Purpose of the Bill

The purpose of the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (the Bill) is to amend the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) and other legislation to adjust Australia’s Anti-Money Laundering and Counter-Terrorism Financing (together, AML/CTF) framework to, among other things, meet relevant international standards. The Bill’s amendments are contained in 12 Schedules.

Structure and summary of the Bill

Schedule 1—AML/CTF programs and business groups

Introduces a reporting entity structure framework, defining the range of entities included in a ‘reporting group’. Amendments detail how entities are to undertake appropriate measures to mitigate and manage AML/CTF risks. The Schedule also details the required AML/CTF programs that reporting entities must have in place.

Schedule 2—Customer due diligence

Reframes and clarifies Customer Due Diligence (CDD) requirements and processes that reporting entities must undertake. It details requirements for entities undertaking initial CDD, the continuing obligations regarding ongoing CDD, and when it is appropriate to use simplified CDD versus enhanced CDD.  

Schedule 3—Regulating additional high-risk services

Includes new designated services, which are intended to capture certain services provided by (among others) real estate agents, dealers in precious metals and stones, and other professionals including legal practitioners and accountants. The provision of the relevant designated services by these entities would enliven AML/CTF obligations.  

Schedule 4—Legal professional privilege

Clarifies the treatment of information which may be subject to legal professional privilege (LPP) when it is required for AML/CTF purposes, including in relation to suspicious matter reports (SMR) and threshold transaction reports (TTR). This Schedule also introduces requirements for reporting entities, in certain circumstances, to specify the basis of LPP to AUSTRAC in a proposed LPP form.

Schedule 5—Tipping off offence and disclosure of AUSTRAC information to foreign countries or agencies

Amends the existing tipping off offence to prevent the disclosure of certain information, such as requirements to submit a SMR, where doing so would or could reasonably be expected to prejudice an investigation. The new amendments provide two exceptions for when it is appropriate to disclose the information.

Schedule 6—Services relating to virtual assets

Extends the AML/CTF regime to include virtual asset-related services.

Schedule 7—Definition of bearer negotiable instrument

Clarifies what monetary instruments are captured by the definition of a ‘bearer negotiable instrument’.

Schedule 8—Transfer of value and international value transfer services

Streamlines existing concepts relating to transfers of value, including the regulation of telegraphic transfers, remittance, and virtual asset transfers. It also updates the international funds transfer instruction reporting regime.

Schedule 9—Powers and definitions

Introduces a range of new information gathering powers, including an examination process which would allow AUSTRAC to obtain information and documents to inform the making of enforcement decisions. This Schedule also provides new information gathering powers allowing AUSTRAC to proactively gather information for intelligence purposes.

Schedule 10—Exemptions

Moves exemptions for certain AML/CTF obligations (which can currently be made by the AUSTRAC CEO) from the AML/CTF Rules into the Act, allowing for greater parliamentary scrutiny of appropriate exemptions from designated services.  

Schedule 11—Repeal of the Financial Transaction Reports Act 1988

Repeals the Financial Transaction Reports Act 1988 (FTR Act) in its entirety.

Schedule 12—Transitional rules

Provides that the Minister may, through legislative instrument, make rules prescribing matters of a transitional nature relating to the amendments or repeals of the AML/CTF Act. Schedule 12 contains a ‘Henry VIII clause’, under which rules made within 4 years of commencement can modify the operation of a primary Act. As has been outlined elsewhere (for example, in the Explanatory Memorandum for the Administrative Review Tribunal Bill 2023, p. 256), Henry VIII clauses ‘should be used in very limited circumstances.’

Background

The AML/CTF Act sets out key obligations for regulated entities in relation to money laundering (ML) and terrorism financing (TF). The AML/CTF Act also establishes the Australian Transaction Reports and Analysis Centre’s (AUSTRAC) powers, providing the framework for the sharing of financial intelligence with revenue and law enforcement agencies. The AML/CTF Act sets out general principles and obligations for entities in relation to ML and TF. Further details of how these obligations are to be carried out are found in the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (AML/CTF Rules).

