CHAPTER 2

KEY ISSUES

Introduction

2.1        The Australian Government is committed to protecting the Australian community and businesses from the social and economic impacts of organised crime, estimated to cost the community $15 billion a year. Organised crime is a significant national security threat, and a growing challenge.

2.2        Through the Commonwealth Organised Crime Strategic Framework the government is ensuring that Commonwealth intelligence, policy, regulatory and law enforcement agencies are working together to prevent, disrupt, investigate and prosecute organised crime.   Tracking money flows, the life-blood of organised crime, is critical.

2.3        AUSTRAC is at the forefront of the fight against transnational organised crime. AUSTRAC provides information about potentially criminal activity to law enforcement agencies, which put it together with other intelligence to detect people smuggling, drug importations, black market weapons trade, and other serious and violent crimes. AUSTRAC intelligence is used to detect drug and chemical precursor transactions, people smuggling, corruption, card skimming, Ponzi scams, tax evasion and fraud. In the 2009-10 financial year AUSTRAC information contributed to:

• more than 3,700 cases conducted by the Australian Federal Police and other partner agencies;
• more than 1,800 cases conducted by the Australian Taxation Office, resulting in recovery of evaded taxes in excess of $272 million; and
• more than 1,200 cases involving Centrelink, leading to total more than $7 million in savings per year.

2.4        AUSTRAC achieves its purpose of protecting the integrity of the financial system and contributing to the administration of justice through its two interdependent functions as both a regulator and an intelligence unit.[1] As a regulator, AUSTRAC supervises the compliance of reporting entities with their obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).[2]

2.5        The introduction of this suite of three bills will enable AUSTRAC to recover the costs of its regulatory activities – including its business as usual supervisory activities and additional revenues to support small business compliance, the legal costs of enforcement and implementation and administration costs.[3]

Key provisions of the bills

2.6        The three related bills introduce the supervisory levy, establish a framework for collection and amend the AML/CTF Act to ensure that enrolment as a registered entity requiring AUSTRAC regulation is mandatory.

The first bill: Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy Bill 2011 (the Levy Bill)

2.7        The Levy Bill creates the liability to the levy.[4] The explanatory memorandum (EM) explains that the amount of the levy will be determined by a legislative instrument made by the minister.[5] The levy will be payable as a single annual charge and the amount of charge to be paid will be determined each year on 'census day'.[6][7]

2.8        Clause 9 of the Levy Bill specifies that if the levy payable for a financial year is less than the 'statutory minimum' for a financial year (defined in Clause 7 of the bill as $100 for the 2011-12 financial year) there will be no liability to the levy.[8]

2.9        On introducing the bills into the House of Representatives, the minister explained that the levy would be comprised of three components:

1.      a base component;

2.      a large entity component; and 

3.      a component for transaction reporting entities.[9]

The base component

2.10      The base component will relate to the costs incurred by AUSTRAC in regulating all businesses. This component will be the same across organisations liable to pay the levy.[10] The draft ministerial determination that has been published for consultation by AUSTRAC[11] identifies that the base component for the 2011-12 financial year will be $284.[12]

2.11      The draft determination also identifies that there will be exclusions from the levy – a reporting entity that, at the census date, has fewer than five employees and a nil large entity component will be exempt from liability to the levy.[13] This reduces compliance costs for small business.

2.12      The Levy Bill also prescribes a statutory upper limit for the levy liability. In the 2011-12 financial year the upper limit is $33 million. This limit will increase in subsequent financial years as an indexation factor will be applied.[14]

The large entity component

2.13      The large entity component will be paid by businesses with high earnings to recover the costs incurred by AUSTRAC in relation to regulating larger businesses. This component will be determined based on a business's earnings – i.e. the higher its earnings, the higher the large entity component will be.[15] The committee notes that following the release of an exposure draft CRIS for consultation, the large entity definition was changed in response to stakeholder concerns.[16]

2.14      The large entity component is set out in the draft ministerial determination as:

Large entity component

(1) The large entity component for a leviable entity is:

(a) for a leviable entity that is not a part of a group of leviable entities – the relevant amount in the second column of the table below; or

(b) for a leviable entity that is part of a group of leviable entities – the relevant amount in the second column of the table below divided by the number of leviable entities in the group.

