House of Representatives

Explanatory Memorandum

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

SCHEDULE 9 - POWERS AND DEFINITIONS

713. Schedule 9 to the Bill would introduce an examination power, an important investigatory tool to enable AUSTRAC to obtain relevant information needed to make enforcement decisions and obtain evidence to be used in proceedings. This would also align AUSTRAC's powers with other financial regulators such as ASIC and APRA, which each have examination functions to assist in investigations under their legislation. The specifics of this new power are set out in the legislation, including appropriate safeguards and thresholds.

714. Schedule 9 would also ensure that AUSTRAC is empowered to gather information for intelligence purposes in circumstances not triggered by the receipt of a suspicious matter, threshold transaction or international value transfer services report. It would also give effect to FATF Recommendation 29 that a FIU should be able to obtain additional information from reporting entities in order to undertake its functions properly, and would provide a facilitative information sharing legislative authority to ensure entities do not face legal risk by virtue of cooperation with the Fintel Alliance.

715. In order to ensure certain definitions commence 28 days after Royal Assent of the Bill, Schedule 9 also includes updates to the definitions of 'credit card', 'debit card', 'derivative', 'issue', 'loan', 'money', 'security', 'service' and 'securities and derivatives'. The amendments to these definitions respond to issues identified by the 2016 Statutory Review, or are otherwise required to modernise and simplify the AML/CTF regime.

Part 1—Examination Power

Anti-Money Laundering and Counter-Terrorism Financing Act 2006

Item 1 – Section 5

716. Item 1 inserts a number of definitions into section 5 of the AML/CTF Act relating to the new examinations power under new Division 3 of Part 14, which is inserted by Item 5 of this Schedule.

717. 'Examinee' means the person who appears for an examination under Division 3 of Part 14 of the AML/CTF Act.

718. 'Examiner' means the AUSTRAC CEO, or a delegate of the AUSTRAC CEO, or a consultant engaged under subsection 225(1) of the AML/CTF Act to perform services as an examiner. This could include, for example, external counsel engaged to undertake the examination on behalf of the AUSTRAC CEO.

719. 'Statement' includes a question asked, an answer given, and any other comment or remark made at an examination under Division 3 of Part 14 of the AML/CTF Act.

720. 'Written record' is a record of the examination (either made in writing or as reduced to writing), or part of such a record.

Item 2 – Before section 166

721. This Item inserts a new heading for Division 1 into Part 14 of the AML/CTF Act titled 'Introduction'.

Item 3 – Section 166

722. This Item repeals and replaces the simplified outline of Part 14 in section 166 of the AML/CTF Act. The new simplified outline notes that an authorised officer may obtain information or documents under this Part, and that the AUSTRAC CEO may require a person who they reasonably believe has information or a document that is relevant to compliance with the AML/CTF Act, AML/CTF Rules or the regulations, or a related offence under the Crimes Act 1914 or Criminal Code, to produce documents, or appear before an examiner to answer questions and produce documents.

723. While this simplified outline is included to assist a reader's understanding of the substantive provisions to follow, it is not intended to be comprehensive. Readers are advised to rely on the substantive provisions for full comprehension.

Item 4 – Before section 167

724. This Item inserts a new heading for Division 2 of Part 14 of the AML/CTF Act titled 'Powers of authorised officers'.

Item 5 – At the end of Part 14

725. This Item inserts a heading for the new Division 3 of Part 14 of the AML/CTF Act titled 'Other powers to obtain information and documents'. This Division provides for AUSTRAC's new examination power.

Subdivision A—Examination of persons

726. Item 5 also inserts a subdivision heading, Subdivision A, which is titled 'Examination of persons'.

727. Subsection 172A(1) establishes the threshold that must be met before an examination can occur. It provides that this section applies if the AUSTRAC CEO believes on reasonable grounds that a person has information or a document that is relevant to:

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compliance with the AML/CTF Act, AML/CTF Rules, or the regulations, or

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an offence against the Crimes Act 1914 or the Criminal Code that relates to the AML/CTF Act, the AML/CTF Rules, or the regulations.

728. Subsection 172A(2) provides that the AUSTRAC CEO may give a written notice to a person requiring the person to produce documents, or appear before an examiner to answer questions and produce documents.

729. Paragraph 172A(2)(a) provides that the notice may require to produce such documents within a particular period of time or in a particular manner specified in the notice. This could be, for example, to provide the documents to the AUSTRAC CEO via an email address within a certain timeframe.

730. Paragraph 172A(2)(b) provides that the notice may require the person to appear before an examiner at a specific time and place for examination on oath and to answer questions or produce documents.

731. Subsection 172A(3) outlines what information must be included in the notice. If a person has been required to appear under paragraph 172A(2)(b), the notice must state the general nature of the matter to which the questions will relate. This would ensure a person can prepare appropriately, and is aware of what may be discussed during the course of the examination.

732. Subsection 172A(4) provides that it is an offence for a person to intentionally or recklessly fail to comply with such a notice. The offence carries a maximum penalty of imprisonment for 2 years or 100 penalty units, or both.

733. Section 172B makes it clear that new sections 172C to 172H would apply where, in accordance with a notice under section 172A, a person appears before another person for examination. This provision identifies the person appearing as the 'examinee' (defined in section 5), and the person who they are appearing in front of as the 'examiner' (defined in section 5).

734. Section 172C provides for the requirements to be made of persons appearing for examination, including how the oath is to be taken, and how questions are to be put and answered.

