House of Representatives

Explanatory Memorandum

(Circulated by authority of the Attorney-General, the Hon Mark Dreyfus KC MP)

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024

1. This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Bill

2. The Bill makes amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) to:

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extend the AML/CTF Act and Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (AML/CTF Rules), and associated regulations, which are together referred to as Australia's 'AML/CTF regime', to additional services that are globally recognised by the Financial Action Task Force (FATF) as posing high money laundering and terrorism financing risks

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simplify the AML/CTF program and customer due diligence (CDD) obligations to minimise regulatory burden and improve compliance

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provide new powers for the Australian Transaction Reports and Analysis Centre (AUSTRAC), as the AML/CTF regulator and Financial Intelligence Unit (FIU), to require the disclosure of information and conduct examinations, and

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modernise current obligations under the regime to reflect emerging technologies and evolving business structures.

3. The reforms will not fundamentally change the central tenets of the existing AML/CTF regime, which align with international obligations. These are:

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a business must enrol (and, in certain circumstances, register) with AUSTRAC if they provide a designated service

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reporting entities must develop, maintain and comply with an AML/CTF program that identifies, mitigates and manages the money laundering/terrorism financing (ML/TF) risks associated with their services

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reporting entities must identify their customers, verify their customers' identity, understand the associated ML/TF risk before providing a designated service, and undertake ongoing CDD

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reporting entities must report certain transactions and suspicious matters, and

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reporting entities must make and retain certain records and ensure they are available to law enforcement.

Human rights implications

4. The Bill may engage, directly or indirectly, with the following human rights:

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protections against arbitrary or unlawful interference with privacy, and unlawful attacks on honour or reputation, in Article 17 of the International Covenant on Civil and Political Rights (ICCPR)

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right to a fair trial and fair hearing and criminal process rights in Article 14 of the ICCPR

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right to freedom of expression in Article 19 of the ICCPR

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right to equality and non-discrimination in Articles 2 and 26 of the ICCPR, and

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right to freedom of association in Article 22 of the ICCPR.

Protections against arbitrary or unlawful interference with privacy, and unlawful attacks on honour or reputation – Article 17 of the ICCPR

5. Article 17 of the ICCPR provides that no one shall be subjected to arbitrary or unlawful interference with his or her privacy, family, home or correspondence. Article 17 of the ICCPR also provides that a person must not be subjected to unlawful attacks on his or her honour or reputation.

6. The protection for privacy under Article 17 can be permissibly limited to achieve a legitimate objective and where the limitations are lawful and not arbitrary. The term 'unlawful' in Article 17 of the ICCPR means that no interference can take place except as authorised under domestic law.

7. The term 'arbitrary' means that any interference with privacy must be in accordance with the provisions, aims and objectives of the ICCPR and should be reasonable in the particular circumstances. The United Nations Human Rights Committee has interpreted 'reasonableness' to mean that any limitation must be proportionate and necessary in the circumstances. In this case, the legitimate end is the protection of public safety, addressing crime and protecting the rights and freedoms of individuals by requiring certain personal information to be collected, retained and disclosed to support relevant investigations.

8. Measures in the Bill that engage the protection against arbitrary and unlawful interference with privacy in Article 17 of the ICCPR include:

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extension of the AML/CTF regime to additional services (Schedules 3 and 6)

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changes to CDD requirements (Schedule 2)

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changes to transfer of value requirements (Schedule 8)

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providing new powers for AUSTRAC to require the provision of information and conduct examinations (Schedule 9), and

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other amendments and clarifications to the AML/CTF regime.

Extension of the AML/CTF regime to additional services

9. Schedule 3 of the Bill would extend the AML/CTF regime to certain high-risk services provided by real estate professionals, professional service providers (such as lawyers, conveyancers, accountants, and trust and company service providers), and dealers in precious metals and precious stones. In addition, Schedule 6 of the Bill would extend the AML/CTF regime to additional services provided by virtual asset service providers (VASPs). These amendments would close regulatory gaps and bring Australian law in line with the international standards set by the FATF.

