Explanatory Statement – Anti-Money Laundering and Counter-Terrorism Financing Rules amending Chapter 14 of the AML/CTF Rules
1. Purpose and operation of Anti-Money Laundering and Counter-Terrorism Financing Rules (AML/CTF Rules) amending Chapter 14 of the AML/CTF Rules
Section 229 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) provides that the AUSTRAC Chief Executive Officer may, by writing, make AML/CTF Rules prescribing matters required or permitted by any other provision of the AML/CTF Act.
Chapter 14 of the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) specifies that customer identification procedures under the AML/CTF Act, do not apply for certain designated services under certain circumstances.
Paragraph 14.4 of Chapter 14 currently specifies that, for the designated service of exchanging one currency for another in the course of carrying on a currency exchange business (Item 50 of Table 1 of section 6 and Item 14 of Table 3 of section 6), the customer identification procedures under the AML/CTF Act do not apply to transactions of less than $500 (Australian or foreign equivalent), unless, in accordance with its enhanced customer due diligence program, a reporting entity decides to obtain and verify any Know Your Customer information about that customer.
2. Notes on sections
Section 1
This section sets out the name of the instrument, i.e. the Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2008 (No.6).
Section 2
This section specifies that the Instrument commences on the day after it is registered.
Section 3
This section contains a schedule which amends the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No.1) as follows:
Schedule 1
This schedule amends Chapter 14 of the AML/CTF Rules.
3. Notes on paragraphs
Paragraph 1
This paragraph lifts the transaction value at which a reporting entity must always comply with the customer identification procedures under the AML/CTF Act to $1000 (Australian or foreign equivalent).
4. Legislative instruments
The AML/CTF Rules are legislative instruments as defined in section 5 of the Legislative Instruments Act 2003.
5. Likely impact
These AML/CTF Rules will have a beneficial impact on businesses which provide the designated services in Item 50 of Table 1 of section 6 and Item 14 of Table 3 of section 6 of the AML/CTF Act. These AML/CTF Rules will reduce costs and inconvenience to many consumers.
6. Assessment of benefits
The AML/CTF Rules reduce compliance costs to industry as relevant reporting entities are not required to carry out the customer identification procedures under the AML/CTF Act, unless the reporting entity, in accordance with its enhanced customer due diligence program, decides to obtain and verify any Know Your Customer information about that customer.
7. 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.
8. Ongoing consultation
AUSTRAC will conduct ongoing consultation with stakeholders on the operation of the AML/CTF Rules.
Overview
The Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2008 (No. 6), enacted to amend Chapter 14 of the AML/CTF Rules, addresses the issue of unnecessary compliance burdens on businesses providing designated services, such as currency exchange, by reducing the threshold for mandatory customer identification procedures from $500 to $1000. This change aims to alleviate the administrative and financial burdens on businesses while still allowing for enhanced due diligence when deemed necessary by reporting entities. The instrument was introduced by AUSTRAC, the Australian Transaction Reports and Analysis Centre, and seeks to balance the need for stringent anti-money laundering and counter-terrorism financing measures with the practicalities of business operations. The policy objective is to streamline compliance processes, thereby reducing costs and inconvenience for both businesses and consumers without compromising the integrity of financial oversight.
Scope and Application
The Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2008 (No. 6) modifies the AML/CTF Rules by lifting the threshold for the transaction value at which reporting entities must comply with customer identification procedures to $1000 (Australian or foreign equivalent). This amendment specifically applies to designated services such as currency exchange, as outlined in Item 50 of Table 1 and Item 14 of Table 3 of section 6 of the AML/CTF Act. The new rules reduce the compliance burden for businesses providing these services and aim to ease the inconvenience for consumers while maintaining the integrity of the AML/CTF framework. These rules are applicable nationally across Australia and are designed to streamline compliance processes for reporting entities, provided they adhere to their enhanced customer due diligence programs. AUSTRAC has engaged in consultations with various government agencies and the public, reflecting a commitment to stakeholder engagement and continuous improvement of the AML/CTF regulatory environment.
Key Provisions
The main operative sections of the Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2008 (No.6) (paragraph 1) amend Chapter 14 of the AML/CTF Rules. Specifically, it raises the transaction value threshold at which a reporting entity must comply with customer identification procedures under the AML/CTF Act from $500 to $1000 (Australian or foreign equivalent) for the designated service of exchanging one currency for another in the course of carrying on a currency exchange business (Item 50 of Table 1 of section 6 and Item 14 of Table 3 of section 6). This means that, unless a reporting entity decides to obtain and verify Know Your Customer information in accordance with its enhanced customer due diligence program, it is not required to carry out the customer identification procedures under the AML/CTF Act for transactions of less than $1000.
The obligations and requirements imposed by these rules are primarily on reporting entities that provide designated services as defined in the AML/CTF Act. These entities must comply with the customer identification procedures if the transaction value is $1000 or more, or if they decide to obtain and verify Know Your Customer information for transactions below this threshold as part of their enhanced customer due diligence program. The rules aim to balance the need to prevent money laundering and counter-terrorism financing with the need to reduce compliance costs and inconvenience to consumers.
The legislation does not explicitly outline specific offences or penalties for non-compliance with these rules. However, breaches of the AML/CTF Act generally may lead to civil or criminal penalties. Under section 13-200 of the AML/CTF Act, a person who contravenes a provision of the Act is liable to a civil penalty not exceeding $21,000 for a minor offence, $105,000 for a serious indictable offence, or $210,000 for a most serious indictable offence. Additionally, individuals who commit serious indictable offences may face imprisonment for up to 10 years, and for most serious indictable offences, imprisonment for up to 15 years. The consequences for entities can include fines and other sanctions as deemed appropriate by the court.
These amendments are intended to provide relief to businesses by reducing the burden of compliance for smaller transactions, while still maintaining robust measures to combat money laundering and counter-terrorism financing for higher-value transactions. The ongoing consultation with stakeholders will ensure that the rules remain effective and are adjusted as necessary to meet evolving risks and operational realities.