Explanatory Memorandum
(Circulated by authority of the Attorney-General, the Hon Mark Dreyfus KC MP)SCHEDULE 7 - DEFINITION OF BEARER NEGOTIABLE INSTRUMENT
552. This Schedule clarifies which monetary instruments are captured by the definition of a 'bearer negotiable instrument' and its subsequent reporting requirements.
Item 1 – Section 17
553. This Item repeals the current definition of a 'bearer negotiable instrument' in section 17 of the AML/CTF Act and replaces it with a new definition. The former definition had been longstanding, having been drawn from the FTR Act. This amendment aligns the AML/CTF Act definition with the FATF definition of 'bearer negotiable instrument', by clarifying the conditions that would apply if an instrument is captured by the definition. It also retains a non-exhaustive list of the kinds of instruments that may be captured under the definition.
554. New section 17 clarifies that the definition of 'bearer negotiable instrument' only captures an instrument that is 'payable to bearer', meaning that title to the instrument passes on delivery of the instrument. For example, this may include a money order that has been signed but does not include a payee's name. An instrument is also payable to bearer if it is endorsed without restriction, or is payable to a fictitious person.
555. The new definition of 'bearer negotiable instrument' does not extend to an instrument that is 'non-bearer' or 'non-negotiable'. For example, a cheque directed to a specific payee and specific instructions, is not captured by the new definition. This ensures that the scope of the AML/CTF Act's definition of bearer negotiable instrument is appropriately tailored to the associated money laundering and terrorism financing risk.
556. New section 17 outlines a non-exhaustive list of the kinds of instruments that are captured when payable to bearer. This includes a:
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- bill of exchange
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- cheque
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- promissory note
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- bearer bond
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- traveller's cheque
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- money order, postal order or similar order, or
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- negotiable instrument not covered by any of the above.
557. As 'bearer negotiable instruments' are 'monetary instruments' as defined in section 5 of the AML/CTF Act, they are subject to Australia's cross-border movement reporting framework (established in Part 4 of the AML/CTF Act). The policy intention of amending the definition of bearer negotiable instrument is to reduce the burden of regulatory compliance with the cross-border movement reporting framework. This would be done by reducing the volume of bearer negotiable instruments that will be reportable under the AML/CTF Act, while appropriately managing the money laundering and terrorism financing risk associated with bearer negotiable instruments. The FATF definition of a bearer negotiable instrument does not intend for instruments that are 'non-bearer' or 'non-negotiable' to be captured by a country's cross-border movement reporting requirements. Consequently, the amended definition of a bearer negotiable instrument based on the FATF definition will provide greater clarity to reporting entities as to what types of instruments require reporting. This amendment also responds to stakeholder feedback received during the consultation processes.