AUSTRAC has dual regulatory and intelligence functions. AUSTRAC has regulatory functions for entities that provide designated services under the AML/CTF Act and is also a member of Australia’s National Intelligence Community (NIC).

Australia is a founding member of the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog. In April 2015, FATF published a Mutual Evaluation Report (2015 FATF Report) which made several findings and recommendations for Australia to enhance its AML/CTF regime. Among other things, the 2015 FATF Report (p. 11) recommended that Australia’s AML/CTF regime be expanded to include lawyers, accountants, real estate agents, precious stone dealers, and trust and company service providers (which FATF has referred to as ‘gatekeeper’ professions, and are usually referred to as ‘tranche two entities’ in the Australian context). Additionally, it recommended that Australia should assess the risk of TF for all forms of legal persons and arrangements (p. 11).

In March 2022, the Senate Legal and Constitutional Affairs References (LCAR) Committee published its Report examining the adequacy and efficacy of Australia’s AML/CTF regime. The LCAR Committee recommended that the Government accelerate stakeholder consultations on the ‘timely implementation of tranche 2 reforms in line with the [FATF] recommendations’ (Recommendation 1).

In April 2023 the Government announced it had accepted the LCAR Committee recommendations and would begin public consultation on proposed reforms. Two consultation periods occurred. The first was between April and June 2023, and the second between May and June 2024. The Bill was introduced on 11 September 2024. The Bill was referred to the Senate Legal and Constitutional Affairs Legislation Committee (the Senate Legal and Constitutional Committee) for inquiry and report by 13 November 2024.

Australia’s AML/CTF regime will next be comprehensively assessed by FATF over 2026–27. As the Attorney-General’s Department (AGD) stated in May 2024 (p. 3), a poor assessment would risk Australia being ‘grey-listed’ by FATF. Being grey-listed would mean Australia would be under increased monitoring by FATF. As the current Attorney-General stated on 9 July 2024, being grey-listed could have serious economic and reputational consequences. At the Committee’s public hearing on 30 October 2024, Mr Clancy Moore, Chief Executive Officer of Transparency International Australia stated (p. 16) that, while it is difficult to know the exact economic consequences of being grey-listed, research indicated that countries that are grey-listed ‘experience an average decline of 7.6 per cent in GDP and three per cent of foreign direct investment’.

Policy position of non-government parties and independents

The Coalition has not committed to a position on the Bill. However, several members of the Coalition, including Shadow Attorney-General Senator Michaelia Cash, Dr David Gillespie MP, and Jason Wood MP have voiced concern regarding the regulatory burden the Bill will have on small businesses in particular. The Greens have previously supported tranche 2 reforms, including a private senator’s Bill in 2022.

Key amendments

Changes to reporting entity structural obligations

Currently, reporting entities from related companies can choose to become a designated business group (DBG), defined in existing section 5. Becoming a DBG means entities can share administration of some or all of their AML/CTF obligations. The Bill replaces the DBG concept with a ‘reporting group’ concept (Explanatory Memorandum (EM), p. 26). Schedule 1 of the Bill introduces new structural descriptions of entities and responsibilities, being:

• Business group: defined in proposed subsection 10A(3) of the AML/CTF Act (item 19 of Schedule 1) as being a group of 2 or more persons where either one person ‘controls’ the other, or the group meets any requirements outlined in the AML/CTF Rules. The definition of ‘control’ takes its meaning from proposed section 11 (item 19 of Schedule 1).
• Reporting group: defined in proposed subsection 10A(1) (item 19 of Schedule 1), as being either a business group or a group of 2 or more persons in certain circumstances. Reporting groups will be able to implement group-wide AML/CTF programs (EM, p. 29). Each person in a reporting or business group is a member of that group, which is defined at proposed subsection 10A(4).
• Lead entity: Each reporting group will be required to have a lead entity, defined in proposed subsection 10A(5) (item 19 of Schedule 1). The lead entity of a reporting group will be specified in the AML/CTF Rules (EM, p. 32), and will be the central entity responsible for the coordination and oversight of AML/CTF program compliance efforts with respect to their reporting group (EM, p. 29).
• Reporting entity: The definition of reporting entity is repealed and substituted (item 13 of Schedule 1) to clarify that a reporting entity can be either a person providing a designated service (listed in section 6) or the lead entity of a reporting group.
• AML/CTF compliance officer: A definition of AML/CTF compliance officer is introduced into section 5 (item 3 of Schedule 1). The requirement to have a compliance officer is currently included in the AML/CTF Rules. Division 5 of proposed Part 1A of the AML/CTF Act (item 24 of Schedule 1) requires reporting entities to have compliance officers whose role is to oversee the operation and coordination of AML/CTF policies and communicate with AUSTRAC on behalf of the reporting entity.

A significant implication of these changes is that lead entities will have liability for reporting group member AML/CTF compliance. As outlined in proposed section 236B (item 50 of Schedule 1), for the purpose of certain parts of the AML/CTF Act (listed in proposed subsection 236B(2)), if a reporting group member provides a designated service, then the lead entity is also taken to have provided such a service. This may be particularly significant for reporting groups who have franchise members. Where a reporting entity member fails to comply with an AML/CTF Act obligation, both the member and the lead entity will be liable for any contravention (proposed subsection 236B(6)).

Amendments to AML/CTF program requirements in light of new reporting structure

Schedule 1 of the Bill replaces current Part 7 of the AML/CTF Act (which outlines AML/CTF program requirements), replacing it with ‘outcomes-focused obligations’ (EM, p. 3). Current Division 2 of Part 7 of the AML/CTF Act requires reporting entities to have an AML/CTF program before commencing designated services. Schedule 1 (item 30) repeals Part 7 of the Act, replacing it with proposed Part 1A (item 24 of Schedule 1, consisting of proposed sections 26A to 26V) which outlines reporting entity requirements for creating and implementing AML/CTF programs.

An AML/CTF program is defined in proposed section 26B as comprising of a risk assessment and required policies. Proposed section 26C requires all reporting entities to undertake risk assessments of ML/TF/proliferation financing (PF) (a definition of PF is proposed at item 12 of Schedule 1). Proposed section 26F requires all reporting entities to develop and maintain policies, procedures, systems and controls that manage AML/CTF/PL risks and ensure the entity complies with its obligations (collectively referred to as ‘AML/CTF policies’). Proposed section 26G requires reporting entities to comply with their AML/CTF policies, with potential civil liability for non-compliance.

A reporting entity’s AML/CTF program must be approved by a senior manager (newly defined at item 14 of Schedule 1 as being an individual within the reporting entity who makes, or participates in making, decisions that affect the whole or part of the business of the reporting entity) (proposed section 26P). In a submission to the Senate Legal and Constitutional Committee, the Financial Services Council queried how, in large organisations that have multiple senior management levels, the particular senior manager for AML/CTF purposes would be allocated and recommended that further information be added to the Explanatory Memorandum on ‘allocating senior managers to approve ML/TF risk assessments and AML/CTF policies, which can then be further developed in AUSTRAC guidance’ (pp. 4-5).

The governing body of a reporting entity will also have specific obligations to ensure compliance with AML/CTF programs, in accordance with proposed section 26H. ‘Governing body’ is newly defined in section 5 (item 8 of Schedule 1) as being an individual, or group of individuals, with primary responsibility for the governance, strategic management and executive decisions of the reporting entity (EM, p. 27).

Inclusion of ‘higher-risk professionals’

Currently, reporting entities that provide designated services listed in section 6 of the AML/CTF Act must meet certain obligations under the Act (unless an exception applies). The Bill proposes three new categories of designated services for inclusion into section 6: real estate services (item 2 of Schedule 3); dealers in bullion, precious metals, stones and products (item 6 of Schedule 3); and a broad category entitled ‘professional services’ (which includes the provision of legal and accounting services, for example) (item 10 of Schedule 3). The inclusion of these new designated services means any entity who provides the designated services becomes a ‘reporting entity’ for AML/CTF purposes and will be required to meet the requisite obligations (and may be liable for any penalties for non-compliance).