10. The expansion of the reporting entity population would result in a larger number of Australian businesses that are authorised or obligated to collect and verify customer and beneficial owner information when providing a designated service for the purposes of knowing the identity of customers when providing designated services. It is anticipated that AUSTRAC's reporting population will increase from approximately 17,000 by approximately 90,000 entities.

11. The expansion of the reporting entity population required to report to AUSTRAC would also have flow on impacts in terms of increasing the number of reports received by AUSTRAC that contain customer information. Any customer information provided to AUSTRAC as part of these reports would be considered to be 'AUSTRAC information'. As such it would be subject to the secrecy and access provisions outlined in Part 11 of the AML/CTF Act, which restrict access, use or disclosure of AUSTRAC information to a limited range of legitimate purposes.

12. To the extent these provisions impact the privacy of individuals, this impact is not arbitrary because the amendments are targeted at addressing the specific money laundering and/or terrorism financing risk posed by the additional regulated services:

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The use of real estate is an established, well-known method of laundering money internationally and in Australia. Real estate is one of the most common property types restrained following investigations by the Australian Federal Police-led Criminal Assets Confiscation Taskforce, reflecting its popularity as an asset and the ease with which illicit funds can be laundered and/or invested in this sector.

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Criminals are also known to seek out the involvement of professional service providers for specialist skills, advice, technical proficiency or knowledge that assists in their money laundering schemes. Law enforcement has often observed these professionals being unwitting facilitators, or reckless as to the risk of illicit financing or concealment of illicit wealth.

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Precious metals and precious stones are particularly vulnerable to use for illicit financing purposes as they are small and easily concealable, may be readily purchased and sold anonymously using cash or virtual assets, and can be used as an alternative currency to make untraceable payments for illicit goods and services.

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Virtual assets allow criminal groups to move funds across borders quickly, cheaply and pseudo-anonymously.

13. The new designated services provided for in the Bill target the activities provided by these sectors that pose the highest risk of exploitation. For clarity, regulation will not apply to all services provided by these businesses – for example, a professional service provider, such as legal professional, may not practice in an area of law covered by the designated services. In this instance, the legal professional would not be covered by the AML/CTF regime. Further, should a reporting entity provide a range of services of which only one or two are designated services under the AML/CTF Act, they would only have to carry out AML/CTF obligations in relation to those specific services. This approach ensures that any interference with the privacy of individual customers only occurs where it is reasonable, necessary and proportionate to the risks of money laundering, terrorism financing and proliferation financing associated with designated services.

14. The collection and verification of personal information by reporting entities would continue to be conducted within the legal framework of the AML/CTF Act, as well as other applicable laws and policies. In relation to CDD, personal information is collected to enable a reporting entity to establish on reasonable grounds that it knows the identity of its customer and can identify the 'ML/TF risk' (defined in Item 5 of Schedule 2 of the Bill) of the customer. Personal information will only be collected to fulfil these requirements and the type of information collected will be appropriate to the customer's identified ML/TF risk. In some cases, such as where enhanced CDD is required, a reporting entity may need to collect additional personal information about a customer. This information will also support a reporting entity to mitigate and manage the ML/TF risk of providing the service to the customer.

15. Reporting entities would continue to be required to retain customer information records for 7 years after the business relationship has ended, or the occasional transaction has stopped. Reporting entities under the AML/CTF Act are responsible entities under the Privacy Act 1988, and have data protection policies, systems and controls in place where they collect and handle personal information.

16. The extension of the AML/CTF regime to additional high-risk services would not constitute an arbitrary or unlawful interference with privacy. To the extent that this aspect of the Bill constitutes a limitation on the protection against arbitrary or unlawful interference with a privacy, the legislative requirements and other safeguards ensure any interference is reasonable, necessary and proportionate.

Changes to Customer Due Diligence requirements

17. The changes to the CDD framework in Schedule 2 of the Bill would apply to the additional services being regulated as a result of Schedules 3 and 6 of the Bill, as well as impacting currently regulated reporting entities. This would expand the number of customers whose personal information is collected by reporting entities.

