Banking (Foreign Exchange) Regulations 1959 - Variation of Exemption relating to paragraph 8(1)(a) - North Korea (19/09/2006)

Overview

The Banking (Foreign Exchange) Regulations 1959 were enacted to regulate foreign exchange transactions and provide the framework for implementing financial sanctions in Australia. The Regulations were introduced to address the need for stringent controls on foreign exchange to ensure the stability of the Australian economy and to enable the enforcement of international sanctions. On 19 September 2006, the Australian Government directed the Reserve Bank of Australia to implement financial sanctions against entities and an individual associated with the Democratic People’s Republic of Korea. This was achieved through a series of instruments including a Direction relating to foreign currency transactions and to North Korea, and variations to existing exemptions under the Regulations. The urgency of these measures was recognised, and it was deemed unnecessary to consult further beyond the discussions already undertaken by Treasury and the Department of Foreign Affairs and Trade.

Scope and Application

The Banking (Foreign Exchange) Regulations 1959 apply to the Reserve Bank of Australia, which implements financial sanctions against specific entities and individuals associated with the Democratic People’s Republic of Korea. The sanctions were mandated by the Australian Government and include a range of entities based in North Korea and one individual, Jacob Steiger, based in Switzerland. These instruments, including a direction relating to foreign currency transactions and variations of exemption, were issued on 19 September 2006 and came into operation on the same date. The measures are intended to restrict financial activities involving the listed entities and individual, thereby enforcing the financial sanctions against North Korea. The scope of this legislation is limited to entities and individuals specified in Attachment A, and the measures are enforced within Australia's jurisdiction, extending to entities and individuals subject to Australian financial regulations regardless of their physical location.

Key Provisions

The Banking (Foreign Exchange) Regulations 1959 have been utilised to implement financial sanctions against certain entities and an individual associated with the Democratic People's Republic of Korea. The main instruments employed for this purpose are a Direction relating to foreign currency transactions and to North Korea (section 5) (i), and two variations of exemptions (section 6(1) and section 8(1)(a)) (ii), (iii). These instruments came into effect on 19 September 2006. The sanctions target twelve entities and one individual, details of which are provided in Attachment A. The urgency of these sanctions was deemed necessary, and as such, the Reserve Bank, in accordance with Section 18 of the Legislative Instruments Act 2003, determined that further consultation was not required beyond what had already been undertaken by Treasury and the Department of Foreign Affairs and Trade. The obligations imposed by these instruments on the parties they govern are primarily concerned with financial transactions. Specifically, they prohibit or restrict dealings with the listed entities and individual. This includes any transactions involving foreign currency, which must be carried out in compliance with the new regulations. Financial institutions and other entities are required to ensure that they do not engage in any transactions that would facilitate the activities of the sanctioned individuals or entities. This involves thorough checks and verification processes to ensure compliance with the sanctions. Failure to comply with the Banking (Foreign Exchange) Regulations 1959 can result in significant legal consequences. Under section 22 of the Banking Act 1959, a person who contravenes the regulations may be guilty of an offence. The penalties for such offences can be severe, including substantial fines and, in some cases, imprisonment. The exact penalties depend on the nature and severity of the breach, but they are designed to deter non-compliance and enforce the sanctions effectively. The seriousness of the sanctions against North Korea underscores the importance of adhering to these regulations.