services, thereby limiting the application of customer identification requirements until these thresholds are met. The explanatory statement clarifies that these rules, developed by the AUSTRAC Chief Executive Officer in accordance with section 229 of the AML/CTF Act, are intended to provide a positive impact by lowering compliance costs while still ensuring effective anti-money laundering and counter-terrorism financing measures. AUSTRAC has engaged in extensive consultation with various government bodies and the public to develop these rules, reflecting a commitment to ongoing dialogue with stakeholders to refine their implementation.
Scope and Application
The Anti-Money Laundering and Counter-Terrorism Financing Rules for thresholds for certain designated services, as detailed in the explanatory statement for F2007L04255, apply to entities and individuals involved in providing designated services as outlined in tables 1 and 3 of section 6 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). These services encompass financial services and gambling services, and the rules are intended to mitigate the compliance burden on reporting entities by specifying threshold amounts below which certain provisions of the AML/CTF Act do not apply. The rules are designed to exempt certain designated services from customer identification requirements when the transactions fall below the stipulated thresholds, thereby reducing the overall compliance costs for entities in these industries. The scope of these rules extends across Australia, aligning with the national regulatory framework established by the Commonwealth. The rules are legislative instruments registered under the Legislative Instruments Act 2003 and are subject to ongoing consultation with stakeholders to ensure their effective implementation.
Key Provisions
The main operative sections of the Anti-Money Laundering and Counter-Terrorism Financing Rules (AML/CTF Rules) in question are found in Chapter 12, which specifies threshold amounts for certain designated services. This chapter directly relates to subsection 39(4) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act), which allows the AUSTRAC CEO to exempt certain designated services from specific provisions of Part 2 if they fall below certain threshold amounts. These thresholds are detailed in tables 1 and 3 of section 6 of the AML/CTF Act. For instance, items 17, 25, 26, and 50 of table 1 and item 14 of table 3 are subject to these threshold exemptions, thereby limiting the scope of the customer identification requirements imposed by Division 4 of Part 2.
The obligations and requirements imposed by these AML/CTF Rules are primarily focused on reducing the compliance burden for reporting entities. Under these rules, reporting entities are not required to apply customer identification procedures to certain designated services that fall below the specified threshold amounts. This exemption is intended to streamline compliance processes and reduce administrative costs for entities that deal with these services. Reporting entities must still comply with other relevant sections of the AML/CTF Act but can benefit from this reduced burden where applicable.
Breach of the AML/CTF Rules can result in both civil and criminal consequences. Under the AML/CTF Act, entities that fail to comply with the specified provisions, including those outlined in Chapter 12, may face penalties. The maximum penalties can be substantial, reflecting the seriousness of non-compliance with anti-money laundering and counter-terrorism financing laws. Civil penalties may include fines up to a significant amount, while criminal penalties can include imprisonment and/or fines. The exact penalties depend on the nature and severity of the breach, but the potential consequences serve as a deterrent against non-compliance.