18. The requirements in new Division 2 of Part 2 of the AML/CTF Act (to be inserted by Item 7 of Schedule 2 of the Bill) for a reporting entity to identify their customer(s) through initial CDD include:

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if the customer is an individual, taking reasonable steps to establish that the customer is who they claim to be, including if they are a politically exposed person

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identifying the ML/TF risk of the customer

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collecting information about the customer that is appropriate to ML/TF risk, and

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verifying the customer information using independent and reliable data that is appropriate to ML/TF risk using independent and reliable data.

19. The ongoing CDD requirements in new Division 3 of Part 2 of the AML/CTF Act (to be inserted by Item 7 of Schedule 2 of the Bill) would require reporting entities to monitor their customers to appropriately identify, assess, manage and mitigate the ML/TF risks they may reasonably face in providing designated services. Ongoing CDD includes reviewing and updating 'Know Your Customer' (KYC) information (as defined in Item 5 of Schedule 2 of the Bill), as well as monitoring for unusual transactions and behaviours that may give rise to a suspicious matter reporting (SMR) obligation (outlined further below).

20. New Division 4 of Part 2 of the AML/CTF Act (to be inserted by Item 7 of Schedule 2 of the Bill) would establish parameters for when reporting entities may apply simplified CDD, or when they must apply enhanced CDD as part of initial and ongoing CDD. Simplified CDD would give reporting entities more discretion, provided the ML/TF risk of the customer is low and other requirements are met, to apply simplified initial and ongoing CDD.

21. Reporting entities must apply enhanced CDD appropriate to customer risk in certain specified circumstances, or if the customer is high ML/TF risk. In these cases, reporting entities are required to collect and/or verify additional KYC information relevant to mitigating the identified higher risk, and must be reasonably satisfied that they know and understand the identity of their customer. In enhanced CDD scenarios, ongoing CDD must also be adjusted to ensure it is appropriate to the ML/TF risk of the customer, and meets specific requirements to be set out in the AML/CTF Rules in line with the FATF Standards.

22. Combined, these provisions clarify the focus on effective risk mitigation in the regime. That is, reporting entities are required to collect personal information that enables them to know and understand their customers, including their ML/TF risk, and to apply appropriate measures to help mitigate the risks they may be exposed to, such as by seeking further customer information. As for newly regulated reporting entities, the collection and verification of personal information would continue to be conducted within the legal framework of the AML/CTF Act, as well as other applicable laws and policies.

23. To the extent the changes to CDD requirements constitute a limitation on the protection against arbitrary or unlawful interference with privacy, any interference is reasonable, necessary and proportionate.

Changes to transfer of value requirements

24. In addition to those outlined above, the Bill contains measures that would expand the customer base whose personal information is collected by reporting entities as part of reporting and CDD requirements.

25. Schedule 8 of the Bill would amend the requirements in Part 5 of the AML/CTF Act for limited personal information to travel with the transfer of value for financial institutions, remittance providers and VASPs, for both domestic and cross-border transfers. This includes a new requirement for payee information to be sent, in addition to payer information, which is currently required to accompany transfers of value for financial institutions. Schedule 8 of the Bill would also extend this requirement to remittance services and VASPs by inserting a new definition of 'transfer of value' in section 5 that incorporates virtual assets, and captures what was previously referred to as a 'designated remittance arrangement'. Currently the requirement only attaches to financial institutions.

26. Consistent with FATF Recommendation 16, the inclusion of limited personal information travelling with transfers of value would ensure that basic information is immediately available to:

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law enforcement agencies to assist them to detect or investigate terrorists or other criminals, and trace their assets

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AUSTRAC, for analysing suspicious or unusual activity and disseminating as necessary, and

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financial institutions, remitters and VASPs to facilitate the identification and reporting of suspicious transactions, and take appropriate actions.

27. To the extent these provisions would constitute a limitation on the protection against arbitrary or unlawful interference with privacy, any interference is reasonable, necessary and proportionate.

Powers enabling AUSTRAC to require the production of information and conduct examinations

28. Schedule 9 of the Bill provides new powers for AUSTRAC to gather information to support AUSTRAC's regulatory, enforcement and intelligence functions. The amendments recognise the delineation of AUSTRAC's dual function as a FIU, and as the AML/CTF regulator.