(1)   Real estate services

The Bill introduces 2 designated real estate services in proposed subsection 6(5A) (item 2 of Schedule 3). The first includes services involving brokering the sale, purchase, or transfer of real estate on behalf of another person. This is intended to capture typical seller’s and buyer’s agent services. The second group of services includes the selling or transferring of real estate not brokered by an independent real estate agent, intended to capture property developers or other businesses that sell house and land packages (EM p. 73). The definition of real estate is proposed to be added to section 5 (item 1 of Schedule 3).

(2)   Dealers in precious metals and stones

The Bill introduces 2 designated services relating to bullion and precious metals, stones and products in proposed subsection 6(3) (item 6 of Schedule 3). These services include the buying or selling of bullion (item 1 of Table 2), and the buying or selling of precious metals, stones or products where the total value is more than $10,000 (item 2 of Table 2). Precious metals are listed in proposed subsection 5A(1) (item 5 of Schedule 3). ‘Precious stone’ is defined in proposed subsection 5A(3) (item 5 of Schedule 3). ‘Precious products’ are defined in proposed subsection 5A(6) and include objects containing precious metals or stones such as watches or jewellery.

(3)   Professional services 

The Bill introduces 9 designated professional services in proposed subsection 6(5B) (item 10 of Schedule 3). While intended to capture a broad range of services, rather than professions, the most obvious professions captured include (but are not limited to): legal practitioners, accountants, conveyancers, consultants, insolvency and restructuring practitioners, financial planners, wealth advisors, and business brokers, company secretarial service providers and trust and company service providers (EM, p. 79).

Stakeholders who provided submissions to the Senate Legal and Constitutional Committee were concerned that the legislative drafting of these designated services would capture services provided by barristers. Stakeholders including the Australian Bar Association (p. 2), Bar Association of Queensland (p. 2), and the Law Council of Australia (p. 27) suggested that the proposed language used in items 1, 2, 4 and 6 of proposed subsection 6(5B), being ‘assisting a person’, is broad and likely to capture work undertaken by barristers, especially advice work. As the Australian Bar Association (pp. 2–3) stated, this would mean that barristers, in some circumstances, could become reporting entities which would ‘impose a very significant burden on barristers at the independent Bar who are required, by the Bar rules, to be sole practitioners’. This would also be duplicative in circumstances where barristers receive instructions from solicitors who themselves are required to undertake obligations under the AML/CTF Act (Law Council of Australia, p. 27).

The Law Society of NSW (p. 1) and Law Council of Australia (p. 54) have recommended that this phrase ‘assisting a person’ be replaced with more precise language. Additionally, the NSW Bar Association (p. 1) and the Western Australia Bar Association (p. 1) recommended the Bill be amended to stipulate that services provided by barristers on instruction from solicitors are not to be taken to be designated services.

Legal professional privilege

Currently section 242 of the AML/CTF Act provides that the Act ‘does not affect the law relating to legal professional privilege’. Legal professional privilege (LPP) protects the confidential communications between a client and their lawyer (and in some cases third parties) made for the purpose of obtaining legal advice or for use in litigation. Section 242 will be repealed and replaced by proposed sections 242 and 242A (item 30 of Schedule 4), in recognition that services frequently provided by legal practitioners are brought within the AML/CTF scheme by Schedule 3 of the Bill, and in response to stakeholder requests for greater clarity (EM, p. 98). Proposed section 242 clarifies that nothing in the AML/CTF Act affects the right of a person to refuse to give information or produce a document if either is privileged on the grounds of LPP. A definition of LPP is introduced into section 5 of the AML/CTF Act (item 1 of Schedule 4) stating LPP includes (but is not limited to) privilege under Division 1 of Part 3.10 (‘Privileges’) of the Evidence Act 1995. Proposed subsection 242(2) states that providing ‘a description of information or documents’ (emphasis added) does not amount to a waiver of LPP.

