EXPLANATORY STATEMENT
STATUTORY RULES 1984 No 111
ISSUED BY AUTHORITY OF TREASURER
AMENDMENT OF THE BANKING (FOREIGN EXCHANGE) REGULATIONS (BFER)
Section 39 of the Banking Act 1959 authorises the making of regulations for purposes related to foreign exchange.
The Government decided on 9 December 1983 to allow the value of the Australian dollar to be determined by market forces and to abolish the major part of the restrictions implemented through exchange control. On 10 April 1984 the Treasurer announced that while the foreign exchange market had worked well since the dollar was floated, the depth and efficiency of the market would be enhanced by the entry of additional foreign exchange dealers. At the present time, nearly all foreign exchange dealing is confined to the trading banks. Applications for authorities to deal in foreign exchange were sought from non-bank financial institutions by the Treasurer on 10 April and are currently being assessed.
It is intended that the new dealers will be authorised by way of general authorities issued under regulation 38A(1) of the BFER. As the Treasurer also indicated on 10 April 1984 authorisation to deal in foreign exchange will not carry any undertaking by the Government or by the Reserve Bank as to the overall financial soundness or credit standing of the authorised institutions.
The operation of foreign exchange arrangements where dealers are authorised under regulation 38A(1) requires, however, amendments to the BFER. Although the major part of the exchange control restrictions implemented through the BFER were abolished in December 1983, exchange control procedures have continued to apply for the purposes of the Government’s taxation screening policies. Arrangements to monitor foreign exchange transactions for tax policy purposes which are to be applied when the new authorities are issued to an important extent will be dependent on the BFER as amended.
Sub-regulation 5(5) of the Regulations previously provided that where any foreign currency was made available by the Reserve Bank or an agent of the Bank it should be used for the purpose for which it was obtained and in accordance with any conditions imposed. The amendment to sub-regulation 5(5) broadens the scope of the sub-regulation so that it also applies where foreign exchange is obtained from a foreign exchange dealer authorised under the Regulations.
Regulation 40 of the Regulations previously provided that a person should not make a false statement to any Commonwealth officer, to any officer of the Reserve Bank or of an agent of the Reserve Bank, or to any person who issued money orders payable overseas. However, it did not cover false statements to officers of institutions authorised to deal in foreign exchange under regulation 38A. The amendment to regulation 40 provides that such a false statement would also be an offence against the Regulations.
Authority: Section 39 of the Banking Act 1959
Overview
The Banking (Foreign Exchange) Regulations (BFER) Amendment Statutory Rules 1984 No 111, issued by the authority of the Treasurer under Section 39 of the Banking Act 1959, were enacted to facilitate the entry of additional foreign exchange dealers in the market, following the government's decision on 9 December 1983 to allow the value of the Australian dollar to be determined by market forces. The objective was to enhance the depth and efficiency of the foreign exchange market, which was currently dominated by trading banks, by opening it up to non-bank financial institutions. The amendments to the BFER sought to broaden the scope of certain regulations to accommodate these new dealers and to ensure that the existing exchange control procedures continued to apply for taxation screening purposes. The changes included adjustments to sub-regulation 5(5) to cover foreign exchange obtained from authorised dealers and an amendment to regulation 40 to include false statements to officers of authorised institutions as an offence. The regulations were issued to support the government's policy of market-driven foreign exchange determination and to ensure the continued monitoring of foreign exchange transactions for tax policy purposes.
Scope and Application
The amendment to the Banking (Foreign Exchange) Regulations (BFER) as described in this explanatory statement pertains to entities and individuals authorised to deal in foreign exchange, specifically non-bank financial institutions that are seeking such authorisation. The amendment aims to facilitate the entry of additional foreign exchange dealers in the market by modifying the existing regulations to accommodate these new authorised institutions. The amendment applies on a national level as it involves the regulation of foreign exchange within Australia, governed by the Commonwealth under the authority of the Banking Act 1959. The changes are designed to ensure that when new dealers are authorised, the foreign exchange regulations are aligned with the new market dynamics, particularly regarding the monitoring of transactions for tax policy purposes and the prevention of false statements to authorised officers. While the amendment primarily serves to expand the regulatory framework to include new entities, it does not specify exclusions or thresholds but rather focuses on the broader application to all authorised foreign exchange dealers under the amended regulations. The scope of the Act is further extended through subordinate instruments, ensuring comprehensive coverage of foreign exchange dealings in Australia.
Key Provisions
The Banking (Foreign Exchange) Regulations (BFER) have undergone amendments to accommodate changes in the foreign exchange market following the decision to allow the value of the Australian dollar to be determined by market forces. Key sections include regulation 38A(1) which now permits the authorisation of additional foreign exchange dealers, broadening the scope beyond the traditional trading banks (section 38A(1)). Another significant change is the amendment to sub-regulation 5(5), which now extends the scope of the regulation to include foreign exchange obtained from authorised dealers, ensuring it is used for the intended purpose and in accordance with any conditions imposed (sub-regulation 5(5)). Regulation 40 has also been updated to include false statements made to officers of authorised foreign exchange dealers as an offence, thereby broadening the scope of regulatory oversight (regulation 40).
These amendments impose several obligations on the parties involved. Firstly, any entity seeking to become an authorised foreign exchange dealer must comply with the requirements set out in regulation 38A(1), which involves applying for the necessary authority from the Treasurer. Once authorised, these dealers must ensure that any foreign currency obtained, whether from the Reserve Bank or another authorised dealer, is used strictly for the purpose for which it was obtained and in accordance with any imposed conditions (sub-regulation 5(5)). Additionally, any person dealing in foreign exchange, including those authorised under regulation 38A, must refrain from making false statements to authorised officers or personnel, including those from the Reserve Bank or its agents, as well as officers of authorised foreign exchange dealers (regulation 40).
Failure to comply with these provisions can lead to various legal consequences. For instance, making a false statement to an authorised officer or dealer is now an offence under regulation 40, which could result in both civil and criminal penalties. Although the specific penalties are not detailed in the explanatory statement, such offences typically attract fines and, in severe cases, imprisonment. The exact penalties would be determined in accordance with relevant legislation and judicial discretion. Non-compliance with the conditions for the use of foreign currency obtained from authorised dealers could also lead to regulatory action, including the revocation of the dealer's authority or other sanctions deemed appropriate by the relevant authorities.