29. These amendments would enable the AUSTRAC CEO to issue a written notice to a person (under new Division 3 of Part 14 of the AML/CTF Act) compelling that person to produce documents, or to appear before an examiner to answer questions under an oath or affirmation to support its enforcement functions. This could potentially include compelling a person to disclose personal information about themselves or another person.

30. The ability to conduct examinations would provide an important investigatory tool for AUSTRAC to obtain relevant information needed to make enforcement decisions, and enable AUSTRAC to obtain evidence in a form that can be utilised in court proceedings. Introducing an examination power in the AML/CTF Act would also align AUSTRAC's information gathering powers with other regulatory and enforcement agencies, such as the Australian Securities and Investments Commission.

31. The AUSTRAC CEO would only be permitted to exercise these powers and issue a notice requiring attendance for an examination where the AUSTRAC CEO has a reasonable belief that the person has information or documents relevant to compliance with the AML/CTF Act, AML/CTF Rules or the regulations, or a related criminal offence. The AUSTRAC CEO would not be able to compel a person to provide information or attend an examination where these thresholds are not met.

32. In addition, Schedule 9 includes appropriate protections for the examinee, including a requirement that the examination take place in private (new section 172D), allowing an examinee to be accompanied by their lawyer, who may address both the examinee and examiner (new section 172F), and allowing the AUSTRAC CEO to provide a written record of the examination to an examinee's lawyer where the examinee is contemplating or carrying on proceedings related to the examination (new section 172H).

33. Schedule 9 of the Bill also amends AUSTRAC's primary notice to produce power in section 167 of the AML/CTF Act to expand who may receive a notice and accordingly narrow the purpose for which notices can be issued. To account for this narrowing in scope, an additional notice to produce power is included in new section 49B (to be inserted by Item 6 of Schedule 9) to allow AUSTRAC to proactively issue notices to produce in circumstances that are not linked to a report that has been given under sections 41, 43 and 45.

34. The new section 49B power may only be used to support the performance of functions of the AUSTRAC CEO and may only be issued if the AUSTRAC CEO reasonably believes the recipient has notice of, or possession, custody or control of the information requested. This power recognises the delineation of AUSTRAC's dual functions, and that the ability to compel information supports AUSTRAC's ability to compel the production of information with legality, propriety and consistency with human rights.

35. To the extent these provisions would constitute a limitation on the protection against arbitrary or unlawful interference with privacy, any interference is reasonable, necessary and proportionate.

Other amendments and clarifications to the AML/CTF regime

36. Schedule 11 of the Bill would repeal the whole of the Financial Transactions Reports Act 1988 (FTR Act) to give effect to the Government's efforts to streamline AML/CTF obligations and remove unnecessary complexities from existing legislation. Repeal of the FTR Act would also result in deregulating remaining cash dealers that have obligations under the FTR Act, including motor vehicle dealers, sellers of traveller's cheques, and offshore online remitters. This reform promotes the right to freedom from arbitrary or unlawful interference with privacy as these FTR Act reporting entities would no longer be required to collect information about their customers.

37. Several other aspects of the Bill promote the right to freedom from arbitrary or unlawful interference with privacy by improving the clarity of AML/CTF obligations and making them easier for reporting entities to understand and apply. This includes clarifications on matters such as when enhanced CDD measures must be applied, when simplified CDD measures may be used, and clarifications about the record-keeping requirements applicable to CDD obligations described above.

Rights to a fair trial and fair hearing, and minimum guarantees in criminal proceedings - Article 14 of the ICCPR

38. The right to a fair trial and fair hearing are protected by Article 14(1) of the ICCPR. The right to a fair trial and fair hearing applies to both criminal and civil proceedings. A range of criminal process guarantees are also afforded by Article 14 to persons accused and convicted of criminal offences, including the presumption of innocence (Article 14(2)), the right to not incriminate oneself (Article 14(3)(g)), the right to have a sentence reviewed by a higher tribunal (Article 14(5)) and the right not to be tried or punished twice for the same offence (Article 14(7)).

39. Measures in the Bill that may engage the right to fair trial and fair hearing and/or criminal process rights in Article 14 of the ICCPR include:

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amendments to criminal offence provisions in relation to tipping off (Schedule 5)

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new criminal offence provisions in relation to examinations (Schedule 9)

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new civil penalty provisions (Schedules 2, 4, 9 and 11), and

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strengthening protections for information subject to legal professional privilege (Schedule 4).