Throughout the Bill, in circumstances where reporting entities are otherwise required to disclose information or documents to AUSTRAC, they are entitled, relying on proposed section 242, to refuse to give the required information or document on the basis that it is privileged on the ground of LPP. In such circumstances, the reporting entity may instead be required to provide AUSTRAC with a written notice, termed an LPP form, that specifies the basis on which the information or document is privileged from being given or produced on the ground of LPP (item 1 of Schedule 4). The LPP form would also need to include any other required information and be accompanied by any required documents. The particulars of the LPP form are not set out in the Bill. Civil penalties would apply under Division 2 of Part 15 of the AML/CTF Act for failure to provide an LPP form when required (EM, p. 91). As set out in the Explanatory Memorandum:

For clarity, the LPP form is to be provided in lieu of any relevant information that may be subject to legal professional privilege; there is no requirement or expectation for privileged information to be provided to AUSTRAC in the LPP form or otherwise (EM, p. 91). 

Key areas where LPP will interact with AML/CTF obligations include in relation to:

• Suspicious matter reporting obligations (amended section 41, items 4 to 8 of Schedule 4)
• Threshold transaction reporting obligations (amended section 43, items 9 and 10 of Schedule 4)
• Requests for AML/CTF program documentation (proposed subsection 26Q(2), item 2 of Schedule 4)
• Requests for information from the AUSTRAC CEO including:
  • Further information to be given to the AUSTRAC CEO (amended section 49, item 11 of Schedule 4; amended section 75N, item 18 of Schedule 4)
  • Notice to obtain information or documents (proposed subsection 49B(6A) , item 13 of Schedule 4 )
  • Information regarding the identity of holders of foreign credit or debit cards (amended section 50, item 15 of Schedule 4).

Some stakeholders have raised concerns about the interaction of LPP with these obligations. The Law Council of Australia (pp. 7, 32–33, 37) has particular concerns regarding legal practitioners being required to report SMRs, stating (p. 36) that ‘the requirement to covertly inform on a client to the executive is irreconcilable with the paramount duty to the court and the duty to a client and is ethically unacceptable.’ Accordingly, the Law Council of Australia (pp. 7, 37) strongly recommends that the Bill should exempt legal practitioners from complying with SMR requirements.

Proposed subsection 242A(1) states that the Minister, by notifiable instrument, may ‘make guidelines in relation to making or dealing with claims or assertions of legal professional privilege’. As outlined in the EM (pp. 98–99), it is intended these guidelines would recommend an approach:

which will best assist AUSTRAC in deciding whether to accept, review or challenge a legal professional privilege claim, processes to be undertaken relating to privilege when warrants are executed, and dispute resolution processes to review or challenge claims of privilege.

Amendments to the ‘tipping off offence’ and to disclosure of AUSTRAC information

Amended tipping off offence

Schedule 5 of the Bill makes amendments to the existing ‘tipping off’ offence. It is currently an offence under the AML/CTF Act for a reporting entity to disclose information about a SMR (or any other required report) to anyone other than AUSTRAC (existing section 123). The Bill repeals and replaces existing section 123 (item 2 of Schedule 5), clarifying who can commit the tipping off offence. Proposed subsection 123(1) broadens liability for the offence, specifying that it applies to reporting entities (or employees), a member of a reporting group (or employees), or any person required by notice to give information or produce documents under section 49 or proposed section 49B (inserted by item 6 of Schedule 9 and amended by items 12–14 of Schedule 4) (a wider group of persons beyond reporting entities).

Crucially, proposed subsection 123(1) stipulates the new tipping off offence applies to any person who ‘is or has been’ engaged in any of these capacities. This captures persons who have ceased employment with the relevant entity and means the prohibition of disclosure of relevant AML/CTF information is an enduring obligation.