If the earnings for a leviable entity, or the total earnings for a group of leviable entities, is ...	... the relevant amount below
Equal to or greater than $5,000,000,000	$425,000
Equal to or greater than $500,000,000 but less than $1,000,000,000	$70,000
Equal to or greater than $200,000,000 but less than $500,000,000	$35,000
Equal to or greater than $100,000,000 but less than $200,000,000	$14,000
Less than $100,000,000	nil

(2) For the purposes of sub item (1), where a leviable entity is a foreign company only the earnings of that entity which are derived from operations in Australia is to be taken into account in determining the earnings of that entity, or the total earnings of the group of leviable entities of which the entity is a member.

(3) Despite sub item (1), where:

(a) a leviable entity is a foreign company or a subsidiary of a foreign company; and

(b) the earnings of that leviable entity which are derived from operations in Australia is less than $100,000,000; and

(c) the total earnings of that leviable entity and its related bodies corporate is equal to or greater than $100,000,000;

then the large entity component for that leviable entity is $14,000.[17]

The transaction reporting component

2.15      The transaction reporting component is to be determined by a formula, as set out in the draft ministerial determination. The formula calculates this component on both volume and value of a reporting entity's transactions.[18]

2.16      In the first year of the levy, the volume element will be fixed at one cent per leviable transaction and the value element at $0.0005066 per cent of the value of the transaction to which the leviable report relates.[19]

2.17      This component of the levy will recover AUSTRAC's costs of regulating businesses that lodge large numbers of transaction reports and/or transactions relating to large amounts of money.[20]

The second bill: Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy (Collection) Bill 2011

2.18      The second bill, the Collection Bill, enables AUSTRAC to recover the supervisory levy from businesses by establishing the framework for administering the levy. The Collection Bill does this by dealing with matters relating to collection, the issuing of notices of assessment and late payments.[21] 

2.19      AUSTRAC expects that the first financial year in which the levy will be payable is the 2011-12 financial year.[22]

2.20      Businesses liable to pay the levy will be issued with a notice of assessment. Notices of assessment will specify the business day on which the levy becomes payable. The bill provides that the due date for payment must be at least 30 days after the notice of assessment is given.[23] Overdue payments will incur a late payment penalty. A late payment penalty will accrue on a monthly basis.[24]

2.21      The Collection Bill also provides the AUSTRAC Chief Executive Officer (CEO) with the discretion to waive a levy or late payment penalty, in part or in full, if the CEO considers it appropriate.[25] Circumstances that may be considered appropriate include where recovery would be inequitable or cause ongoing hardship. A waiver cannot, however, extend to administrative error in relation to the issuing of invoices. In exercising the waiver discretion, the AUSTRAC CEO is required to provide a decision in writing to the applicant. Waiver decisions are reviewable decisions.[26]

The third bill: Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy (Consequential Amendments) Bill 2011 [Provisions]

2.22      The third bill in the suite of bills, the Consequential Amendments Bill, will amend the AML/CTF Act to make mandatory the enrolment of reporting with AUSTRAC.[27] Under the existing legislation, enrolment is not mandatory; however, mandatory enrolment is considered necessary as AUSTRAC moves to a cost recovery environment as it ensures transparency, efficiency and effectiveness. Mandatory enrolment will also enable AUSTRAC to issue infringement notices for a failure to enrol.[28]

2.23      The Consequential Amendments Bill sets out the administrative procedures for enrolment and maintenance of the Reporting Entities Roll as well as penalties for failure to enrol or maintain the record.[29]

2.24      The Consequential Amendments Bill will amend the AML/CTF Act to require businesses regulated by AUSTRAC to enrol within 28 days of providing or commencing to provide a designated service, or within 28 days of commencement of the relevant provisions of the bill.[30] The amendments require that once enrolled, businesses must keep their details up to date. Failure to enrol or keep details up to date will attract a civil penalty.[31]

2.25      The Consequential Amendments Bill will, however, introduce provisions that enable reporting entities to request the AUSTRAC CEO to remove their name/details from the Reporting Entities Roll.  It will also introduce a new section 51G into the AML/CTF Act that will direct the AUSTRAC CEO, when considering such a request, to take into consideration a number of factors:

• whether the business has discharged its reporting obligations,
• whether the entity has ceased to provide designated services, and
• the likelihood that the entity will provide a designated service in the financial year following the request.[32]

Issues raised

2.26      The introduction of the three related bills follows a targeted consultation period. The committee received 12 public submissions in response to its inquiry into the bills.

2.27      Although submissions received by the committee acknowledged appreciation of the consultation that has preceded these reforms, they did raise concerns in relation to some specific areas:

(i)        the appropriateness of the application of cost recovery to AUSTRAC's activities; 

(ii)       the methodology for determining the levy; and

(iii)      other issues.