Criminal offence provisions

40. Schedule 5 of the Bill would amend the scope of the existing offence of tipping off in section 123 of the AML/CTF Act to prevent the disclosure of SMR, section 49 or section 49B related information where the disclosure would or could reasonably be expected to prejudice an investigation. The offence carries a maximum penalty of imprisonment for 2 years or 120 penalty units, or both.

41. This amendment engages with the right to a fair trial and other criminal process rights in Article 14 of the ICCPR, but does not place any additional limitations on those rights. It does not change the statutory protections afforded to someone accused of a tipping off offence. The objectives of the tipping off offence framework remain the same as under the current framework, along with the existing protections and safeguards for persons charged with an offence.

42. Schedule 9 of the Bill would provide for the following criminal penalties associated with the new powers for the AUSTRAC CEO to issue a notice compelling a person to disclose documents or attend for an examination:

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the offence of intentionally or recklessly failing to comply with a notice issued by the AUSTRAC CEO, which carries a maximum penalty of imprisonment for 2 years or 100 penalty units, or both (section 172A, Item 5 of Schedule 9)

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the offence of intentionally or recklessly failing to comply with a requirement to answer a question put to the person during an examination by the examiner, which carries a maximum penalty of imprisonment for 2 years (section 172C, Item 5 of Schedule 9)

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the strict liability offence for refusing or failing to comply with a requirement made by an examiner to take an oath or make an affirmation, which carries a maximum penalty of imprisonment for 3 months (section 172C, Item 5 of Schedule 9)

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the strict liability offence of being present at an examination without meeting the criteria, which carries a maximum penalty of 30 penalty units (section 172D, Item 5 of Schedule 9)

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the strict liability offence of refusing or failing to comply with a requirement made by an examiner, which carries a maximum penalty of 20 penalty units (section 172F, Item 5 of Schedule 9)

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the strict liability offence of failing to comply with a requirement to read or sign a statement, which carries a maximum penalty of 3 months imprisonment (section 172G, Item 5 of Schedule 9)

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the strict liability offence of copying, publishing, or communicating the contents of the record of an examination, except in the course of preparing, beginning or carrying on a proceeding, which carries a maximum penalty of 30 penalty units (section 172H, Item 5 of Schedule 9), and

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the strict liability offence of breaching a condition related to the disclosure of the copy of the record of an examination, which carries a maximum penalty of 30 penalty units (section 172J, Item 5 of Schedule 9).

43. These amendments engage with the right to the presumption of innocence in Article 14(2) of the ICCPR by introducing new strict liability offences. Article 14(2) provides that a person charged with a criminal offence has a right 'to be presumed innocent until proven guilty according to law.' Strict liability offences engage Article 14(2) because, where strict liability is applied to an offence, the requirement for the prosecution to prove fault is removed and a defence of honest and reasonable mistake of fact may be raised. Strict liability provisions will not violate the presumption of innocence so long as they are reasonable in the circumstances and maintain rights of defence.

44. These new offences and the strict liability components of the offences in Schedule 9 of the Bill are not inconsistent with the presumption of innocence because they are reasonable, necessary and proportionate in the pursuit of a legitimate objective. In line with the Guide to Framing Commonwealth Offences, the application of strict liability to all physical elements of these offences is considered appropriate in these circumstances because:

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this is likely to significantly enhance and effectiveness of enforcement of the new powers in Schedule 9 by deterring non-compliance

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the centrality of the examination power to AUSTRAC's ability to monitor compliance is such that it is appropriate that there be a significant deterrent to conduct that undermines the exercise of the power

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the information to be obtained through the exercise of the powers is critical to AUSTRAC's ability to monitor and ensure compliance with the AML/CTF regime, which in turn is aimed at protecting the community from money laundering, terrorism financing and other serious crimes

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a person receiving a notice under the new powers will be made aware of the criminal offences applicable for non-compliance, to guard against the possibility of inadvertent contravention, and

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in relation to some offences, terms of imprisonment are not applicable to ensure the sanction for the offence is proportionate to the gravity of the conduct and required deterrent effect.