735. Subsection 172C(1) provides the examiner with the power to require a person to take an oath or make an affirmation, and to administer the oath or affirmation to the person.

736. Subsection 172C(2) provides that the oath or affirmation to be taken by the examinee is an oath or affirmation that the statements they will make at the examination will be true.

737. Subsection 172C(3) provides that it is a strict liability offence for a person to refuse or fail to comply with a requirement made by the examiner under subsection 172C(1). The offence carries a maximum penalty of 3 months' imprisonment.

738. The strict liability offence in subsection 172C(3) is appropriate as the information that would be obtained through an examination will be critical to AUSTRAC's ability to monitor compliance with the AML/CTF Act, the AML/CTF Rules or the regulations. In turn, this information will assist AUSTRAC in detecting, deterring and disrupting money laundering, the financing of terrorism, and other serious offences. The penalty is sufficient enough as a deterrent to potential conduct that may undermine the exercise of the power, and falls well below the threshold for strict liability offences under the Guide to Framing Commonwealth Offences.

739. Subsection 172C(4) provides the examiner with the authority to require a person to answer a question put to them that is relevant to compliance with the AML/CTF Act, AML/CTF Rules or the regulations, or an offence against the Crimes Act 1914 or the Criminal Code that relates to the AML/CTF Act, AML/CTF Rules, or the regulations.

740. Subsection 172C(5) provides that it is an offence for a person to intentionally or recklessly refuse or fail to comply with a requirement made under subsection 172C(4). The offence carries a maximum penalty of 2 years imprisonment.

741. Subsection 172D(1) provides that the examination must take place in private, and gives the examiner the power to give directions about who may be present during it, or during a part of it.

742. Subsection 172D(2) provides that the persons who may be present at the examination include:

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the examiner or examinee

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a member of the staff of AUSTRAC approved by the examiner

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a person entitled to be present by virtue of a direction of the examiner under subsection 172D(1), or

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the lawyer of a person being examined.

743. It is an offence of strict liability under subsection 172D(2) if a person is present at the examination and they are not a person that meets the above criteria. The offence carries a maximum penalty of 30 penalty units.

744. This penalty is appropriate as the information that would be obtained through an examination will be critical to AUSTRAC's ability to monitor compliance with the AML/CTF Act, the AML/CTF Rules or the regulations. In turn, this information will assist AUSTRAC in detecting, deterring and disrupting money laundering, the financing of terrorism, and other serious offences. The penalty is sufficient enough as a deterrent to potential conduct that may undermine the exercise of the power, and falls well below the threshold for strict liability offences under the Guide to Framing Commonwealth Offences.

745. Section 172E outlines the procedures an examiner may put in place for holding an examination, including location and virtual examination technology. This section is designed for flexibility, ensuring that an examination can be held in a manner that is reasonable in all of the relevant circumstances.

746. Subsection 172E(1) provides that the examiner may hold an examination at one or more physical venues, use virtual examination technology, or a combination of both.

747. Subsection 172E(2) provides that the application of subsection 172E(3) is where virtual examination technology is used, either solely or in combination with a physical venue.

748. Subsection 172E(3) provides that the examiner must ensure that the use of virtual examination technology is reasonable.

749. Subsection 172E(4) provides that where an examination has taken place using virtual examination technology, or across multiple physical venues, the examiner may appoint a single place and time as the place and time at which the examination is taken to have been held.

750. Subsection 172E(5) notes that this section applies to part of an examination in the same way it applies to all of an examination.

751. Section 172E also inserts a definition of 'virtual examination technology' for the purpose of these provisions. 'Virtual examination technology' means any technology that allows a person to appear at all or part of an examination without being physically present at the examination. This definition is future proofed, and will allow for the use of any technology that improves the flexibility of an examination.

752. Subsection 172F(1) provides that at an examinee is entitled to have their legal representative present at an examination, and that their legal representative may address the examiner or examine the examinee about matters being discussed.

753. Subsection 172F(2) puts appropriate limits on that attendance to ensure the examinee's lawyer does not obstruct the examination, and allows for the examiner to require the person's lawyer to stop addressing the examiner or examining the examinee. The examiner may only do so if they consider the examinee's lawyer is trying to obstruct the examination using the protections in subsection 172F(1).

754. Subsection 172F(3) provides for an offence of strict liability if an examinee's lawyer refuses or fails to comply with a requirement under subsection 172F(2) to stop addressing the examiner, or examining the examinee. The offence carries a maximum penalty of 20 penalty units.

755. This penalty is appropriate as the information that would be obtained through an examination will be critical to AUSTRAC's ability to monitor compliance with the AML/CTF Act, the AML/CTF Rules or the regulations. In turn, this information will assist AUSTRAC in detecting, deterring and disrupting money laundering, the financing of terrorism, and other serious offences. The penalty is sufficient enough as a deterrent to potential conduct that may undermine the exercise of the power, and falls well below the threshold for strict liability offences under the Guide to Framing Commonwealth Offences.

756. Subsection 172G(1) provides that an examiner may cause a record to be made of statements made at an examination, and clarifies that if an examinee requests a record be made, the examiner must do so.

757. Subsection 172G(2) provides that if a record is made under subsection 172G(1), the examiner may require the examinee to read it, or have it read to the examinee, and may require the examinee to sign it. If requested in writing, the examiner must give the examinee a copy of the written record, but may impose conditions on the document, for example the examiner may choose to limit who the record may be shared with.

758. Subsection 172G(3) provides that it is an offence of strict liability if a person fails to comply with a requirement made under paragraph 172G(2)(a) to read and sign the record. The offence carries a maximum penalty of 3 months' imprisonment.

