Chapter 1 - Introduction
Background
1.1
On 22
June 2006, the Senate referred the Financial Transaction Reports
Amendment Bill 2006 ('the Bill')
to the Senate Legal and Constitutional
Legislation Committee for inquiry and report by 1 August 2006.
1.2
The
Explanatory Memorandum to the Bill
explains that the Bill's primary purpose is to vary the amendments
to the Financial
Transaction Reports Act 1988 (FTR
Act) made by Schedule 9 of the Anti-Terrorism (No.2) Act 2005 (AT
Act). Schedule 9 of the AT
Act comes into force on 14 December 2006. The EM states that the Bill needs to come into operation by that
date. The amendments proposed by the Bill are to the new Division 3A which Schedule 9
of the AT Act inserted at Part II of the FTR Act.[1]
1.3
According
to the EM, the FTR Act requires identification of persons opening or becoming a
signatory to an account with a 'cash dealer'. It also requires reporting of
certain transactions and transfers and creates certain record-keeping
obligations. The purpose of the FTR Act is to reduce the incidence and
facilitate the tracking of money laundering and terrorist financing.[2]
1.4
The
Federal Government is currently considering a range of other reforms which are
designed to improve and strengthen Australia's anti-money laundering (AML) and counter-terrorism
financing (CTF) system, in line with international standards issued by the
Financial Action Task Force on Money Laundering (FATF).
1.5
These
international standards are contained in the FATF Forty Recommendations on AML,
which were revised in June 2003 (FATF Recommendations), and the Nine Special
Recommendations on Terrorist Financing (Special Recommendations) which were
adopted following the terrorist attacks in the US on 11 September 2001.[3] Notably
in the context of the Bill, Special
Recommendation VII (SR VII) requires that funds transfer instructions
include customer information about the sender of the funds.[4]
1.6
As it
currently stands, when Division 3A of Part II of the FTR Act comes into force
on 14 December 2006, it will require cash dealers in Australia to include certain required information
about the ordering customer with an International Funds Transfer Instructions
(IFTI) when transmitting the IFTI out of Australia. It also creates offences for failure to
include this information.[5]
1.7
The amendments in the Bill
are designed to address concerns raised during the Attorney-General's
Department's consultation in relation to the Exposure Draft of the Anti-Money
Laundering and Counter-Terrorism Financing Bill (AML/CTF Bill).[6]
1.8
The
proposed amendments to Division 3A of Part II of the FTR Act are:
- an amendment to the definition of 'account' for
the purposes of Division 3A of Part II of the FTR Act;
- clarification of the definition of 'customer
information' in section 17FA of the FTR Act;
- an amendment to the definition of 'customer
information' for incoming IFTIs under section 17FB of the FTR Act; and
- an amendment to restrict the application of
Division 3A of Part II of the FTR Act to Authorised Deposit-taking Institutions
(ADIs) (which are, for example, banks).[7]
1.9
The EM states that the Bill's
proposed measures will assist industry by reducing the number of systems
changes required at an institutional level. In particular, the EM notes that, if
the amendment to restrict the application of Division 3A of Part II of the FTR
Act to ADIs is not made, then certain legitimate non-bank money remitters may
be put out of business.[8]
Conduct of the inquiry
1.10
The committee advertised the inquiry in The Australian newspaper on 27 June 2006 and 5 July 2006, and invited submissions by 10 July 2006. Details of the inquiry,
the Bill, and associated documents were placed
on the committee's website. The committee also wrote to 54 organisations and
individuals.
1.11
The committee received seven submissions which
are listed at Appendix 1. Submissions were placed on the committee's website for
ease of access by the public.
1.12
Due to the limited number of submissions and the
largely technical nature of the matters raised, the committee decided to
conduct the inquiry on the papers, and a number of questions were placed on
notice to the Attorney General's Department. The Department's answers are
Submissions 6 and 6A.
Acknowledgement
1.13
The committee thanks those organisations and individuals
who made submissions, particularly given the short time frame of the inquiry.
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