Explanatory Memorandum
(Circulated by authority of the Attorney-General, the Honourable Daryl Williams AM QC MP)Schedule 2 - Amendments relating to the reporting of financial transactions
Part 1 of this Schedule introduces amendments to the Financial Transaction Reports Act 1988 (FTR Act) and Mutual Assistance in Criminal Matters Act 1987 (Mutual Assistance Act) to require cash dealers to report suspected terrorist-related transactions and streamline the procedures for the disclosure of financial transaction reports information (FTR information) to foreign countries. Part 2 of the Schedule provides for a review of the proposed amendments to be conducted two years after their commencement.
Part 1 - Amendments relating to the reporting of financial transactions
Financial Transaction Reports Act 1988
This Item inserts proposed subsection 16(1A) into the FTR Act. Subsection 16 (1A) requires a cash dealer to report a transaction to the Director of the Australian Transaction Reports and Analysis Centre (AUSTRAC) if he or she has reasonable grounds to suspect that the transaction is preparatory to the commission of a financing of terrorism offence or that information he or she has concerning the transaction may be relevant to the investigation or prosecution of such an offence. Cash dealer is defined in section 3 of the FTR Act to include financial institutions, financial corporations, insurers, securities dealers, futures brokers, trustees and persons who collect, hold, exchange, remit or transfer cash and non-cash funds on behalf of others.
Cash dealers are currently required to report other types of suspicious transaction, including transactions relevant to the investigation or prosecution of Commonwealth offences. This amendment makes it clear that cash dealers also have an obligation to report transactions that they suspect are related to terrorist activity. The amendment is consistent with Article 18 of the International Convention for the Suppression of the Financing of Terrorism.
These Items insert references to proposed subsection (1A) into section 16 of the FTR Act consequent upon the insertion of proposed subsection (1A) into that section by Item 1. This ensures that the provisions in section 16that specify the details to be included in reports, prevent cash dealers from disclosing information contained in reports and prohibit the use of reports in legal proceedings, apply to reports made under proposed subsection (1A).
This item inserts a definition of financing of terrorism offence into subsection 16(6) of the FTR Act. A financing of terrorism offence means an offence under section 103.1 of the Criminal Code or section 20 or 21 of the Charter of the United Nations Act 1945 (UN Charter Act). A cash dealers reporting obligations under proposed subsection 16(1A) relate specifically to these offences (see Item 1).
The offence in section 103.1 of the Criminal Code applies to persons who collect or provide funds to facilitate terrorist activities (see Item 3 of Schedule 1). The offences in sections 20 and 21 of UN Charter Act prohibit dealings in the assets of proscribed persons or entities engaged in terrorist activities (see Item 1 of Schedule 3).
This Item repeals existing paragraph 27(1)(d) of the FTR Act, which entitles the Attorney-General to access FTR information for the purpose of dealing with a request from a foreign country for assistance with a criminal matter. The existing paragraph 27(1)(d) is replaced by a new paragraph, which gives the Commissioner of the Australian Federal Police power to access FTR information for the purpose of communicating that information to a foreign law enforcement agency.
The repeal of the existing paragraph 27(1)(d), in conjunction with other proposed amendments to the FTR Act and the Mutual Assistance Act made by this Schedule, removes the current requirement for foreign country requests for FTR information to be dealt with by the Attorney-General in accordance with the provisions of the Mutual Assistance Act. The proposed amendments instead give the Director of AUSTRAC general responsibility for disclosure of information outside of Australia. The Australian Federal Police Commissioner and the Director-General of Security will also be able to communicate FTR information directly to foreign law enforcement and intelligence agencies (see Items 14 and 17).
The Director of AUSTRAC currently has the responsibility for disclosure of FTR information within Australia. By enabling the Director to also disclose information to foreign countries both spontaneously and upon request, the proposed amendments will make the procedures for sharing information with other countries significantly faster and more efficient. The current mutual assistance procedures for communicating FTR information are unnecessarily cumbersome and hamper the rapid exchange of information. In the context of international investigations and intelligence gathering, delays in the transmission of information can have significant consequences. Australias current requirements were adopted because of the strict secrecy attaching to FTR information but they are not geared to enabling urgent sharing of financial intelligence.