759. This penalty is appropriate as the information that would be obtained through an examination will be critical to AUSTRAC's ability to monitor compliance with the AML/CTF Act, the AML/CTF Rules or the regulations. In turn, this information will assist AUSTRAC in detecting, deterring and disrupting money laundering, the financing of terrorism, and other serious offences. The penalty is sufficient enough as a deterrent to potential conduct that may undermine the exercise of the power, and falls well below the threshold for strict liability offences under the Guide to Framing Commonwealth Offences.

760. Subsection 172H(1) provides that the AUSTRAC CEO may give a copy of the whole or a part of the written record of an examination to a person's lawyer if the person is carrying on, or is contemplating in good faith, a proceeding in respect of a matter to which the examination related.

761. Subsection 172H(2) provides that it is an offence of strict liability if a person uses the copy, publishes it or communicates the contents of it to another person except in connection with preparing, beginning or carrying on, or in the course of, a proceeding. The offence carries a maximum penalty of 30 penalty units.

762. This penalty is appropriate as the information that would be obtained through an examination will be critical to AUSTRAC's ability to monitor compliance with the AML/CTF Act, the AML/CTF Rules or the regulations. In turn, this information will assist AUSTRAC in detecting, deterring and disrupting money laundering, the financing of terrorism, and other serious offences. The penalty is sufficient enough as a deterrent to potential conduct that may undermine the exercise of the power, and falls well below the threshold for strict liability offences under the Guide to Framing Commonwealth Offences.

763. Subsection 172H(3) also provides that the AUSTRAC CEO may give another person a copy of the record, and may subject this to conditions. In practice, this will ensure the AUSTRAC CEO or their delegate can provide a copy of the record to officials of law enforcement agencies or officials of the Commonwealth Director of Public Prosecutions.

764. Section 172J is an offence provision, and provides that it is an offence of strict liability if a person breaches conditions related to the disclosure of the copy of the record. The offence carries a maximum penalty of 30 penalty units.

765. This penalty is appropriate as the information that would be obtained through an examination will be critical to AUSTRAC's ability to monitor compliance with the AML/CTF Act, the AML/CTF Rules or the regulations. In turn, this information will assist AUSTRAC in detecting, deterring and disrupting money laundering, the financing of terrorism, and other serious offences. The penalty is sufficient enough as a deterrent to potential conduct that may undermine the exercise of the power, and falls well below the threshold for strict liability offences under the Guide to Framing Commonwealth Offences.

766. Subsection 172K(1) provides that it is not a reasonable excuse for an individual to refuse or fail to answer a question, produce a document or sign a record in accordance with a requirement made under this Division on the ground that doing so might incriminate them or expose them to a penalty. This section acts as a safeguard for statements made and records signed during examinations.

767. Subsection 172K(2) is an application provision for subsection 172K(3) and provides that that subsection applies if before making a statement in answer to a question, or signing a record, the examinee claims the statement or the signing of the record might tend to incriminate them or expose them to a penalty.

768. If the criteria at subsection 172K(2) are met, subsection 172K(3) provides that the statement or the fact that the individual has signed the record of the examination is not admissible in evidence against the person other than in a proceeding relating to the falsity of the statement or the falsity of any statement contained in a signed record of the examination.

769. The Guide to Framing Commonwealth Offences indicates that where a law excludes the privilege against self-incrimination as in section 172K, it is 'usual to include a use immunity or a derivative use immunity provision'. The Guide explains that the rationale for this protection is that 'removing the privilege against self-incrimination represents a significant loss of personal liberty for an individual who is forced to give evidence that would tend to incriminate him or herself'.

Subdivision B—Evidentiary use of certain material

770. Item 5 also inserts a new heading for Subdivision B – 'Evidentiary use of certain material'. This Subdivision provides for the use of certain material provided at an examination and clarifies when and how this can be used in evidence.

771. Subsection 172L(1) provides that a statement made by an examinee is admissible in proceedings against the person, unless it fits within a number of circumstances including that because of subsection 172K(3), the statement is not admissible.

772. Subsection 172L(2) provides that for the purposes of subsection 172L(1), a proceeding is a proceeding in a court, or a proceeding, hearing or examination before a tribunal, authority or person that has the power to hear, receive or examine evidence.

773. Subsection 172L(3) provides that subsection 172L(1) applies in relation to a proceeding against a person even if it is heard together with a proceeding against another person.

774. Subsection 172L(4) provides that if a written record of an examination is signed by the person under subsection 172G(2), or authenticated in another appropriate manner, the record is prima facie evidence of the statements it records. This subsection also provides that nothing in this Division limits or affects the admissibility in the proceeding of other evidence of statements made at the examination.

775. Subsection 172M(1) allows a statement made by an absent witness in an examination to be admissible as evidence in proceedings. Section 172M would operate as an evidentiary certificate. Sections 172N and 172P provide procedural safeguards to accompany section 172M.

776. Subsection 172M(2) outlines what is considered a proceeding for the purposes of subsection 172M(1).

777. Subsection 172N(1) provides that this section applies if evidence of a statement made by a person at an examination is admitted under section 172M.

778. Subsection 172N(2) specifies the matters which must be considered in deciding the evidentiary weight given to evidence provided by an absent witness under section 172M.

779. Subsection 172N(3) provides that if a person is not called as a witness in the proceeding, evidence that would have been admissible if the person had been called is admissible. This ensures statements are able to be used as evidence where a person is unable to attend proceedings, for example they are unable to travel or have died.

