Chapter 5 - Committee View
Committee view
5.1
The committee acknowledges the efforts of the Department and AUSTRAC to
consult extensively with stakeholders in relation to AML/CTF legislation. The
majority of witnesses appearing before the committee indicated that they had been
consulted in relation to the legislation and many considered that the
Department and AUSTRAC had been receptive to addressing their concerns.
5.2
However, evidence received during this inquiry indicated that industry
groups and stakeholders have continuing specific issues ranging from requests
for technical re-drafting to issues regarding the intent and the scope of the Bill.
In particular, stakeholders still have concerns in relation to the practical
impact of some provisions as well as privacy and discrimination issues.
Key concerns for industry
5.3
Evidence received during this inquiry indicated that industry stakeholders
were generally supportive of the Bill though some general, and several specific,
issues remain unresolved.
5.4
Major criticism was expressed by stakeholders regarding the proposed timetable
of the release of the AML/CTF Rules. Complaints concentrated on the lack of
time available to adequately consider the Rules prior to the implementation of
the Bill. Specific suggestions related to delaying the obligations immediately
after Royal Assent and extending the transition periods to allow the
development of necessary systems and support mechanisms.
5.5
The committee is concerned that reporting entities have adequate time to
engage with AUSTRAC on the implications of the Rules and are able to analyse
and process the content of the Rules to effectively carry out their
obligations. Given that there has been some confusion in relation to the
government's intentions with respect to the Rules which may have hampered the
efforts of industry to prepare for compliance with the new regime, the
committee recommends that the first stage of implementation should not commence
until three months after the date of Royal Assent. In making this
recommendation, the committee notes that the FATF recommendations are not a
binding international agreement subject to a defined implementation timetable. The
committee is also conscious of the importance of ensuring that the anti-money
laundering and counter-terrorism financing regime functions effectively from
the outset.
5.6
The committee also considers that it is imperative that the Department
and AUSTRAC commence the proposed public education campaigns in relation to the
new regime as soon as possible.
5.7
Another area of concern was the extent of power that AUSTRAC and the
AUSTRAC CEO have under the Bill. The ability of AUSTRAC to make Rules
prescribing matters and also exempt significant provisions of the Bill is an
issue. The committee notes that AUSTRAC has in the past undertaken extensive
consultation with stakeholders and intends to continue this approach in the
future. In addition, the Bill imposes obligations of the CEO to consult with various
persons in exercising the functions of CEO. The committee recommends that AUSTRAC
when amending or making further Rules after commencement of the Act thoroughly
consult with industry and other stakeholders.
5.8
Subclause 6(7) is a Henry VIII clause. A Henry VIII clause is defined as
follows:
An express provision which authorises the amendment of either
the empowering legislation, or any other legislation, by means of delegated
legislation is called a Henry VIII clause. The Macquarie Dictionary of Modern
Law defines a Henry VIII clause as a clause in an enabling Act providing that
the delegated legislation under it overrides earlier Acts or the enabling Act
itself; so named because of its autocratic flavour.[1]
5.9
The Bill imposes extensive obligations on reporting entities in relation
to the provision of designated services. Subclause 6(7) permits amendment of
the definition of 'designated services' by regulation and thus undermines
robust scrutiny of changes to the obligations of reporting entities by the
Parliament. The committee considers that the definition of 'designated
services' should not be amended by regulation and recommends that subclause
6(7) be deleted from the Bill.
5.10
The committee is concerned that the Department's intention to establish
thresholds of $10,000 in relation to customer identification obligations for
some designated services provided by casinos is not consistent with FATF
recommendation 12 which requires a threshold of USD 3,000.
5.11
Some evidence to the committee raised concerns about whether the safe
harbour provisions for customer identification which are set out in the draft
Rules would maintain reliable customer identification. The committee considers
that the safe harbour provisions ought to be re-examined during the review of
the legislation required under clause 251.
5.12
The committee is concerned that Part 6 of the Bill which deals with the
register of designated remittance services providers does not provide the
AUSTRAC CEO with a power to refuse registration or de-register providers who
are involved in money laundering or terrorism financing. The committee suggests
that the Department should consider whether there should be a capacity to
exclude such providers from the register. Alternatively, it may be appropriate
to establish a register of persons who are not permitted to provide designated
remittance services.
5.13
The committee considers that in clause 138 the offences relating to
manufacturing false documents or equipment for producing false documents should
be regarded as more serious than those relating to possession of false
documents or equipment for making false documents. Accordingly the penalties
for the possession offences ought to be decreased.
5.14
Several industry groups indicated to the committee that they have
concerns that are specific to the operation of their business. For example,
there are concerns that relate to services being caught unintentionally or
inappropriately by the definition of 'designated services' in clause 6 and in
relation to the possible exclusion of some community bank branches from the
definition of 'owner managed branch' in clause 12. The committee is pleased to note
that many stakeholders are working directly with the Department and AUSTRAC in
order to resolve outstanding issues. The committee suggests that the Department
and AUSTRAC, in consultation with industry stakeholders, continue their endeavours
to address these technical drafting issues.