2.28      In addition to these specific concerns, the committee also notes the concern raised by a number of submitters, that the introduction of the cost recovery supervisory levy will have unintended consequences for smaller reporting entities when the second tranche of AML/CTF reforms are implemented.[33]

The appropriateness of cost recovery to AUSTRAC's activities

2.29      The Australian Government's Cost Recovery Guidelines identify that cost recovery is appropriate to recover fees and charges related to the provision of goods and services, including regulation, to the private and non-government sectors.[34] The Guidelines set out 14 key principles for agencies to follow when designing cost recovery mechanisms.[35]

2.30      The Explanatory Memorandum to the bills explains that:

Reporting entities provide services that are vulnerable to exploitation for money laundering and terrorism financing purposes, creating the need for regulation by AUSTRAC. It is appropriate that industry meet the costs of regulatory systems that ensure the integrity of their operating environment.[36]

2.31      Submitters to the inquiry however, question this view. For example, CPA Australia argued:

CPA Australia understands the principle of imposing cost recovery levies where a regulated entity receives a direct economic benefit from such regulation (such as tax agents being licensed to offer tax advice when those unregistered cannot); however being regulated under this regime confers no direct benefit or rights to those regulated. We therefore do not accept the contention in the Explanatory Memorandum that 'It is appropriate that industry meet the costs of regulatory systems that ensure the integrity of their operating environment.' The entire community, including the government, benefits from the integrity of the financial system.

The direct beneficiaries from the imposition of this Act is AUSTRAC and other law enforcement agencies (because of the intelligence reporting entities provide them), and not reporting entities. Given this, we cannot support the imposition of a cost recovery levy, particularly when complying with the Act already imposes ongoing costs on reporting entities.[37]

2.32      Stakeholders are critical of the government's decision to recover the costs of its regulatory activities given that, in their view, the result of those activities is in fact a public benefit:

It needs to be borne in mind that AUSTRAC reporting entities, particularly large entities, are part of the allied industry collaborative apparatus combating money laundering and terrorism financing activities. Reporting entities are providing intelligence gathering services to the Government for free, which is of benefit to the Australian community as a whole. The value of these services provided by the financial services industry to the Australian community is not acknowledged in the Cost Recovery Impact Statement (CRIS).

The imposition of a levy on AML/CTF reporting entities would fall outside the Australian Government's own Cost Recovery Guidelines and on that basis the merits of the proposals contained in the Bills should be reconsidered and an alternative approach adopted.[38]

2.33      The Australian Financial Markets Association challenge the assertion that businesses benefit from AUSTRAC's regulatory activities. They are of the view that:

AUSTRAC supervision provides no commensurate benefit to reporting entities individually, in contrast to financial services regulation which provides systemic, prudential and market integrity value to market participants.[39]

2.34      CPA Australia suggest that government should bear the costs of educating industry participants:

It is the responsibility of government to provide information and education material to help the community comply with the law, and hence such costs should be paid for from consolidated revenue, not directly by reporting entities.[40]

2.35      It was suggested that it would be more appropriate for government to recover the costs of AUSTRAC's regulatory activities from consolidated revenue:

...the benefits of the AML/CTF regime should be viewed as broad public policy outcomes that are more appropriately characterised as 'public goods' in an economic sense. The benefits derived are not restricted to reporting entities alone. This fact is important in the context of assessing whether or not the regulatory costs should be met from consolidated government revenues.[41]

Committee comment

2.36      The committee notes the criticism of the government's decision to impose a supervisory cost recovery levy. The committee however draws attention to the government's cost recovery guidelines (principle 5) which clearly identify regulatory activities as a cost that should appropriately be recovered.[42]

2.37      The committee emphasises the fact that it is the policy of recent governments that entities which have created the need for government regulation bear the costs of that regulation.  Other regulators, such as the Australian Prudential Regulation Authority, already recover the costs of their regulatory activities from the entities which they regulate. The AUSTRAC bills propose nothing new or different in terms of cost recovery application to an industry.

2.38      Businesses that provide services that are vulnerable to exploitation for money laundering and terrorism financing purposes create the need for regulation by AUSTRAC. It is entirely appropriate therefore that they meet the costs of the regulatory systems that ensure the integrity of their operating environment.

2.39      The committee takes the view that cost recovery in these circumstances is not only appropriate and accords with the government's guidelines, but also strengthens and improves the integrity of Australia's financial system.