780. Subsection 172N(4) provides that this evidence is not admissible if, had the person been called as a witness and denied the matter in cross-examination, evidence of the matter would not have been admissible if adduced by the cross-examining party.

781. Section 172P creates a mechanism for an objection to be lodged to the admission of a statement made at an examination. Subsection 172P(1) provides that the adducing party to a proceeding may, not less than 14 calendar days before the first day of the hearing of the proceeding, give to another party to the proceeding written notice that the adducing party:

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will apply to have admitted in evidence in the proceeding specified statements made at an examination, and

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for that purpose, will apply to have evidence of those statements admitted in the proceeding.

782. Subsection 172P(2) outlines what matters are considered proceedings for the purposes of subsection 172P(1).

783. Subsection 172P(3) provides that a notice under subsection 172P(1) must set out, or be accompanied by writing that sets out, the specified statements.

784. Subsection 172P(4) provides that within 14 days after a notice is given under subsection 172P(1), the other party may then give the adducing party a written notice objecting to specified statements being admitted in evidence and the grounds of that objection.

785. Subsection 172P(5) allows for the period of time prescribed by subsection 172P(4) to be extended by the court or tribunal, or by agreement between the concerned parties.

786. Subsection 172P(6) provides that copies of a notice under subsection172P(1) or 172P(4) must be given to the court or tribunal by the adducing party.

787. Subsection 172P(7) provides that if the requirements of subsection 172P(6) are complied with, the court or tribunal may determine the objections as a preliminary point before the proceeding begins or defer determination of the objections until the hearing.

788. Subsection 172P(8) provides that if notice has been given in accordance with this section, the other party is not entitled to object at the hearing to the statement specified in the notice being admitted in evidence unless they have previously objected, or the court or tribunal gives leave to object.

789. Section 172Q provides that nothing in this Division renders evidence inadmissible in a proceeding in circumstances where it would have been admissible if this Division had not been enacted.

Subdivision C—Miscellaneous

790. Item 5 also inserts a new heading for Subdivision C – Miscellaneous.

791. Section 172R provides for the application of the Crimes Act 1914 (the Crimes Act) and the Evidence Act 1995 (the Evidence Act) for the purposes of this Division.

792. Subsection 172R(1) provides that for the purposes of Part III of the Crimes Act, an examination under this Division is a judicial proceeding. Part III of the Crimes Act includes offences relating to the administration of justice.

793. Subsection 172R(2) provides that for Part 2.2, sections 69, 70, 71, 147 and Division 2 of Part 4.6 of the Evidence Act apply to an examination under this Division in the same way they apply to a proceeding to which the Evidence Act applies under section 4 of that Act. The relevant provisions of the Evidence Act are:

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Part 2.2 deals with adducing documentary evidence.

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Section 69 provides that the hearsay rule does not apply to business records

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Section 70 provides that the hearsay rule does not apply to a tag or label attached to or writing placed on an object, including a document

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Section 71 provides that the hearsay rule does not apply to a representation contained in a document recording an electronic communication

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Section 147 presumes that documents are produced by processes, machines and other devices in the course of business

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Division 2 of Part 4.6 sets out procedures for proving certain matters by affidavits or written statements.

Part 2—Information gathering power

Division 1 – Main amendments

Anti-Money Laundering and Counter-Terrorism Financing Act 2006

Item 6 – After section 49A

794. Item 6 inserts new sections 49B and 49C following section 49A in the AML/CTF Act.

795. New section 49B provides for the AUSTRAC CEO's power to issue a notice to obtain information or documents in certain circumstances, and new section 49C provides the AUSTRAC CEO with the power to issue a written notice authorising persons to provide information or documents in certain circumstances without breaching general law obligations of confidence.

New section 49B – Notice to obtain information or documents in certain circumstances

796. The intention of new section 49B is to empower AUSTRAC to gather information for intelligence purposes in circumstances that are not triggered by the receipt of a suspicious matter, threshold transaction or international value transfer services report, in recognition of the reframing of existing section 167 of the AML/CTF Act to focus on regulatory compliance and enforcement of the AML/CTF Act. This would enable AUSTRAC to be proactive in collecting information that assists and supports the AUSTRAC CEO to carry out their functions under the AML/CTF Act.

797. The power to issue a notice under section 49B is appropriately conferred on the AUSTRAC CEO, as a notice may be issued to any person (not just a reporting entity). As with other powers conferred on the AUSTRAC CEO under the AML/CTF Act, this power may be delegated in accordance with subsection 222(1), and the CEO may provide directions that the delegate must follow in relation to the use of this power under subsection 222(2).

798. New subsection 49B(1) outlines the scope of the power to issue a notice, and provides that this section applies if a person has information or a document that may assist theAUSTRAC CEO with particular activities for the purpose of the performance of functions of the AUSTRAC CEO.

799. Those particular activities are set out in paragraphs 49B(1)(a) and (b) as:

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obtaining or analysing information to support efforts to combat money laundering, terrorism financing, proliferation financing and other serious crimes; or

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identifying trends, patterns, threats or vulnerabilities associated with money laundering, terrorism financing, proliferation financing and other serious crimes.

800. FATF Recommendation 29 provides that a FIU "should be able to obtain additional information from reporting entities, and should have access on a timely basis to the financial, administrative and law enforcement information that it requires to undertake its functions properly". The interpretive note to Recommendation 29 further breaks down the kinds of analysis to be carried out by the FIU into 'operational analysis' and 'strategic analysis'.