Civil penalty provisions

45. The United Nations Human Rights Committee has stated that the notion of criminal charges may 'also extend to acts that are criminal in nature with sanctions that, regardless of their qualification in domestic law, must be regarded as penal because of their purpose, character or severity'. As such, a penalty or other sanction may be 'criminal' for the purposes of the ICCPR even if it is described as a civil penalty under Australian law.

46. The Bill includes a number of new civil penalty provisions, including in relation to:

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commencing to provide a designated service without an up to date ML/TF risk assessment (new section 26E, Item 24 of Schedule 1)

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contravention of requirements to develop and maintain AML/CTF policies (new section 26F, Item 24 of Schedule 1), which replaces the existing civil penalty provision in section 81 of the Act)

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contravention of responsibilities related to governing bodies (new section 26H, Item 24 of Schedule 1)

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contravention of requirements related to AML/CTF compliance officers (new sections 26J, 26K and 26M, Item 24 of Schedule 1)

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contravention of requirements related to AML/CTF program documentation and approvals (new sections 26N, 26P and 26Q, Item 24 of Schedule 1)

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contravention of requirements related to a written notice from the AUSTRAC CEO (new section 26R, Item 24 of Schedule 1)

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failure to make an AML/CTF program available to registered remittance affiliates (new section 26S, Item 24 of Schedule 1), which replaces the existing civil penalty provision in subsection 84(5A) of the AML/CTF Act

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failure to retain records relating to Part 1A of the AML/CTF Act (new section 116, Item 35 of Schedule 1), which replaces the existing civil penalty provision in section 116 of the AML/CTF Act

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commencing to provide a designated service to a customer without establishing certain matters in relation to the customer (new subsection 28(8), Item 7 of Schedule 2), which replaces the existing civil penalty provision in section 32 of the AML/CTF Act

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continuing to provide a designated service to a customer or commencing to provide any other designated service to a customer if the reporting entity does not undertake initial CDD as soon as reasonably practicable or within the period specified in the AML/CTF Rules (new subsection 29(3), Item 7 of Schedule 2), which replaces the existing civil penalty provision in section 34 of the AML/CTF Act

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failure to monitor customers in relation to the provision of designated services in order to appropriately identify, assess, manage and mitigate the risks of money laundering, terrorism financing and proliferation financing (new subsection 30(6), Item 7 of Schedule 2), which replaces the existing civil penalty provision in section 36 of the AML/CTF Act

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failure to retain certain records that demonstrate compliance with obligations under Part 2 and are in a form readily accessible or convertible into the English language (new subsection 111(4), Item 23 of Schedule 2), which replaces the existing civil penalty provisions in sections 112 and 113 of the AML/CTF Act

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failure to provide a 'LPP form' in certain circumstances (new subsections 26Q(3), paragraphs 41(3)(aa) and 43(3)(aa), subsections 49(3) and 49B(7), paragraph 50(6)(aa), subsections 75N(4), 76Q(4), 167(6) and 202(6) in Schedule 4)

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contravention of obligations of institutions in value transfer chains (new sections 64, 65, 66 and 66A, Item 22 of Schedule 8), which replace existing civil penalty provisions in sections 64, 65 and 66 of the AML/CTF Act

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failure to comply with a notice to provide information or documents (new section 49B, Item 6 of Schedule 9), and

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failure to comply with a notice to provide information or documents (new section 167, Item 16 of Schedule 9).

47. The civil penalty provisions in the Bill would form part of a regulatory regime aimed at ensuring compliance with the obligations imposed by the Bill, as opposed to being for the purpose of punishment. In addition, no term of imprisonment is provided for and, while the maximum pecuniary penalties that can be applied under section 150 of the AML/CTF Act are high, these penalties are appropriate given the nature of the sectors and entities being regulated and the illicit financing risks they face. As the civil penalty provisions in the Bill are properly characterised as civil penalty provisions and not criminal penalty provisions, the criminal process guarantees in Article 14 of the ICCPR do not apply.