The levy methodology

2.40      Submitters to the committee's inquiry also raised concerns regarding the proposed levy calculation methodology.

2.41      One submitter, Citigroup, raised concerns that the levy will not be applied equally to all services regulated by AUSTRAC and that it will place financial institutions operating in Australia at a 'substantial' competitive disadvantage compared to other businesses operating in the Asia Pacific but doing so outside of Australia.[43]

2.42      They take the view that implementation of the levy, in accordance with the methodology that has been proposed, will have unintended consequences.[44]

The levy calculation methodology currently proposed by the Minister will place Australia and its financial institutions at a competitive disadvantage to other countries and financial institutions in the Asia-Pacific region. The proposed methodology heavily weights the levy disproportionately to those financial institutions in Australia that provide high value cross border payments and settlement flows;

Financial institutions that run pan-Asia custody hubs, regional processing centres and/or payments and trade service centres all process significant and high value cross-border payments and settlement flows for legitimate business reasons. The proposed levy will therefore discourage financial institutions from establishing and maintaining these financial services hubs in Australia given the significant cost increase imposed by this levy;

Established hubs located in Australia, will equally have no incentive to grow or expand their business model given any increase in cross border payment and settlement flows will mean an increase in the levy...[45]

2.43      The Australian Financial Markets Association (AFMA) was also of the view that the levy's calculation is not equitable. They drew attention to the burden that will be placed on large entities and challenged the assumption that such entities are more prone to risks of money laundering and/or terrorism financing:

It is not correct to assume that a financial intermediary which has more customers is exposed to a higher level of money laundering risk. Indeed, the clients that AFMA members typically deal with are institutional and wholesale clients who, in turn, are likely to be reporting entities themselves and regulated under the AML/CTF Act, or under an AML regime in a comparable jurisdiction. These types of clients are, we suggest, at much lower risk of being engaged in money laundering and terrorism financing activities...the mere fact that a large entity may operate over multiple jurisdictions is not something for which AUSTRAC has supervisory responsibility, and is not a basis to justify a level of cost recovery that is out of proportion to the money laundering risk posed by the financial intermediary’s legitimate activities.[46]

2.44      In addition to concerns being raised in relation to large entities, CPA Australia also raised concerns that the levy would have onerous implications for micro businesses and that the exclusion of entities from liability to the levy with less than five employees did not go far enough. As an alternative they suggested that the definition of small business used to determine the base component in the legislative instrument (Item 5, p. 4 of the draft legislative instrument sets out the definition of small business for determining the base component of the levy) be changed and that the Australian Bureau of Statistics definition of small business be used instead:

We recommend that should the Bill proceed, the method by which most micro businesses (under five employees) are effectively removed from having to pay the levy (removing such businesses from the base component) be extended to all small business as defined by the Australian Bureau of Statistics (a business employing less than 20 employees).[47]

Committee comment

2.45      The committee acknowledges concerns that have been raised in relation to the levy's methodology. The committee however draws attention to the safeguard that the government has announced – the commitment to review the calculation methodology after five years or earlier if there are material changes to the AUSTRAC operating environment.[48]

2.46      The committee also notes AUSTRAC's commitment to monitor the cost recovery approach on an ongoing basis. 

Other issues

2.47      Submissions from Bunnings, Coles Liquor, Coles Express, Target and the Australian National Retailers' Association[49] expressed concern about the operation of the Anti-money Laundering and Counter-Terrorism Financing Rules Instrument 2010 (No.3) (Rules).  The Rules are made under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006; these rules (contained in Schedule 3 of the instrument) commence on 1 October 2011.

2.48      The large retailers are concerned that under the Rules, when they conduct cash pick-up or receive cash deliveries with secure cash collection entities such as ArmaGuard, those collection agencies will request:

personal information from employees and contractors who despatch or receipt cash to a reporting entity on behalf of a corporate entity whose identity is known.

In our view, these measures

• increase risks of security breaches;
• are confronting to our staff and contractors;
• raise additional operational issues;
• increase the burden of compliance; and
• increase costs to the business;

without effectively adding to the prevention of anti-money laundering or counter terrorism measures when compared with the information regarding threshold transactions that is already being recorded and reported to AUSTRAC under the existing rules...