801. The activities outlined at paragraphs 49B(1)(a) and (b) are intended to reflect the FATF's expectation of FIU functions, including the broader central role to identify, assess and understand risks of money laundering and terrorist financing. The inclusion of 'other serious crimes' also reflects the objects clause of the AML/CTF Act at section 3, and the functions of the AUSTRAC CEO at section 212.

802. This item will support AUSTRAC's FIU operations in ways not currently supported by section 49 of the AML/CTF Act. In practice, paragraph 49B(1)(a) will assist in circumstances where a person comes to AUSTRAC's attention (whether by way of a referral from an international FIU, or an Australian law enforcement agency) in relation to money laundering, terrorism financing, or other serious criminal offending, and there have been no reports made by reporting entities in respect of the person of interest or the offending. New section 49B will allow the AUSTRAC CEO to issue a notice to a person (for example, a bank, bullion trader, or firearms store that AUSTRAC knows the person to be a customer of) if they reasonably believe that the person has knowledge or information on the person of interest that will support AUSTRAC's analysis.

803. In practice, paragraph 49B(1)(b) will allow AUSTRAC to conduct broader analysis at a thematic level. At present, if AUSTRAC is undertaking analysis that requires the acquisition of data relating to a theme, or a set of financial crime indicators, it is currently not possible under the existing section 49 notice power to obtain higher level, strategic information to support AUSTRAC's role to advise and assist reporting entities on risk for the purposes of their ML/TF risk assessment, or to support domestic and international efforts to combat money laundering, terrorism financing, proliferation financing and other serious crimes. Section 49B will better enable AUSTRAC to collect information from reporting entities and other persons to deliver its financial intelligence functions, and to support cooperation and collaboration among reporting entities and law enforcement agencies to detect, deter and disrupt money laundering, the financing of terrorism, and other serious crimes.

804. New subsection 49B(2) outlines the requirements for a written notice issued by the AUSTRAC CEO. A notice issued under this section must set out the time period and the manner in which the required documents are to be produced. For example, a notice may state that the documents must be produced to the AUSTRAC CEO by sending the documents to a specific email address by a specific date set out in the notice.

805. New subsection 49B(3) clarifies that the AUSTRAC CEO must not give a notice to a person unless he or she reasonably believes that the recipient of the notice has knowledge, possession or control of the information set out in the notice. This safeguard would ensure that the AUSTRAC CEO meets a particular threshold before issuing a notice to a recipient, and prevents information being sought to advance a 'fishing expedition'. This safeguard is also particularly important as non-compliance with a notice attracts a civil penalty. The AUSTRAC CEO may reach this conclusion in a number of ways, for example other documents provided to AUSTRAC may confirm the recipient has a particular document in their possession.

806. New subsections 49B(4) and 49B(5) set out the requirements for the content of the notice. At a minimum, the notice must set out the period within which the required documents are to be provided to the AUSTRAC CEO. Generally, this period must end at least 14 days after the date on which the notice is given to the recipient. However, a shorter period may be specified in the notice in circumstances where the AUSTRAC CEO considers a shorter period is necessary, or a shorter period is reasonable in the circumstances.

807. It is expected that a period of at least 14 days will be appropriate to ensure the recipient has sufficient time to obtain the documents and produce or make them available to the AUSTRAC CEO in line with the requirements set out in the notice. However, there may be circumstances where a shorter period is considered necessary, or is otherwise reasonable in the circumstances. For example, information in a document may be time sensitive, such as where AUSTRAC is conducting financial analysis on an emerging national security or terrorism financing matter.

808. New subsection 49B(5) requires a notice to set out the effect of subsection 49B(7) and sections 136 and 137 of the AML/CTF Act. Subsection 49B(7) relates to compliance with the notice and civil penalties applicable for non-compliance with a notice. This ensures the person receiving a notice is aware that they may be liable for a civil penalty if they do not comply with the notice within the period specified, and in the manner specified.

809. Both notes 1 and 2 inserted under subsection 49B(5) clarify that section 136 is about giving false or misleading information and section 137 is about producing false or misleading information. Requiring the notice to set out the effects of these sections makes it clear to the person receiving the notice what their obligations are in providing information or documents to the AUSTRAC CEO, that is, that they not be false or misleading.

810. Subsection 49B(6) requires a person to comply with a notice provided under this subsection.

811. Subsection 49B(7) makes the obligation from subsection 49B(6) subject to a civil penalty. These penalties are outlined in Division 2 of Part 15 of the AML/CTF Act. The maximum civil penalty under the AML/CTF Act is set at the highest amount allowed, which is 100,000 penalty units for a corporation and 20,000 penalty units for individuals. While the penalties can be substantial, AML/CTF enforcement actions can involve serious systemic failures by a reporting entity where the number of contraventions is immeasurable. The amount of any civil penalty will be determined by the court. Courts will decide the appropriate penalty (subject to the statutory maximum) based on the circumstances of a contravention. In determining the appropriate amount for a civil penalty, the courts will consider the impact of these violations on the Australian community, the financial system, and law enforcement efforts.

812. An individual's right to refuse to give information on the basis that it would be self- incriminating is not abrogated by this notice power.

New section 49C – Authorisation to obtain information or documents in certain circumstances

813. New section 49C would empower the AUSTRAC CEO to provide authorisation by written notice to a person allowing for the provision of information or documents voluntarily. There are no civil penalties attached to a failure to provide information under such an authorisation. This authorisation to produce recognises AUSTRAC's public-private partnerships, and other forms of cooperation between AUSTRAC and reporting entities, which facilitate cooperation to detect, deter and disrupt financial crime.