The proposed amendment will give effect to Recommendation 32 of The Forty Recommendations of the Financial Action Task Force on Money Laundering (FATF), which is an inter-governmental body whose purpose is the development and promotion of policies to combat money laundering. FATF Recommendation 32 states that 'each country should make efforts to improve a spontaneous or upon request international information exchange relating to suspicious transactions, persons and corporations involved in those transactions between competent authorities. Strict safeguards should be established to ensure that this exchange of information is consistent with national and international provisions on privacy and data protection. Most FATF members do not require foreign country requests for FTR information to be processed via the mutual assistance channel as Australia currently does.
The amendment is also consistent with paragraph 3(a) of United Nations Security Council Resolution 1373, which calls upon States to find ways of intensifying and accelerating the exchange of operational information, especially regarding actions or movements of terrorist persons or networks.
The confidentiality of the information disclosed to a foreign country will be protected by the requirement that the Director be satisfied that the foreign country has given appropriate undertakings for protecting the confidentiality, and controlling the use, of that information (see Item 14). There would also be a review of the proposed amendments to be conducted two years after their commencement, which would consider whether the privacy of persons identified in FTR information is adequately protected (see Part 2 of this Schedule).
The proposed new paragraph 27(1)(d) will enable the Australian Federal Police (AFP) Commissioner to access FTR information for the purpose of communicating it to a foreign law enforcement agency, where access has been authorised in writing by the Director of AUSTRAC. In practice, the written authority will take the form of a Memorandum of Understanding between AUSTRAC and the AFP, which address issues relating to notification protocols and procedures to protect privacy.
The AFP currently has access to FTR information for the purpose of performing its functions. However, in order to provide foreign law enforcement agencies with FTR information relevant to their investigations (see Item 14), the AFP Commissioner also needs to be able to access information for that purpose. Permitting the AFP Commissioner to communicate FTR information directly to foreign law enforcement agencies will enable relevant information to be exchanged, without delay, at an agency level. The spontaneous exchange of information between the AFP and foreign law enforcement agencies will enhance the ability of those agencies to act rapidly in response to international terrorism and transnational crime.
The notes in Item 9 insert headings in section 27 for clarity.
This Item repeals subsection 27(3A). Subsection 27(3A) enables the Attorney-General to communicate FTR information to a foreign country under the Mutual Assistance Act where the Attorney-General is satisfied that the country has given appropriate undertakings as to confidentiality and use.
The repeal of subsection 27(3A), in conjunction with other proposed amendments to the FTR Act and the Mutual Assistance Act made by this Schedule, will remove the current requirement for foreign country requests for FTR information to be dealt with by the Attorney-General in accordance with the provisions of the Mutual Assistance Act. The proposed amendments will instead give the Director of AUSTRAC the general responsibility for disclosure of information outside of Australia. (See the discussion at Item 9).
This Item includes a reference to proposed subsection (11D) in subsection 27(6) consequent upon the insertion of proposed subsection (11D) into section 27 by Item 14.
This Item omits and and substitutes or at the end of subparagraph 27(6)(a)(ii) consequent upon the addition of proposed new subparagraph 27(6)(a)(iii) at the end of paragraph 27(6)(a) by Item 13.
This Item adds proposed new subparagraph 27(6)(a)(iii) at the end of paragraph 27(6)(a). The new subparagraph will permit the AFP Commissioner, or an AFP member authorised by the Commissioner, to communicate FTR information to a foreign law enforcement agency in accordance with proposed subsections 27(11B) to (11D).
Permitting the AFP Commissioner to communicate FTR information directly to foreign law enforcement agencies will enable relevant information to be exchanged, without delay, at an agency level. The spontaneous exchange of information between the AFP and foreign law enforcement agencies will enhance the ability of those agencies to act rapidly in response to international terrorism and transnational crime.
This Item inserts proposed subsections (11A), (11B), (11C) and (11D) into section 27. These subsections stipulate the conditions upon which the Director of AUSTRAC and the AFP Commissioner may communicate FTR information to a foreign country or a foreign law enforcement agency. The conditions are intended to safeguard privacy and confidentiality and ensure that information is used only for proper purposes. There would also be a review of the proposed amendments to be conducted two years after their commencement, which would consider whether the privacy of persons identified in FTR information is adequately protected (see Part 2 of this Schedule).
