EXPLANATORY STATEMENT
Select Legislative Instrument 2006 No. 332
Issued by the Authority of the Minister for Justice and Customs
Financial Transaction Reports Act 1988
Financial Transaction Reports Amendment Regulations 2006 (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, prescribing all matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The Financial Transaction Reports Regulations 1990 (‘the Principal Regulations’) set out various matters necessary to give effect to the Act.
The Act specifies no conditions that need to be met before the power to make the Regulations may be exercised.
The purpose of the proposed Regulations is twofold. First, the proposed Regulations carves out from the definition of ‘international funds transfer instruction’ (‘IFTI’) in subsection 3(1) of the Act, instructions that are transmitted into or out of Australia by a corporate treasurer, for the purposes of providing or assisting to provide financial management services to a related body corporate. In effect, the proposed Regulations will mean that such bodies corporate will be exempt from Division 3A (which was inserted into the Anti-Terrorism (No.2) Act 2005 (‘the AT Act’) and varied by the Financial Transaction Reports Amendment Act 2006) and Division 3 of the Act. Division 3A concerns customer information to be included in IFTIs and Division 3 concerns the reporting of IFTIs to the Australian Transaction Reports and Analysis Centre (‘AUSTRAC’).
Secondly, under subsection 3(1) of the Act, ‘prescribed particulars’ are defined to mean particulars prescribed by the Regulations made for the purposes of sections 24E and 24F of the Act. Schedule 9 of the AT Act inserted, amongst other things, a new Part IIIB – Register of Providers of Remittance Services into the Act. Sections 24E and 24F provide that cash dealers (other than financial institutions and real estate agents) who provide remittance services will be required to be registered and must provide certain information (ie the names and ‘prescribed particulars’ of those cash dealers) to the AUSTRAC CEO, which will be placed on a Register maintained by the CEO. The proposed Regulations define what the ‘prescribed particulars’ are for the purposes of sections 24E and 24F and therefore detail what those cash dealers must provide.
The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Consultation is not necessary for this legislative instrument as this instrument is of a minor or machinery nature and does not substantially alter existing arrangements. It has no direct or substantial indirect effect on business.
The Regulations commence on the day after they are registered.
Authority: Section 43 of the Financial Transaction Reports Act 1988
Overview
The Financial Transaction Reports Amendment Regulations 2006 (No. 1), issued under the authority of the Minister for Justice and Customs, amend the Financial Transaction Reports Act 1988. This legislation aims to address gaps in the reporting and management of international funds transfers, particularly by exempting certain corporate transactions from stringent reporting requirements and by specifying the particulars that cash dealers providing remittance services must disclose. The regulations clarify the definition of 'international funds transfer instruction' to exclude transfers made by a corporate treasurer for the provision of financial management services to related entities, thereby exempting these transactions from the reporting obligations under Division 3A and Division 3 of the Act. Additionally, the regulations define the 'prescribed particulars' for cash dealers required to register under the Act, ensuring that AUSTRAC receives the necessary information to maintain an effective register of providers of remittance services.
The Parliament of Australia enacted these amendments to refine the regulatory framework surrounding financial transactions, ensuring that legitimate business operations are not unduly burdened while still achieving the policy objective of preventing the misuse of financial systems for illegal activities. The regulations are designed to streamline reporting processes for certain corporate transactions and to enhance transparency and compliance among cash dealers providing remittance services. These amendments do not require consultation due to their minor nature and lack of substantial impact on existing business operations.
Scope and Application
The Financial Transaction Reports Amendment Regulations 2006 (No. 1) applies to entities involved in financial transactions within Australia and those that transmit funds internationally. Specifically, the regulations exempt corporate treasurers from the reporting requirements of international funds transfer instructions (IFTI) when such transfers are made for the purpose of providing or assisting in financial management services to related body corporates. This exemption effectively removes these entities from the obligations under Division 3A and Division 3 of the Act, which pertain to the reporting of IFTIs and the inclusion of customer information. Additionally, the regulations clarify and detail the 'prescribed particulars' required for cash dealers, other than financial institutions and real estate agents, who provide remittance services. These dealers must register and provide specific information to the Australian Transaction Reports and Analysis Centre (AUSTRAC), which will then be included in a register maintained by the AUSTRAC CEO. The regulations extend to all entities within the Commonwealth of Australia and are a necessary instrument to give effect to the Financial Transaction Reports Act 1988. There are no exclusions or thresholds specified in these regulations, and they come into effect on the day after they are registered.
Key Provisions
The Financial Transaction Reports Amendment Regulations 2006 (No. 1) establish specific exemptions and requirements under the Financial Transaction Reports Act 1988 (the Act). Section 3 of these Regulations modifies the definition of 'international funds transfer instruction' (IFTI) in subsection 3(1) of the Act. This amendment excludes certain transactions from the IFTI definition. Specifically, it exempts instructions transmitted by a corporate treasurer for the purpose of providing or assisting in financial management services to a related body corporate (subsection 3(1)). This means that such transactions are no longer subject to the reporting requirements outlined in Division 3A, which pertains to customer information in IFTIs, and Division 3, which requires reporting of IFTIs to the Australian Transaction Reports and Analysis Centre (AUSTRAC).
The Regulations also impose obligations on cash dealers who provide remittance services, as outlined in sections 24E and 24F of the Act. These dealers, excluding financial institutions and real estate agents, must register with AUSTRAC and provide specific information to the AUSTRAC CEO, which is then placed on a Register. The Regulations, through subsection 3(1), define the 'prescribed particulars' that these cash dealers must furnish. This includes details necessary for compliance with sections 24E and 24F, ensuring that the Register maintained by the AUSTRAC CEO is complete and up-to-date.
Failure to comply with the requirements set out in the Financial Transaction Reports Amendment Regulations 2006 (No. 1) can result in significant consequences. Under the Act, non-compliance with reporting obligations can lead to civil and criminal penalties. Specifically, the Act provides for civil penalties for non-compliance, which can include fines up to a substantial amount as specified by the regulations. Additionally, the Act allows for criminal penalties, including fines and imprisonment, for wilful or reckless non-compliance. These penalties underscore the importance of adhering to the reporting and registration requirements outlined in the Regulations to avoid legal repercussions.