814. The Fintel Alliance is a public-private partnership led by AUSTRAC, which brings together the private sector, including major banks, as well as law enforcement and security agencies from Australia and overseas. Through the cooperation of members, the Fintel Alliance develops shared intelligence and delivers innovative solutions to detect, disrupt and prevent serious crime.

815. Members of the Fintel Alliance, alongside other cooperative reporting entities, proactively work with AUSTRAC on live intelligence cases and on strategic level intelligence analysis. However, in many cases the provision of information to AUSTRAC can only occur following the issuing of mandatory information production notice. This information sharing comes with a risk of civil penalties if entities cannot access protections from section 51 or section 235 of the AML/CTF Act. The new authorisation notice power is intended to facilitate such information sharing for defined purposes without exposing cooperative persons to legal risks such as breach of privacy or contractual obligations of confidence.

816. Section 49C is intended to allow for the AUSTRAC CEO to issue a notice to a person or entity as part of these partnerships, allowing them to voluntarily provide information. In order to encourage the sharing of information, section 49C is designed in a way that ensures recipients are protected any legal action such as breaches of confidence as a result of sharing the information.

817. Subsection 49C(1) mirrors subsection 49B(1) to set out the scope of such an authorisation, by making it clear that this section applies if a person has information or a document that may assist the AUSTRAC CEO with particular activities for the purpose of the performance of functions of the AUSTRAC CEO.

818. Similar to section 49B, those particular activities are set out in paragraphs 49C(1)(a) and (b) as:

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obtaining or analysing information to support efforts to combat money laundering, terrorism financing, proliferation financing and other serious crimes; or

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identifying trends, patterns, threats or vulnerabilities associated with money laundering, terrorism financing, proliferation financing and other serious crimes.

819. New subsection 49C(2) provides that the AUSTRAC CEO may, by written notice, authorise a person to give information or provide documents. Unlike section 49B, this is not limited to a particular manner or timeframe, and is intended to be as broad and flexible as possible to facilitate collaboration between AUSTRAC and its partners.

820. New subsection 49C(3) requires a notice to set out the effect of subsection 49C(5) and sections 136 and 137 of the AML/CTF Act. Subsection 49C(5) sets out the application of the section despite any general law obligations of confidence, clarifying for the person receiving the notice that in providing information or documents in response to the authorisation notice, they will be protected from inadvertently breaching any contractual obligations of confidence.

821. Both notes 1 and 2 inserted at the end of subsection 49C(3) provide that section 136 of the AML/CTF Act is about giving false or misleading information and section 137 of the AML/CTF Act is about producing false or misleading information. Requiring the notice to set out the effects of these sections makes it clear to the person receiving the notice what their obligations are in providing information or documents to the AUSTRAC CEO, that is, that they are not false or misleading.

822. New subsection 49C(4) provides that a person may give information or produce a document to the AUSTRAC CEO in accordance with a notice under subsection 49C(2). This confirms the intent of the operation of section 49C detailed above.

823. The note inserted at the end of new subsection 49C(4) clarifies that this subsection constitutes an authorisation for the purposes of the Privacy Act 1988 and other laws.

824. New subsection 49C(5) expressly provides that the authorisation to provide information or documents under section 49C applies despite general law obligation of confidence. The effect of this is to ensure a person providing information in response to a notice is protected from the operation of general law obligations as such a disclosure would not amount to a breach of confidence.

825. An individual's right to refuse to give information on the basis that it would be self- incriminating is not abrogated by this notice power.

Item 7 – Section 50A (at the end of the heading)

826. This Item inserts ', 49B or 49C' at the end of the heading. This is intended to ensure that information obtained in response to a notice issued under clauses 49B or 49C is afforded the same secrecy protections under the AML/CTF Act as notices issued under section 49. As outlined below in relation to Items 8 and 9 of this Schedule, amendments to section 50A would extend the existing criminal offence for making a record of, disclosing or otherwise using information obtained under section 49 to sections 49B and 49C.

Item 8 – Paragraph 50A(1)(b)

827. As outlined above in relation to Item 7 of this Schedule, Item 8 extends paragraph 50A(1)(b) to include information obtained through section 49B or 49C notices.

Item 9 – Paragraphs 50A(3)(a) and (b)

828. Similarly to Items 7 and 8, Item 9 extends paragraphs 50A(3)(a) and (b) to information obtained under sections 49B and 49C. This clarifies that an entrusted investigating official is not to be required to produce a document containing information obtained under these clauses to a court or tribunal, or disclose such information to a court or tribunal, except where it is necessary to do so for the purposes of giving effect to the AML/CTF Act.

Item 10 – Section 51

829. Item 10 includes reference to '49, 49B or 49C' in existing section 51 of the AML/CTF Act. Section 51 of the AML/CTF Act clarifies that a person who provides information under sections 41, 43, 45 or 49 of the AML/CTF Act will be taken not to have been in possession of that information for the purposes of Division 400 (Money laundering) and Chapter 5 (The Security of the Commonwealth) of the Criminal Code. Item 10 amends this provision to also add information obtained under sections 49B and 49C, offering the same protections to that information.

Item 11 – Section 120

830. Item 11 amends the simplified outline in section 120 of the AML/CTF Act to insert an additional point that notes certain persons must not disclose information relating to the giving or production of certain reports, information or other documents.