Privacy and Discrimination
5.15
The committee welcomes the Privacy Impact Assessment undertaken by the
Department. The committee notes that approximately two thirds of these
recommendations were not accepted by the Department and that reasons for this
were given in the Department's formal response as well as in evidence provided
at the public hearing. Achieving an appropriate balance between a consumer's
right to privacy with legislation intended to combat money laundering and
prevent terrorism financing is inherently difficult.
5.16
Privacy concerns mainly centre on the gathering, reporting and retention
of customer information which is of a personal, financial and sensitive nature.
The committee acknowledges the concerns of stakeholders regarding the scope of
financial services caught under the Bill. The committee believes that further
consideration should be given to excluding low value transactions which
represent a low risk in the context of money-laundering and terrorism financing
from the definition of 'designated services'. It may also be appropriate to
make provision for periodic indexing of the thresholds applied by the Bill.
5.17
The ability for AUSTRAC held data to be accessed by a wide range of
designated agencies is also of concern to the committee. The committee
considers that Division 4 of Part 11 of the Bill should be amended to restrict
access to AUSTRAC held information to access for the purposes of responding to
money laundering, terrorist financing or other serious crime. In addition, the
committee recommends that the Office of the Privacy Commissioner should audit
AUSTRAC's administration of the Bill with respect to compliance with privacy
obligations, particularly as they relate to the distribution of AUSTRAC
information to other agencies.
5.18
Concerns remain regarding the risk of discrimination from reporting
entities performing customer risk-assessments and suspicious matter reports
with a risk-based approach which results in high levels of discretion and
potentially subjective criteria. The committee considers that it should be
placed beyond doubt that clause 235 does not exclude the operation of federal,
state or territory anti-discrimination legislation. The committee also
recommends that AUSTRAC work with stakeholders to ensure reporting entities and
their staff are able to perform these obligations based on non-discriminatory,
objective criteria.
5.19
Overall the committee is generally satisfied with the provisions of the Bill.
Nevertheless, specific issues remain, of which some are significant, and these
need to be addressed. The committee has made a number of recommendations to
address these concerns and encourages the Department and AUSTRAC to continue to
consult and engage with stakeholders.
5.20
Given the complexity and scale of the new regime, the committee
considers that review of the legislation, as provided for in clause 251, should
occur in four years rather than seven years. The review should include further
consultation with industry and other stakeholders.
Recommendations
Recommendation 1
5.21
The committee recommends that the Bill be amended to delay the first
stage of implementation until three months after the date of Royal Assent.
Recommendation 2
5.22
The committee recommends that AUSTRAC when amending or making further
Rules after commencement of the Act thoroughly consult with industry and other
stakeholders.
Recommendation 3
5.23
The committee considers that the AML/CTF Rules which provide safe
harbour provisions for customer identification should be re-examined during the
review of the legislation required by clause 251.
Recommendation 4
5.24
The committee recommends that subclause 6(7) be deleted from the Bill.
Recommendation 5
5.25
The committee recommends that the Department consider whether Part 6 of
the Bill should be amended to provide the AUSTRAC CEO with powers to refuse
registration as a designated remittance services provider and to de-register
providers; or to maintain a register of persons who are not permitted to
provide remittance services.
Recommendation 6
5.26
The committee recommends that the penalties for the offences in
subclauses 138(3) and (5) which relate to possessing false documents or possessing
equipment for making false documents be reduced.
Recommendation 7
5.27
The committee recommends that the Department continue to work with
industry groups and other stakeholders to resolve technical drafting issues including:
- the exclusion of services relating to stored value cards by the
drafting of items 21-24 of table 1 in clause 6;
- the capture of fund managers selling securities on an exchange by
item 35 of table 1 in clause 6; and
- the exclusion of some community bank branches from the definition
of 'owner-managed branch' in clause 12.
Recommendation 8
5.28
The committee recommends that the Federal Government consider amending
the Bill to include further threshold value limits, to exclude low risk, low
value services (such as the provision of travellers cheques and foreign currency
transactions) from the definition of 'designated services' and that consideration
be given to indexing these thresholds every five years.
Recommendation 9
5.29
The committee recommends that the Office of the Privacy Commissioner
conduct periodic audits of AUSTRAC's compliance with privacy obligations in its
administration of the Bill.
Recommendation 10
5.30
The committee recommends that Division 4 of Part 11 of the Bill should
be amended to restrict access to AUSTRAC held information to access for the
purposes of responding to money laundering, terrorist financing or other
serious crime.
Recommendation 11
5.31
The committee recommends that clause 235 be amended to provide that
protection from liability does not extend to actions which breach federal,
state or territory anti-discrimination laws.
Recommendation 12
5.32
The committee recommends that AUSTRAC work with stakeholders to develop
an objective, non-discriminatory model for assessing the risk of money
laundering and terrorism financing to assist reporting entities in performing
their obligations.
Recommendation 13
5.33
The committee recommends that clause 251 be amended to provide for review
of the legislation in four years and for that review to incorporate
consultation with industry and other stakeholders.
Recommendation 14
5.34
Subject to the preceding recommendations, the committee recommends that
the Bill be passed.
Senator Marise Payne
Chair
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