The proposed legislation requires reporting entities to solicit the following information from individuals who are involved in transactions on behalf of their employers from 1 October 2011:

• Full name (and any other names that they may be known by)
• Date of birth
• Residential address
• Postal address (if different)
• Phone number
• Occupation
• Methodology for verifying the individuals' identity.[50]

2.49      Coles make the point in their submission that the provision of employee personal information to AUSTRAC does not contribute to the detection of offences under the AML/CTF legislation and leads only to additional costs to business.[51] Coles suggests that this issue could be addressed by excluding the requirement to report the personal information of employees and agents where:

...the identity of the corporate entity is known.[52]

2.50      The committee notes that these Rules reflect:

...changes to TTR requirements arise as a result of Rules made by the AUSTRAC CEO under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. AUSTRAC consulted extensively with reporting  entities on these Rules during 2010 and the final Rules were made on 17 December 2010. The Rules are disallowable legislative instruments. These new obligations will commence on 1 October 2011.[53]

AUSTRAC's response

2.51      The submissions from Bunnings, Coles Liquor, Coles Express, Target and the Australian National Retailers' Association link the Rules and the Levy Bills.  After these issues were raised with the committee, AUSTRAC provided advice explaining that the concerns of these stakeholders do not correctly relate to the bills currently before parliament:

[the] submissions relate to requirements for reporting entities [such as cash collection entities] regulated by the Australian Transaction Reports and Analysis Centre (AUSTRAC) to collect and report to AUSTRAC additional details within threshold transaction reports (TTRs)...

Contrary to statements made in the submissions, these new obligations are not related to measures contained in the three AUSTRAC Supervisory Cost Recovery Bills currently being considered by the Committee.

Rather, changes to TTR requirements arise as a result of Rules made by the AUSTRAC CEO under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. AUSTRAC consulted extensively with reporting entities on these Rules during 2010 and the final Rules were made on 17 December 2010. These new obligations will commence on 1 October 2011...

[T]hese new requirements will mean that reporting entities, such as cash carriers, will be required to capture basic identification information about the person conducting a transaction, if that person is not the customer of the reporting entity.

Some cash carrying firms have interpreted this to mean that they have to collect the details of their customers’ staff members every time they pick up cash in excess of $10,000 under the terms of a standard contract. If this were the case, this would have an operational impact on large retailers such as those which have made submissions to the Committee.

AUSTRAC’s view is that this obligation should not require the capture of staff details in such circumstances.[54]

Committee comment

2.52      The committee notes the concerns of some of the large reporting entities, and is pleased by AUSTRAC's reassurance that:

In light of the concerns raised, AUSTRAC will consult further with the cash carrying industry to make it clear that for cash carriers, it is not necessary for staff details to be collected where cash is collected from a customer's premises under a standing arrangement.[55]

2.53      The committee has confidence that the concerns of these stakeholders will be addressed given AUSTRAC's further commitment to consider 'whether the wording of the [AML/CTF] Rules needs to be changed to make this position clear', and to conduct further stakeholder consultation in relation to any proposed changes to the Rules.[56]

Consultation

2.54      Although concerns were raised with the committee in relation to the application of the levy and the method by which it will be determined, stakeholders such as CPA Australia and the Institute of Chartered Accountants of Australia did acknowledge their appreciation of the consultation process which has taken place.[57]

We would like to thank AUSTRAC for consulting with us and the broader community on the detail of the Government's cost recovery policy in relation to the Anti-Money Laundering regime.[58]

The Institute of Chartered Accountants in Australia (the Institute) welcomes the opportunity to present to the Senate Legal and Constitutional Affairs Committee our views on the above Bills currently being considered as part of this inquiry... the Institute continues to unequivocally support the policy objectives of the Act, and the implementation of the Financial Action Taskforce (FATF) Revised 40 Recommendations...[59]

A broader concern

2.55      Submitters expressed concern over how the tranche two reforms would interact with the amendments contained in the levy bills:

Successive governments have failed to introduce Tranche 2 as promised at the time the AML/CTF regime was implemented. There are a significant number of entities that would become reporting entities under Tranche 2 and would therefore be subject to cost recovery, which would reduce the cost recovery burden on existing reporting entities.[60]

2.56      Although this suite of bills will assist the government's announced reforms to the regulatory environment by introducing a levy to fund AUSTRAC's supervisory activities, they do not implement the breadth of changes that the government foreshadowed would occur under the tranche two reforms. Submitters are therefore of the view that the implementation of the supervisory levy before the introduction of the changes that will extend the scope of regulation, will have negative implications for entities that, at this point in time do not fall within the regulatory regime but will do so following passage of the broader reforms:

...the Law Council notes that it is the Government's longstanding intention to introduce a second tranche of AML/CTF reforms, which would expand the current regulatory regime to a range of so-called "gate-keeper" industries, including the legal profession. Should this occur, the Law Council would be quite concerned if legal practices, in addition to incurring the substantial compliance costs associated with the regime, were also required to pay a direct fee to be regulated. The combined effect of such an impost may prove prohibitive for smaller practices and result in the withdrawal of certain services or an increase in the cost of such services.[61]

At an overarching level, the Institute is concerned that the proposed cost recovery levy model set out in the above Bills will serve as the basis for a similar approach being adopted in respect of Tranche 2 reporting entities in the future. The adoption of such an approach would, in our view, place an unreasonable burden on small to medium sized professional accounting practices across Australia... In relation to Tranche 2 reporting entities, approximately 95 percent of our members’ practices are made up of five partners or less. As to be expected, such small practices have limited capacity and resources to bear high compliance and regulatory costs.[62]

We recommend that AUSTRAC clarify whether it intends to impose the cost recovery levy on entities caught within the second tranche. It is suggested that those second tranche entities that would have to pay the levy once the second tranche is enacted, be given an exemption from the levy during the transition to the full implementation of the second tranche, in recognition of the costs incurred in becoming compliant.[63]

Committee comment

2.57      The committee acknowledges these concerns and recognises that further consultation occur between the government and Tranche Two entities. The committee recommends that this consultation occur prior to any expansion of the AML/CTF regime.

Committee view

2.58      The committee acknowledges AUSTRAC's important role to protect the integrity of Australia's financial system, and recognises that AUSTRAC contributes to the administration of justice through its role as Australia's financial intelligence unit and anti-money laundering/counter terrorism financing regulator.[64]

2.59      AUSTRAC's activities of providing information about potentially criminal activity to law enforcement agencies and working with other intelligence agencies to detect people smuggling, drug importations, black market weapons trade and other serious and violent crimes ensures it delivers these important outcomes in accordance with its statutory objectives.

2.60      The committee is of the view that the introduction of the supervisory levy will ensure that AUSTRAC can continue to provide a regulatory environment that maintains community confidence in financial flows and minimises risks to business of exploitation for money laundering or terrorism financing.[65]  The introduction of a levy will ensure these activities are given the funding priority they deserve.

2.61      On introducing the bills, the minister explained that regulation of businesses by AUSTRAC is necessary as:

...businesses regulated by AUSTRAC can facilitate financial flows that provide opportunities for others to disguise the true origin or eventual use of funds...businesses that operate internationally actually benefit from operating in a jurisdiction [i.e. Australia] that meets international standards for combating money laundering and terrorism financing.[66]

2.62      The importance therefore of ensuring continued and robust regulation cannot be emphasised enough and although the committee acknowledges the concerns raised by submitters that question the appropriateness of applying cost recovery to AUSTRAC's activities, the committee points out that reporting entities do in fact benefit from being regulated by AUSTRAC. By complying with the requirements of the AML/CTF Act, the risk of an entity being used for money laundering of terrorism financing purposes is reduced.

2.63      The committee takes the view that cost recovery in these circumstances is not only appropriate and accords with the government's guidelines, but also strengthens and improves the integrity of Australia's financial system. The committee emphasises that cost recovery is common among federal regulatory bodies and what is being proposed is consistent with past practice.

2.64      The CRIS Guidelines are a robust gate keeping instrument to ensure cost recovery is applied in a targeted manner and complies with the cost recovery guidelines. In these circumstances, the committee therefore takes the view that requiring the entities that are regulated by AUSTRAC to assist in funding these activities is necessary and appropriate.

2.65      In recognition of the unease shared by those stakeholders that made submissions, the committee does, however, encourage AUSTRAC to commence monitoring the levy in the first year of its operation to ensure the government intent is being met and unintended consequences minimised.

Recommendation 1

2.66      The committee recommends that the Australian Government give further consideration to the concerns raised by stakeholders in relation to how the imposition of a supervisory levy will interact with the tranche two reforms.

Recommendation 2

2.67      In giving further consideration to the issues specified in Recommendation 1, the committee recommends that the Australian Government specifically examine the concerns of larger corporate entities in relation to their reporting obligations under the proposed mandatory enrolment requirements of the AML/CTF regime.

Recommendation 3

2.68      Notwithstanding Recommendations 1 and 2, the committee recommends that the Senate pass the Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy Bill 2011, the Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy (Collection) Bill 2011, and the Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy (Consequential Amendments) Bill 2011.

Senator Trish Crossin
Chair

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