National Security (Exchange Control) Regulations (Amendment)

Overview

The Statutory Rules 1941 No. 123, Regulations under the National Security Act 1939-1940, were enacted by the Governor-General in Council to address the need for stringent control over financial transactions and foreign currency exchanges during a period of national security concerns. These regulations were issued under the authority of the Commonwealth of Australia and aim to enforce stringent measures to control the purchase, use, and transfer of foreign currency and securities, particularly by non-residents, to safeguard the nation's economic stability. This legislative instrument seeks to prevent unauthorised financial activities that could potentially threaten national security by imposing strict conditions on foreign currency transactions and requiring explicit consent for specific types of financial dealings involving non-residents.

Scope and Application

The National Security (Exchange Control) Regulations, as amended by these statutory rules, apply to all individuals and entities within the Commonwealth of Australia, particularly in relation to transactions involving foreign currency and securities. These regulations govern the control over the purchase, use, and transfer of foreign currency and securities to ensure national security during times of conflict. The regulations impose restrictions on the transfer of securities or land between persons resident outside Australia unless expressly permitted by the Treasurer. Furthermore, they mandate the blocking of certain accounts and condition the acquisition of foreign currency by subjecting payments to the collection of proceeds. The regulations extend their reach to entities incorporated outside Australia and define terms such as "security" and "transfer" to clarify their application. Notably, these regulations do not apply to certain instruments like bills of exchange or promissory notes, as explicitly excluded from the definition of "security". The application of these stringent controls is enforced through subordinate instruments, which provide further details and mechanisms for their implementation.

Key Provisions

The main operative sections of the Statutory Rules 1941 No. 123 involve amendments to the National Security (Exchange Control) Regulations under the National Security Act 1939-1940. Regulation 6 is amended to redefine the term “foreign securities” by removing the reference to the “sterling area” and adding a new definition for “sterling area” (Regulation 1(a)-(c)). Regulation 7 is amended by adding a new sub-regulation (4a) that prohibits the misuse of foreign currency provided by the Bank or its agents (Regulation 2). A new Regulation 10a is inserted, prohibiting certain transactions such as the sale, loan, transfer, mortgaging or charging of securities or land by persons outside Australia, unless the Treasurer consents in writing (Regulation 3(1)-(5)). Regulation 12 is amended to include new definitions for “blocked account” and “the banker,” to cover accounts declared as blocked by the Bank or its agents (Regulation 4(a)-(b)). Lastly, Regulation 13 is amended by adding a new sub-regulation (3a) that allows the Bank or its agents to subject the payment for foreign currency to the collection of proceeds (Regulation 5). These Regulations impose several obligations on the parties and entities they govern. Persons who receive foreign currency from the Bank or its agents must use it strictly for the purpose and under the conditions specified, or face legal consequences (Regulation 2). Transactions involving the sale, loan, transfer, mortgaging or charging of securities or land by non-residents must be approved in writing by the Treasurer to be lawful (Regulation 3(1)-(5)). Furthermore, any blocked accounts or those declared as such by the Bank must adhere to the specified definitions and conditions (Regulation 4(a)-(b)). Lastly, payment for foreign currency sales may be subject to the collection of proceeds by the Bank or its agents (Regulation 5). Failure to comply with these Regulations can result in various legal consequences. Under Regulation 3(1), unauthorised transactions involving securities or land by non-residents are prohibited and can be subject to penalties. The High Court can invalidate such transactions if the Treasurer applies and the Court is satisfied that the invalidation would not prejudice bona fide rights acquired without notice of the prohibition (Regulation 3(3)-(4)). Additionally, misuse of foreign currency provided by the Bank or its agents is prohibited under Regulation 2. Although the specific penalties are not detailed in the provided text, breaches of these Regulations could potentially lead to fines, imprisonment, or other civil or criminal penalties as prescribed by the applicable laws.