Financial Transaction Reports Amendment Regulations 2003 (No. 1) 2003 No. 32
EXPLANATORY STATEMENT
Statutory Rules 2003 No. 32
Issued by the authority of the Minister for Justice and Customs
Financial Transaction Reports Act 1988
Financial Transaction Reports Amendment Regulations 2003 (No. 1)
Section 43 of the Financial Transaction Reports Act 1988 (the Act) provides that the Governor-General may make regulations not inconsistent with the Act.
Regulation 11D of the Financial Transaction Reports Regulations 1990 (FTR Regulations) relates to Part VIA of the Act. Section 40H(1) of the Act makes it an offence for financial institutions not to retain, for the minimum retention period, the original or a copy of a customer generated financial transaction document. Subsection 40H(2)(a) provides that the retention obligation only relates to single transactions exceeding $200. Subsection 40H(2)(b) provides that an amount higher than $200 may be specified by regulation. Regulation 11D prescribes that the amount for single transactions to which retention obligations relate be $1000 for subsection 40H(2)(b) of the Act.
Section 40J(1) of the Act similarly provides that it is an offence for financial institutions not to retain, for the minimum retention period, the original or a copy of a non-customer generated financial transaction document. Subsection 40J(2)(a) provides that the retention obligation only relates to single transactions exceeding $200. Subsection 40J(2)(b) provides that an amount higher than $200 may be specified by regulation.
The purpose of the Regulation is to increase to $1000 the amount currently prescribed in subsection 40J(2) of the Act as the minimum transaction amount which would require financial institutions to retain certain transaction related documents. The Regulation would also amend an outstanding typographical error.
Item 2 of Schedule 1 of the Regulation would amend the present Reg. 11D of the FTR Regulations by effectively adding a reference to subsection 40J(2). The effect of the amendment would be that the amount for a single transaction to which retention obligations relate under subsection 40H(2) and subsection 40J(2) would be prescribed as $1000. The increase to $1000 is consistent with the present Reg 11D of the FTR Regulations but extends it to subsection 40J(2) of the Act for consistency. The amendment is also consistent with Recommendation 4 in the August 2002 Report of the Taskforce on the Financial Transaction Reports Act and Regulations. The Taskforce was established under the Commonwealth Legislation Review Program. The purpose of the Program is to review legislation which restricts competition or imposes costs or confers benefits on business.
The Regulation would be taken to have commenced on 1 January 2003. The commencement provision of the Regulation is retrospective and is anticipated to commence on the same day as the existing Reg 11D of the FTR Regulations. The Regulation was not included in Reg. 11D of the FTR Regulations due to an oversight. 1 January 2003 coincides with the Proceeds of Crime (Consequential Amendments and Transitional Provisions) Act 2002 (the Consequentials Act) which commenced on 1 January 2003. The Consequentials Act transferred sections 40H and 40J from the Proceeds of Crime Act 1987 to the Act commencing on 1 January 2003. Consequently, the FTR Regulations were required to commence on the same day.
The Regulation benefits those institutions and/or individuals who would be required to retain documents under subsection 40J(1) of the FTR Act because the higher threshold would require fewer documents to be retained. Consequently, the retrospective nature of the regulation would confer a benefit on those institutions and/or individuals who are required to comply with subsection 40J(1) of the FTR Act. In addition, no liability would be incurred by those institutions and /or individuals affected by the Regulation if the Regulation was made retrospective. The Regulation would therefore satisfy section 48(2) of the Acts Interpretation Act 1901, and may be validly made with retrospective effect.
Authority: section 43 of the Financial Transaction Reports Act 1988
Overview
The Financial Transaction Reports Amendment Regulations 2003 (No. 1) were enacted to address an oversight in the regulation of financial transaction document retention requirements within the Financial Transaction Reports Act 1988. These regulations were introduced by the Parliament of Australia under the authority of the Minister for Justice and Customs and aim to ensure consistency and compliance with the Act. The policy objective is to align the threshold for document retention with other provisions in the Act and to correct a typographical error, thereby reducing the burden on financial institutions while maintaining the integrity of financial transaction reporting. The regulations were designed to commence retrospectively on 1 January 2003 to avoid any compliance issues arising from the transfer of sections from the Proceeds of Crime Act 1987 to the Financial Transaction Reports Act 1988.
Scope and Application
The Financial Transaction Reports Amendment Regulations 2003 (No. 1) applies to financial institutions subject to the Financial Transaction Reports Act 1988, requiring them to retain transaction documents for specific periods. These institutions include banks, credit unions, building societies, and other financial entities regulated under the Act. The Act applies on a national level, with the intent to standardise and strengthen anti-money laundering and counter-terrorism financing measures across Australia. The regulation amends the retention threshold for single transactions from $200 to $1000, aligning with the recommendations of the Taskforce on the Financial Transaction Reports Act and Regulations. This adjustment reduces the administrative burden on financial institutions by decreasing the number of documents they must retain. The Regulation's retrospective application, effective from 1 January 2003, ensures compliance with the Proceeds of Crime (Consequential Amendments and Transitional Provisions) Act 2002, which transferred certain sections from the Proceeds of Crime Act 1987 to the Financial Transaction Reports Act 1988. This change ensures no institutions incur liability for non-compliance during the transitional period, thus satisfying the requirements of the Acts Interpretation Act 1901.
Key Provisions
The Financial Transaction Reports Amendment Regulations 2003 (No. 1) primarily address the retention requirements for financial transaction documents under the Financial Transaction Reports Act 1988 (the Act). Regulation 11D of the Financial Transaction Reports Regulations 1990 (FTR Regulations) is amended to increase the minimum transaction amount that triggers the retention requirement for financial institutions. Under section 40H(2)(b) of the Act, the retention obligation applies to single transactions exceeding a specified amount, which is currently set at $200. The regulation specifies that this amount should be increased to $1000. Similarly, under section 40J(1) of the Act, financial institutions must retain certain non-customer generated financial transaction documents for single transactions exceeding the specified amount, which is also increased to $1000. This amendment aligns with the existing retention requirement under section 40H(2) and extends it to include section 40J(2), ensuring consistency across the regulations.
Financial institutions governed by the Act and the FTR Regulations are required to retain the original or a copy of a financial transaction document for the minimum retention period if the transaction exceeds the specified amount. For both customer-generated and non-customer generated transactions, this retention requirement now applies to transactions exceeding $1000. The regulations mandate that these documents be kept for a specified period to ensure that they are available for review if needed. Financial institutions must implement systems and processes to ensure compliance with these retention obligations.
Failure to comply with the retention requirements can result in civil and criminal penalties. Under the Act, it is an offence for financial institutions not to retain the required documents for the specified period. Subsection 40H(1) and 40J(1) of the Act outline the offences and associated penalties for non-compliance. The precise penalties are not specified in the explanatory statement, but non-compliance with financial transaction reporting regulations can typically result in substantial fines and other legal consequences. The severity of the penalties may depend on the nature and extent of the non-compliance.
The regulations also aim to correct a typographical error that was present in the original FTR Regulations. By rectifying this error, the regulations ensure that the retention requirements are applied consistently and accurately. The retrospective commencement of the regulation on 1 January 2003 ensures that the amendments apply from the same date as the existing regulations and the Proceeds of Crime (Consequential Amendments and Transitional Provisions) Act 2002, which transferred certain sections from the Proceeds of Crime Act 1987 to the Act. This retrospective effect means that financial institutions are not liable for non-compliance prior to the commencement date, provided they comply with the new requirements thereafter.