48. The civil penalty provisions in the Bill engage with the right to fair hearing in Article 14(1) of the ICCPR. However, this right is not limited by these provisions because the imposition of a civil penalty in these circumstances does not derogate from, or abridge, existing procedural rights of parties to litigation and would not result in actual disadvantage or unfairness to the defendant. In addition, these provisions do not affect the ability of parties to a relevant civil proceeding being provided the opportunity to adduce or challenge arguments or evidence on the matters at issue.

Legal professional privilege

49. Legal professional privilege is a fundamental principle of common law in Australia that serves the public interest in the administration of justice by encouraging full and frank disclosure by clients to their lawyers. It enables a person to resist the giving of information or production of documents that would reveal the content of communications between a client and their lawyer for the dominant purpose of giving or obtaining legal advice or the provision of legal services.

50. Schedule 4 of the Bill promotes the rights to rights to a fair trial and fair hearing and criminal process rights in Article 14 of the ICCPR by providing more explicit protections for information subject to legal professional privilege. Schedule 4 achieves this by:

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replacing existing section 242 of the AML/CTF Act with stronger and clearer protections for legal professional privilege

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inserting a definition of 'legal professional privilege' in section 5 of the AML/CTF Act that refers to the Evidence Act 1995 (Cth) to provide clarity and greater certainty, and

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making clear that nothing in the AML/CTF Act affects the right of a person to refuse to give information (including by answering a question) or produce a document if the information would be privileged from being given or produced on the ground of legal professional privilege.

Right not to incriminate oneself

51. The minimum guarantees in criminal proceedings in Article 14(3) of the ICCPR include that a person is not to be compelled to testify against himself or herself, or to confess guilt, in the determination of criminal charges against that person. The privilege against self-incrimination is a well-established common law principle in Australia and will apply unless expressly abrogated by legislation, with such abrogation often viewed as permissible.

52. New section 172K of the AML/CTF Act (to be inserted by Item 5 of Schedule 9 of the Bill) would expressly abrogate the privilege against self-incrimination. It provides that an individual is not excused from producing a document under new section 172A, or answering a question at an examination under Part 3, Division 14 of the AML/CTF Act, on the grounds that the information or document might tend to incriminate the individual giving the information or document or expose that person to a penalty.

53. Importantly, new subsection 172K(2) of the AML/CTF Act would contain corresponding immunities ensuring that the information and documents provided are not admissible as evidence in civil proceedings or criminal proceedings against the individual that has provided them, subject to certain exceptions. Similar to the examination framework set out in the Australian Securities and Investments Commission Act 2001, information and documents may only be used in civil or criminal proceedings insofar as they relate to the falsity of the information or document provided.

54. Schedule 9 of the Bill would also clarify the abrogation in section 169 of the AML/CTF Act by making it clear that information provided in response to a notice under section 167 can also be used in criminal proceedings for an offence covered by the definition of 'money laundering', 'financing of terrorism' and 'proliferation financing' under section 5 of the AML/CTF Act. This could include proceedings relating to offences against state or territory laws that relate to money laundering, financing of terrorism or proliferation financing where relevant information has been collected by AUSTRAC under section 167.

55. To ensure the limitations being placed on the privilege against self-incrimination are reasonable and proportionate while still enabling effective regulatory powers, the Bill also maintains the existing safeguards in section 169. Further, this abrogation is reasonable, necessary and proportionate, as it balances the rights and interests of the individual with benefits to the public that arise from the investigation and prosecution of serious criminal offences such as money laundering and the financing of terrorism. The abrogation is only to the extent necessary to ensure AUSTRAC's effectiveness in monitoring and ensuring compliance with the AML/CTF regime.

Right to freedom of expression – Article 19 of the ICCPR

56. The right to freedom of expression in Article 19 of the ICCPR protects the right to hold opinions without interference and the right to express those opinions to others.

57. Part 1 of Schedule 9 of the Bill may engage the right to freedom of expression because it would enable the AUSTRAC CEO to direct a person undergoing an examination not to disclose to third parties that the examination took place or to disclose the questions asked or information disclosed during the examination. Under new section 172D of the AML/CTF Act, an examination would be required to take place in private and the examiner may give directions about who may be present. The lawyer of a person being examined may be present at the examination.