831. While this update to the simplified outline is included to assist a reader's understanding of the substantive provisions to follow, it is not intended to be comprehensive. Readers are advised to rely on the substantive provisions for full comprehension.

Item 12 – After subsection 123(2)

832. This is a bridging provision which would protect against the disclosure of information relating to a notice under section 49B ahead of the new tipping off offence (at Schedule 5 of the Bill) commencing on 31 March 2026. This bridging provision will then be repealed upon commencement of the new tipping off offence.

833. Item 12 inserts subsection 123(2A), which would prohibit a person from disclosing to anyone (except an AUSTRAC entrusted person) they that are or have been required by a notice under subsection 49B(2) to give information or produce a document, or that the information has been given or the document has been produced.

Item 13 – Subsection 123(10)

834. Item 13 is consequential to the amendment made by Item 12 of this Schedule (see above) and provides that except where it is necessary to do so for the purposes of giving effect to the AML/CTF Act or the FTR Act a reporting entity is not to be required to disclose to a court or tribunal information mentioned in subsections 123(1), 123(2) or 123(2A).

Item 14 – Paragraph 123(11)(a)

835. Item 14 is consequential to the amendment made by Item 12 of this Schedule (see above) and inserts new subsection 123(2A) into the tipping off offence.

Item 15 – Subsection 167(1)

836. This Item repeals and replaces subsection 167(1) of the AML/CTF Act to reinforce its original policy intent to be a complementary 'paper-based' production power to Part 13 of the AML/CTF Act. The amendments to section 167 will allow an authorised officer to issue a notice to any person the officer reasonably believes has knowledge or information relevant to compliance with the AML/CTF Act or the regulations requiring them to provide that information.

837. Authorised officers can currently only request information from a person if they are a reporting entity, an officer, employee or agent of a reporting entity, or their name has been entered on the Remittance Sector Register. New subsection 167(1) would allow a notice to be given to any person the authorised officer considers has knowledge of information, or possession or control of a document.

838. As this amendment to subsection 167(1) expands the class of potential recipients from current or former reporting entities (or their current of former employees or agents), the scope of the provision has been reduced. Whereas before an authorised officer could request anything 'relevant to the operation of this Act, the regulations or the AML/CTF Rules', new subsection 167(1) will require the information or document to be relevant to the compliance with or enforcement of:

•

an offence provision of the AML/CTF Act or the regulations,

•

a civil penalty provision of the AML/CTF Act or the regulations, or

•

an offence provision of the Crimes Act 1914 or the Criminal Code, to the extent that it relates to the AML/CTF Act.

839. 'Compliance with or enforcement of' the AML/CTF Rules is not included in the new subsection 167(1) as there are no criminal or civil penalty provisions contained within the AML/CTF Rules.

840. The scope of new subsection 167(1) is intended to ensure that AUSTRAC can appropriately seek the information it needs to ensure compliance with and enforcement of the AML/CTF regime where individuals or entities have information that is relevant, but may not necessarily be considered a reporting entity. This is particularly relevant given the opening up of flexibility for members of reporting groups elsewhere in these reforms, and will ensure AUSTRAC is able to ensure compliance even where AML/CTF obligations are being discharged on behalf of reporting entities.

Item 16 – After subsection 167(3)

841. This Item inserts a new 'Compliance' heading into section 167. Item 16 also inserts new subsection 167(3A) to provide that a person is required to comply with a notice given under subsection 167(2), and subsection 167(3B) to clarify that subsection 167(3A) is a civil penalty provision.

842. The insertion of these new subsections amends the penalty for non-compliance with a notice issued under subsection 167(2) from only a criminal penalty, to be a criminal and civil penalty. The addition of a civil penalty provision is so AUSTRAC is able to address non- compliance with a notice without referral for criminal prosecution. Both a criminal and civil penalty is required in this instance, as if only civil penalties were available, a reporting entity may make a commercial decision to not respond to a notice issued under subsection 167(2) and accept the civil pecuniary penalty. This would frustrate AUSTRAC's efforts and leave it unable to progress any meaningful supervision or enforcement proceedings.

843. Subsection 167(3B) makes the obligation from 167(3A) subject to a civil penalty. These penalties are outlined in Division 2 of Part 15 of the AML/CTF Act. The maximum civil penalty under the AML/CTF Act is set at the highest amount allowed, which is 100,000 penalty units for a corporation and 20,000 penalty units for individuals. While the penalties can be substantial, AML/CTF enforcement actions can involve serious systemic failures by a reporting entity where the number of contraventions is immeasurable. The amount of any civil penalty will be determined by the court. Courts will decide the appropriate penalty (subject to the statutory maximum) based on the circumstances of a contravention. In determining the appropriate amount for a civil penalty, the courts will consider the impact of these violations on the Australian community, the financial system, and law enforcement efforts.

Item 17 – At the end of paragraph 169(2)(d)

844. Section 169 currently deals with a person's privilege against self-incrimination for the purposes of giving information or producing a document under section 167 of the AML/CTF Act. Subsection 169(2) provides for limitations on the admissibility of the information provided in evidence against the person, including that it can only be used in civil and criminal proceedings under the AML/CTF Act, or proceedings under the POCA that relate to the AML/CTF Act.

845. The amendments made by Item 17 to subparagraph 169(2)(d) add three further exceptions to these limitations, being criminal proceedings for an offence against a provision covered by the definition of 'money laundering', 'financing of terrorism' or 'proliferation financing' as defined in 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 information collected by AUSTRAC under section 167 is relevant.

