Explanatory Statement
Statutory Rules 1990, No. 266
Issued by Authority of the Treasurer
Amendment of the Banking (Foreign Exchange) Regulations
Section 39 of the Banking Act 1959 provides that, where the Governor General considers it expedient to do so, he may make regulations for purposes related to:
(a) foreign exchange or the foreign exchange resources of Australia;
(b) the protection of the currency or the protection of the public credit or revenue of Australia; or
(c) foreign investment in Australia, Australian investment outside Australia, foreign ownership or control of property in Australia or of Australian property outside Australia or Australian ownership or control of property outside Australia or of foreign property in Australia.
The Banking (Foreign Exchange) Regulations are administered by the Reserve Bank of Australia on behalf of the Government.
On 6 August 1990 the Government announced a package of wide-ranging sanctions against Iraq in response to its invasion of Kuwait. Subsequently, the United Nations Security Council adopted a resolution which requires members of the United Nations to implement economic measures against Iraq and to protect the assets of the legitimate Government of Kuwait and its agencies.
The Banking (Foreign Exchange) Regulations provide the Reserve Bank with powers which may be used to protect the assets of the legitimate government of Kuwait and to restrict transfers of funds from residents of Australia to residents of Iraq and Kuwait. The amendment to the Regulations would ensure that they may be used to give effect to the Government’s announcement in respect of Iraq and to meet Australia’s obligations under the Security Council resolution.
Overview
The Banking (Foreign Exchange) Regulations, amended by Statutory Rules 1990 No. 266, were introduced in 1990 to address the urgent need for economic sanctions against Iraq following its invasion of Kuwait. Enacted under the authority of the Treasurer and pursuant to section 39 of the Banking Act 1959, the regulations were designed to empower the Reserve Bank of Australia to safeguard the assets of the legitimate government of Kuwait and to restrict financial transactions that could facilitate transfers of funds from Australian residents to residents of Iraq and Kuwait. This legislative action was in line with Australia’s commitment to uphold the United Nations Security Council resolution, which mandated member nations to implement economic measures against Iraq and protect Kuwaiti assets. The overarching policy objective of these amendments was to ensure that Australia's financial regulations could be effectively utilised to support international sanctions and protect national and international financial interests.
Scope and Application
The Banking (Foreign Exchange) Regulations, as amended, apply to all individuals and entities within Australia, including banks, financial institutions, and any person or entity conducting foreign exchange transactions or involved in foreign investment. The geographic scope of these regulations extends to all activities occurring within the Australian jurisdiction, and they are designed to protect the currency and public credit of Australia, as well as to enforce foreign exchange controls as mandated by the Banking Act 1959. The regulations allow the Reserve Bank of Australia to implement measures such as restricting fund transfers to specified countries, in this instance, Iraq and Kuwait, in compliance with both national policies and United Nations resolutions. These measures are intended to safeguard the assets of the legitimate government of Kuwait and to enforce economic sanctions against Iraq in response to its actions. The regulations can be further extended or modified through subordinate instruments, ensuring flexibility in addressing evolving international and domestic economic conditions.
Key Provisions
The main operative sections of the Statutory Rules 1990, No. 266, which amend the Banking (Foreign Exchange) Regulations, include provisions that enable the Reserve Bank of Australia to enforce measures related to foreign exchange and foreign investment in response to specific international events. Section 39 of the Banking Act 1959 grants the Governor-General the authority to make regulations concerning foreign exchange, the protection of currency and public credit, and foreign investment. This authority is exercised through the Banking (Foreign Exchange) Regulations, which the Reserve Bank administers on behalf of the Government.
These Regulations permit the Reserve Bank to take specific actions to protect the assets of the legitimate government of Kuwait and to restrict financial transactions between Australian residents and entities in Iraq and Kuwait. This includes measures to prevent the transfer of funds that could benefit Iraq or hinder the legitimate government of Kuwait. The amendment to the Regulations ensures they can be applied to enforce the Government’s sanctions against Iraq and to comply with the United Nations Security Council resolution. This legislative change is a direct response to Iraq's invasion of Kuwait and the subsequent need for international economic measures.
The Banking (Foreign Exchange) Regulations impose several obligations on the Reserve Bank of Australia and the entities they govern. The Reserve Bank must enforce the measures designed to protect the assets of the legitimate government of Kuwait and restrict financial transactions with Iraq and Kuwait. Australian residents and entities must comply with these regulations, which may include freezing assets, prohibiting financial transactions, and reporting any dealings that could contravene the Regulations. The Regulations also require the Reserve Bank to monitor and report on compliance, ensuring that the measures are being effectively implemented.
Breaches of the Banking (Foreign Exchange) Regulations can result in significant legal consequences. Those found in violation of these Regulations may face civil or criminal penalties, depending on the nature and severity of the breach. The penalties can include substantial fines, imprisonment, or both. For instance, individuals or entities that knowingly facilitate or participate in restricted financial transactions could face criminal charges, which may result in fines up to a certain maximum amount and imprisonment for a specified period. Additionally, civil penalties can apply, where the Reserve Bank may impose fines or other sanctions on those found to be non-compliant. The exact penalties are determined by the specific provisions of the Banking Act 1959 and the Regulations themselves, ensuring that the measures are enforced effectively and that the public's financial stability is maintained.