58. The purpose of the examinations power is to improve AUSTRAC's access to information for the purposes of investigating serious contraventions of the AML/CTF Act. Examinations will be conducted as part of an AUSTRAC investigation into a suspected contravention of the AML/CTF regime. This aspect of the Bill advances a legitimate objective of protecting the information that may form part of an examination, and the investigation to which the examination relates. Accordingly, it is reasonable, necessary and proportionate that the information is kept confidential while the investigation is ongoing, in order to protect the operations of law enforcement.

59. The amendments provide that a person being examined would be entitled to particular protections during the course of an examination, including attendance by their lawyer who may address the examiner, or examine their client about matters being discussed. The person being examined may also request a copy of the written record of the examination. However, there will be limits on disclosing that record in order to protect AUSTRAC information and investigations.

60. To the extent that a person's ability to communicate and express their opinions to others could be limited by this aspect of the Bill, the circumstances under which a person can be required to attend for an examination ensure the limitation is reasonable, necessary and proportionate. In addition, any limitation would be consistent with Article 19(3) of the ICCPR, which allows for restrictions for the protection of national security or of public order.

Right to equality and non-discrimination - Articles 2, 16 and 26 of the ICCPR

61. Articles 2, 16 and 26 of the ICCPR provide for the right of equality and non-discrimination. All persons are equal before the law and are entitled without any discrimination to the equal protection of the law. Discrimination is prohibited, and laws should guarantee to all persons equal and effective protection against discrimination on any ground such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status.

62. The provisions in Schedule 2 of the Bill related to initial CDD, enhanced CDD and politically exposed persons may indirectly limit this right by permitting reporting entities to distinguish between different customers based on certain political affiliation, place of residence within a country and their property. There is potential for these measures to have a disproportionate negative impact on particular persons and groups, such as people residing in jurisdictions subject to sanctions.

63. For example, Schedule 2 of the Bill would require reporting entities to establish on reasonable grounds whether a customer is a politically exposed person, or if a person or entity is designated for targeted financial sanctions. Enhanced CDD must be applied for all foreign politically exposed persons. However, unless a reporting entity deems it is unable to mitigate the ML/TF risks posed by such customers, the provisions do not restrict the ability for such people to receive designated services. Rather the Bill would ensure the application of CDD that is proportionate and appropriate to the ML/TF risk of the customer.

64. The United Nations Human Rights Committee recognises that 'not every differentiation of treatment will constitute discrimination, if the criteria for such differentiation are reasonable and objective'. To the extent that the provisions of the Bill may reduce a person's ability to receive a designated service, these limitations are reasonable, necessary and proportionate to address the risks of money laundering, and terrorism and proliferation financing.

Right to freedom of association - Article 22 of the ICCPR

65. Article 22 of the ICCPR protects the right to form and join associations to pursue common goals.

66. The provisions in Schedule 2 of the Bill may indirectly limit this right by creating a disincentive for persons to form or join certain organisations, such as terrorist organisations or outlaw motorcycle gangs. In undertaking initial CDD and ongoing CDD, a person may potentially be required to disclose their membership of a group or association, and a reporting entity may potentially be required to treat that person differently on the basis of their association.

67. For instance, Schedule 2 of the Bill would require enhanced CDD to be applied to all high ML/TF risk customers. Enhanced CDD includes measures that are more onerous or require a greater level of scrutiny about a customer. While the Bill does not restrict the ability for such people to receive designated services (unless the reporting entity it is unable to mitigate the ML/TF risks posed), this may make some people more reluctant to form or join certain organisations if they know it could potentially result in enhanced CDD being applied or services being denied.

68. Overall, the provisions in Schedule 2 of the Bill are tailored to ensure the application of CDD that is appropriate to the ML/TF risk of the customer. To the extent that these provisions may limit the right to freedom of association by disincentivising persons from joining organisations such as terrorist organisations or outlaw motorcycle gangs, this would be reasonable, necessary and proportionate to address the risks of money laundering, and terrorism and proliferation financing.

Conclusion

69. The Bill engages with a number of human rights and, to the extent the Bill limits some rights, those limitations would be reasonable, necessary and proportionate, and facilitate the overarching legitimate objectives of the AML/CTF Act.