A new element introduced into the amended offence is a requirement that the disclosure of information would or could reasonably be expected to prejudice an investigation. The Law Council of Australia (p. 41), in its submission to the Senate Legal and Constitutional Committee, highlighted that what ‘would or could reasonably be expected to prejudice an investigation’ is uncertain language, and examples of prejudicial behaviour should be included in the Bill. The maximum penalty for this offence is 2 years imprisonment, or 120 penalty units, or both.

Proposed section 123 provides 2 exceptions to the tipping off offence (reduced from 9 exceptions listed in the current offence). The first is a crime prevention exception, detailed at proposed subsection 123(4). This allows disclosure of certain information by specified persons (including legal practitioners and accountants) to dissuade a customer from engaging in unlawful conduct. Defendants bear an evidential burden of proof in relation to this exception.

The second exception is an information sharing exception, detailed at proposed subsection 123(5). The tipping off offence does not apply if disclosure is made to another reporting entity for the purpose of detecting, deterring, or disrupting ML/TF/PF, and any conditions set out in the regulations are met. Defendants bear an evidential burden of proof in relation to this exception. This exception will be inoperative if regulations are not made regarding the appropriate information sharing requirements (EM, p. 103).

Disclosure of AUSTRAC information to foreign countries or agencies

Currently, only certain Commonwealth, State or Territory agencies (listed in existing subsection 127(3)) may disclose AUSTRAC information to foreign governments or agencies in certain circumstances. The Bill (item 5 of Schedule 5) repeals subsection 127(3), and amends paragraph 127(2)(a) by detailing that relevant agencies that can disclose AUSTRAC information to foreign governments or agencies will instead be prescribed by the AML/CTF Rules. The EM (p. 100) explains this will ‘enable a greater degree of flexibility and would ensure this provision does not easily become outdated and require legislative amendment to correct.’

For such a significant disclosure of intelligence information, it is unclear if prescription in the Rules is appropriate, given that only select departments and agencies deal with the sharing of financial intelligence information. The Senate Standing Committee for the Scrutiny of Bills has raised concern with this provision and has sought advice from the Attorney-General ‘as to why it is considered necessary and appropriate to leave the designation of Commonwealth, State and Territory entities who can disclose AUSTRAC information to foreign governments to delegated legislation’ (pp. 3–4). At the time of writing this Digest, the Attorney-General’s response had been received by the Committee, but not yet published.  

Coercive powers: examination and information-gathering powers

Examination power

Schedule 9 of the Bill introduces an examination power, which is an investigatory process enabling AUSTRAC to obtain relevant information to inform the making of enforcement decisions, and to obtain evidence to be used in some proceedings. Proposed paragraph 172A(2)(b) (item 5 of Schedule 9) provides AUSTRAC power to obtain information and documents, including by requiring a person to appear before an examiner. ‘Examiner’ means the AUSTRAC CEO, a delegate of the AUSTRAC CEO, and consultants who are engaged under subsection 225(1) to provide examiner services (item 1 of Schedule 9). As outlined at Part 7.4.2 of the Guide to Framing Commonwealth Offences, in only rare circumstances is it appropriate to grant coercive powers to non-government employees.

A range of new offences are included within the examination process, committed if:

• a person does not comply with a section 172A notice, with a maximum penalty of 2 years imprisonment or 100 penalty units, or both (proposed subsection 172A(4))
• an examinee refuses or fails to comply with oath or affirmation requirements (a strict liability offence, per proposed subsection 172C(3)) with a maximum penalty of 3 months imprisonment
• an examinee intentionally or recklessly refuses or fails to comply with examiner requirements to answer questions, with a maximum penalty of imprisonment for 2 years (proposed subsection 172C(5))
  • This offence contains two fault elements (intention and recklessness) but carries the same maximum penalty for both, irrespective of the lower recklessness threshold.

The Senate Standing Committee for the Scrutiny of Bills has requested a detailed justification from the Attorney-General for the proposed strict liability offence in subsection 172C(3), and in particular why it is considered necessary and appropriate to impose a period of imprisonment in relation to a strict liability offence (p. 10).