Proposed subsection (11A) provides that the Director may communicate FTR information to a foreign country if it is appropriate in all the circumstances to do so and if the Director is satisfied that the foreign country has given appropriate undertakings for protecting the confidentiality of the information and ensuring it is properly used.
Proposed subsection (11B) provides that the AFP Commissioner may communicate FTR information to a foreign law enforcement agency if it is appropriate in all the circumstances to do so and the Commissioner is satisfied the foreign law enforcement agency has given appropriate undertakings for protecting the confidentiality of the information, and for ensuring that it is used in the performance of the foreign law enforcement agencys functions. The Commissioner may authorise a member of the AFP to communicate FTR information to a foreign law enforcement agency on his or her behalf (proposed subsection (11C)).
When considering whether it is appropriate to grant a request by a foreign country or foreign law enforcement agency for FTR information, the Director and Commissioner may need to take into account a range of issues, including whether the request was made for the purpose of persecuting or punishing a person on the ground of sex, race, nationality or religion and whether the granting of the request would prejudice the sovereignty, security or national interest of Australia.
Proposed subsection (11D) provides that if the Commissioner of the AFP accesses FTR information for the purpose of communicating it to a foreign law enforcement agency and that information is not relevant to the performance of the AFPs functions, neither the Commissioner, nor a person authorised by the Commissioner to communicate the information, may record, communicate or divulge the information except for the purpose of communicating the information to a foreign law enforcement agency. This provision is designed to ensure that where the AFP obtains FTR information for the purpose of communicating it to an overseas agency, it cannot make use of that information for its own purposes where it would not currently be able to do so.
The reasons for enabling the Director and the Commissioner to exchange information directly with foreign agencies are discussed at Item 9 and Item 13.
This Item inserts proposed subsection 27(20), which provides that a reference in this section to a foreign law enforcement agency is a reference to an agency that has responsibility for law enforcement in a foreign county. The amendment is consequent upon the insertion of paragraph 27(1)(d), subparagraph 27(6)(a)(iii) and subsections 27(11B), 27(11C) and 27(11D) by Items 9, 13 and 14, which enable the AFP Commissioner to disclose FTR information to foreign law enforcement agencies.
This Item omits and and substitutes or at the end of subparagraph 27AA(4)(a)(iii) consequent upon the addition of proposed new subparagraph 27AA(4)(a)(iv) at the end of paragraph 27AA(4)(a) by Item 17.
This Item inserts proposed new subparagraph 27AA(4)(a)(iv) at the end of paragraph 27AA(4)(a). The new subparagraph will permit the Director-General of Security, or an Australian Security Intelligence Organisation (ASIO) employee authorised by the Director-General, to communicate FTR information to a foreign intelligence agency in accordance with proposed subsections 27AA(5A) and (5B).
Permitting the Director-General of Security to communicate FTR information directly to foreign intelligence agencies will enable relevant information to be exchanged, without delay, at an agency level. The spontaneous exchange of information between ASIO and foreign intelligence agencies will enhance the ability of those agencies to act rapidly in response to international terrorism and other national security issues.
In contrast to the AFP, ASIO does not require a provision expressly enabling the Director-General to access information for the purpose of communicating it to a foreign intelligence agency. ASIO is currently able to access information for the purpose of performing its functions (subsection 27AA(1)). As ASIOs functions include the provision of information to foreign countries in relation to security matters, it is able to access information under subsection 27AA(1) for the purpose of communicating it to a foreign intelligence agency. However, the Memorandum of Understanding between AUSTRAC and ASIO, under which ASIO currently accesses FTR information, will be revised to take account of the amendments permitting the Director-General to communicate FTR information to foreign intelligence agencies.
The notes in Item 17 insert headings in section 27AA for clarity.
This Item inserts new subsections (5A) and (5B) into section 27AA. These subsections stipulate the conditions upon which the Director-General of Security may communicate FTR information to a foreign intelligence agency. The conditions are intended to safeguard privacy and confidentiality and ensure that information is used only for proper purposes. There would also be a review of the proposed amendments to be conducted two years after their commencement, which would consider whether the privacy of persons identified in FTR information is adequately protected (see Part 2 of this Schedule).