Self-incrimination (and ‘use immunity’)

Proposed subsection 172K(1) (item 5 of Schedule 9) details that, during examination, it is not a reasonable excuse for an individual to refuse or fail to answer a question, produce a document, or sign a record because doing so might incriminate them or expose them to a penalty. Proposed subsections 172K(2) and 172K(3) provide that an oral statement in answer to a question, or the fact that an individual has signed a record is not admissible in evidence in civil or criminal proceedings, or a proceeding for the imposition of a penalty (other than in respect of making a false statement) if, before making the statement or signing the record, the individual claims that it might tend to incriminate them or make them liable to a penalty and it might, in fact, do so.

Proposed subsection 172K(3) appears to provide a ‘use immunity’, meaning protections are afforded to persons so that self-incriminating evidence is not used against them in certain other proceedings. However, although the Explanatory Memorandum (pp. 143–144) refers to a ‘derivative use immunity’ (which prevents self-incriminatory information or documents provided by a person being used to gather other evidence against that person, although they can be used to investigate third parties: Guide to Framing Commonwealth Offences, p. 88), no such immunity is provided by proposed section 172K. The Senate Standing Committee for the Scrutiny of Bills has asked the Attorney-General why this is the case (p. 7) and the Parliamentary Joint Committee on Human Rights recommended that ‘consideration be given to the inclusion of a derivative use immunity in proposed section 172K’ (p. 70).

Information gathering power (for intelligence purposes)

Part 2 of Schedule 9 inserts proposed sections 49B and 49C into the AML/CTF Act (item 6 of Schedule 9). These provisions allow the AUSTRAC CEO to give a notice requiring or authorising a person to provide information or documents that may assist AUSTRAC to perform its intelligence functions. These notice powers do not abrogate an individual’s right to refuse to give information on the basis that it would be self-incriminating (EM, pp. 149‑150). Proposed section 49B will empower AUSTRAC to gather informative proactively, for intelligence purposes. AUSTRAC can issue a notice to any person (as broadly defined in section 5) if that person has information or documents relevant to the AUSTRAC CEO’s performance of intelligence functions. To issue a notice, the AUSTRAC CEO must ‘reasonably believe’ the person has knowledge of the relevant information or documents (proposed subsection 49B(3)). The information must relate to assisting AUSTRAC with either obtaining or analysing information which supports efforts to combat ML/TF/PF or other serious crimes; or identifying trends, patterns, threats or vulnerabilities, associated with ML/TF/PF or other serious crimes. If a person does not comply with this request, they may face a civil penalty (proposed subsection 49B(7)). The Law Council of Australia (pp. 38–39) has raised concerns about these provisions, noting that:

the scope of these provisions are so broad, imprecise and opaque that they could conceivably be invoked to compel any person in the community (including a law practice or associate of a law practice) to provide specified information and produce specified documents about any other person or entity, simply on the basis that it may assist the AUSTRAC CEO with the performance of any of the AUSTRAC CEO’s functions.

Regulatory burden and industry concerns

Reporting entity infrastructure and uplift to comply with new processes

The Bill’s Impact Analysis (pp. 177–78) anticipates additional regulatory burden may cost businesses $13.9 billion over 10 years. As discussed below, several stakeholder submissions to the Senate Legal and Constitutional Legislation Committee have noted the regulatory burden that this Bill will have on business, especially small businesses. Concern for regulatory burden has mostly concerned tranche 2 entities, in relation to key aspects of the Bill including CDD obligations, value transfer transactions, and other general compliance requirements including AML/CTF program establishment and any increased legal costs reporting entities may experience.

Additionally, stakeholders (including the Commonwealth Bank of Australia (p. 2), Financial Services Council (p. 2), and Australian Financial Markets Association (p. 3)) have suggested that, without the AML/CTF Rules requirements being known, the regulatory burden is difficult to fully appreciate. The Government has acknowledged this inherent limitation in its projection of regulatory burden cost for business, noting that the details of the AML/CTF Rules are not yet formalised, which means that ‘the operational impact of the reforms is difficult to quantify, particularly for tranche 2 entities who have no experience with the AML/CTF regime’ (Impact Analysis, p. 178).

Customer Due Diligence

Some stakeholders, particularly those in the financial sector, have acknowledged the regulatory burden of the Bill’s CDD requirements. Reporting entities are currently able to confirm certain customer details, including politically exposed persons (PEPs) screening, after the provision of a designated service. The proposed changes will require reporting groups to be satisfied, on ‘reasonable grounds’, of a number of elements prior to the provision of the designated service, which may lead to delays in providing designated services (e.g., see Australian Financial Markets Association pp. 4–5). As the National Australia Bank (p. 3) has suggested:

[t]he greater level of prescription for customer information and the requirement to complete verification or screening of customer information prior to providing banking services … would introduce unnecessary complexity, potentially slow down banking services (particularly the opening of new products), and risk creating poor customer outcomes and experience (particularly for vulnerable customers) whilst not reducing the risk of criminal compromise.

The Association of Superannuation Funds of Australia (p. 2) has also noted that without clearer prescription in the AML/CTF Rules, the regulatory burden of reporting entities being required to run PEP and sanction checks is unclear.

Transfers of value

Some stakeholders have also provided commentary on regulatory burden in relation to transfers of value amendments in Schedule 8 of the Bill. For instance, National Australia Bank (p. 2) recommended the removal of the proposed amendments to the Travel Rule and the International Value Transfer Services (IVTS), noting ‘the concepts as drafted are ambiguous and risk impairing financial institutions’ ability to facilitate payments efficiently.’ National Australia Bank (p. 2) recommended any changes to the Travel Rules and IVTS ‘should be informed by broader changes to the payments landscape’. The Australian Banking Association (pp. 3–4) suggested the uncertainty surrounding the obligations relating to transfers of value are ‘so significant that they should not proceed at this time and should be excised from the amendment Bill.’

Extending commencement date

Because of regulatory complexities contained in the Bill, some stakeholders have suggested that the commencement date be extended. For instance, the Commonwealth Bank of Australia (p. 2) has suggested that:

due to the complexity and expansion of the proposed amendments and reliance on the AML/CTF Rules (on which consultation is yet to occur) for Customer Due Diligence (CDD), the obligations for transfers of value (travel rule), and foreign branches and subsidiaries, the time available to comply will be insufficient if the commencement date remains 31 March 2026.

In relation to CDD, National Australia Bank (p. 3) stated that implementing the changes relating to CDD would:

require substantial updates to existing processes and technology solutions to enable compliance with the amended CDD obligations. The changes would require extensive planning, design and testing prior to deployment, potentially causing disruptions to operations and NAB’s ability to provide critical services to our customers. [National Australia Bank] considers it will be extremely challenging to undertake the necessary change activity prior to the proposed commencement date [31 March 2026].

Other stakeholders that support extending the commencement date for certain provisions include the Financial Services Council (p. 5), the Australian Financial Markets Association (p. 7), and the Self-Managed Superannuation Fund Association (p. 1).

Law enforcement agencies and reform facilitation

Law enforcement and intelligence agencies, such as the Australian Criminal Intelligence Commission (p. 1), expressed support for the Bill’s proposed reforms. The Australian Federal Police considered the reforms would ‘provide tangible benefits to law enforcement’ and noted its experience with tranche 2 entities who have ‘used their specialist skills to subvert legal frameworks, in breach of their professional and ethical obligations’ (pp. 1–2).

AUSTRAC advised it was creating a new team as a direct engagement avenue for both existing and newly regulated industries ‘to drive effective implementation of the reforms’ (p. 14). AUSTRAC also noted that it was working to simplify the AML/CTF Rules where appropriate and that consultation with industry would commence before the end of 2024. It intends ‘to undertake 2 rounds of public consultation, and engagement with specific sectors, before the AML/CTF Rules are promulgated’ (p. 15).