Proposed subsection (5A) provides that the Director-General of Security may communicate FTR information if it is appropriate in all the circumstances to do so and the Director-General is satisfied the foreign intelligence agency has given appropriate undertakings for protecting the confidentiality of the information and ensuring that it is used in the performance of the foreign intelligence agencys functions. The Director-General may authorise an ASIO employee to communicate FTR information to a foreign intelligence agency on his or her behalf (proposed subsection (5B)).
When considering whether it is appropriate to grant a request by a foreign intelligence agency for FTR information, the Director-General may need to take into account a range of issues, including whether the request was made for the purpose of persecuting or punishing a person on the ground of sex, race, nationality or religion and whether the granting of the request would prejudice the sovereignty, security or national interest of Australia.
This Item replaces the existing Note 2 in subsection 27AA(7) with a new note, consequent upon the insertion of subsections (11A) to (11D) into section 27 by Item 14.
This Item inserts a definition of foreign intelligence agency in subsection 27AA(8). Foreign intelligence agency means an agency that has responsibility for intelligence gathering for a foreign country or the security of a foreign country. The amendment is consequent upon the insertion of subparagraph 27AA(4)(a)(iv) and subsections 27AA(5A) and 27AA(5B) by Items 16 and 17, which enable the Director-General of Security to disclose FTR information to foreign intelligence agencies.
This Item provides that the amendments made by Items 1-8 above apply to transactions completed on or after the day on which this Schedule commences. This means that the amendments requiring cash dealers to report suspected terrorist-related transactions will not apply to transactions that are finalised before the amendments commence.
Mutual Assistance in Criminal Matters Act 1987
This Item repeals Part VIA of the Mutual Assistance Act. Part VIA provides that where a foreign country asks the Attorney-General for information, the Attorney-General may direct the Director of the AUSTRAC to give the Attorney-General access to FTR information for the purpose of enabling the Attorney-General to deal with the request.
The repeal of Part VIA, in conjunction with the proposed amendments to the FTR Act made by this Schedule, will remove the current requirement for foreign country requests for FTR information to be dealt with by the Attorney-General in accordance with the provisions of the Mutual Assistance Act. The proposed amendments will instead give the Director of AUSTRAC the general responsibility for disclosure of information outside of Australia. (See the discussion at Item 9).
Part 2 - Review of effectiveness of amendments
This Item requires the Attorney-General to cause a review of the amendments made by Part 1 of this Schedule to be undertaken as soon as possible after the second anniversary of the commencement of the amendments. The review will consider the extent to which the amendments made by Part 1 of the Schedule have contributed to the enforcement of financing of terrorism offences, whether the amendments sufficiently regulate the sharing and use of FTR information and whether the privacy of persons identified in that information is adequately protected.
The review will be conducted by a committee consisting of members nominated by the Attorney-General, the AFP Commissioner, the Director-General of Security, the Inspector-General of Intelligence and Security, the Director of AUSTRAC and the Federal Privacy Commissioner. However, the Attorney-General may reject a nomination on the grounds that a the person nominated does not possess the requisite qualifications or an appropriate security clearance.
A written report of the review must be given to the Attorney-General, who is required to table the report in each House of Parliament within 15 sitting days of its receipt by the Minister. However, the Attorney-General must remove information from the report if, on advice given by the AFP Commissioner or Director-General of Security, the Attorney-General is of the view that it may endanger a persons safety, prejudice an investigation or compromise the operational activities or methodologies of ASIO or the AFP.
If the review identifies any inadequacies, a further review would have to be undertaken within two years to ascertain whether those inadequacies had been dealt with.
The provision for review of the proposed amendments was included to address the privacy considerations that they raise. They will provide an opportunity to ensure that the regulation of the use of FTR information under legislation, memoranda of understanding and guidelines is adequate and appropriate. The involvement of the Privacy Commissioner in the review will ensure that privacy interests are represented.
There is a precedent for such a review in section 23YV of the Crimes Act 1914 , which requires an independent review of the operation of the provisions in the Act dealing with forensic procedures.