846. This expansion of the abrogation of the privilege against self-incrimination is proportionate and reasonable, 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. Further, the abrogation is no more than necessary to ensure AUSTRAC's effectiveness in monitoring and ensuring compliance with the AML/CTF Act, the AML/CTF Rules and the regulations.

Items 18 and 19

847. Items 18 and 19 add the relevant new subsections to the existing list of designated infringement provisions in the AML/CTF Act by inserting new text at section 184 of the AML/CTF Act to provide that new subsections 49B(6) and 167(3A) are 'designated infringement notice provisions' for the purpose of the AML/CTF Act.

848. Subsection 49B(6) deals with complying with a notice requiring certain documents, and subsection 167(3A) deals with complying with a notice requiring certain information or documents.

Division 2—Consequential Amendments

Freedom of Information Act 1982

Item 20 – Subparagraph 7(2G)(a)(iii)

849. This Item amends subparagraph 7(2G)(a)(iii) of the Freedom of Information Act 1982 (the FOI Act) to add information communicated to AUSTRAC in response to a notice issued under sections 49B and 49C to the list of documents exempt from the operation of the FOI Act.

850. This is intended to ensure that information obtained by AUSTRAC in response to notices issued under section 49B notices and section 49C notices has the same protections as information provided in response to notices issued under section 49 of the AML/CTF Act. The nature of the information or documents provided under all the notice powers in the AML/CTF Act will be similar and they should therefore be offered similar protections.

851. Information or documents provided in response to a notice could contain commentary that is damaging to an individual or reporting entity, and this information may not be comprehensive or substantiated. It is important, therefore that this information is afforded additional protections under the FOI Act to avoid its disclosure.

Part 3—Definitions

Anti-Money Laundering and Counter-Terrorism Financing Act 2006

Items 21 and 22

852. Items 21 and 22 amend the existing definitions of 'credit card' and 'debit card' in section 5 of the AML/CTF Act. The intention is to clarify the intended meaning of these terms, including where they are used in the amended definition of 'stored value card' inserted by Item 12 of Schedule 6.

853. The existing definitions of credit card and debit card in section 5 have the same meaning as in section 39 of Schedule 2 of the Competition and Consumer Act 2010 (CCA). The current interpretation and application of the definitions is problematic as paragraph 131A(2)(d) of the CCA states that the definitions of credit card and debit card do not apply to cards that are financial products. This has created confusion for reporting entities, as it is unclear whether the limitation under paragraph 131A(2)(d) also applies under the AML/CTF Act.

854. Recommendation 19.1(c) of the 2016 Statutory Review recommended that the definitions of credit card and debit card be replaced with definitions identical to those in section 39 of Schedule 2 of the CCA. These definitions have not been adopted in this Bill due to the need to ensure that the definitions are not restricted only to products where a physical card is issued due to the use and definition of 'article' in section 39 of Schedule 2 of the CCA.

855. The new definitions are intended to capture 'digital only' credit cards and debit cards that do not exist in a physical form. Additionally, the department considers that there is a benefit to including in both definitions that the credit card or debit card is linked to an account, which corresponds to various designated services in the AML/CTF Act (and in the definition of loan).

Item 23 – Section 5 (definition of derivative )

856. This Item replaces the existing definition of 'derivative' in section 5 of the AML/CTF Act. The new definition refers to the meaning of 'security' in new subsections 7A(1) and (2) (to be inserted by Item 29 of this Schedule). This would allow for the AML/CTF Rules to specify what is or is not a derivative for the purposes of the AML/CTF Act.

Item 24 – Section 5 (definition of issue )

857. This Item amends the definition of 'issue' in section 5 of the AML/CTF Act to clarify that it has the same meaning as in Chapter 7 of the Corporations Act.

858. There is uncertainty regarding the meaning of 'issue' in respect of the existing definition of 'security' and 'derivative' in section 5 of the AML/CTF Act (to be moved to section 8 of the AML/CTF Act by Item 29 of this Schedule), which references section 716E of the Corporations Act only in respect of timing. This provision of the Bill intends to resolve this issue by prescribing that 'issue' has the meaning of Chapter 7 (or section 716E) of the Corporations Act, including when used in relation to a security or derivative.

Item 25 – Section 5 (paragraphs (e) and (f) of the definition of loan )

859. This Item amends paragraphs (e) and (f) of the definition of 'loan' in section 5 of the AML/CTF Act to clarify the interaction between these paragraphs and the CCA. Paragraph (e) refers to goods and (f) refers to services.

860. The definition of 'loan' currently relies on the definition of goods and services outlined in the CCA. However, there are a number of banking, insurance and financial carve outs in the CCA definition of services that are not intended to be carved out of the AML/CTF regime. The ordinary meaning of both goods and services is considered more appropriate for the AML/CTF Act.

Item 26 – Section 5 (definition of money )

861. This Item amends the definition of 'money' in section 5 of the AML/CTF Act by adding digital representations of value that are issued by or under the authority of a government body and are intended to function as money. This amendment is intended to provide certainty that the definition of 'money' in section 5 of the AML/CTF Act includes digital representation of value. This includes, for example, digital currency issued by the central bank of a government.

862. The existing definition of 'digital currency' in the AML/CTF Act excludes any digital representation of value that is issued by or under the authority of a government body. However, since this definition of digital currency was introduced, there has been an emergence of digital currencies issued by central banks (known as 'central bank digital currency' or CBDC). These are considered legal tender and as such, the FATF Standards require that these forms of currency be subject to AML/CTF regulation.

Item 27 – Section 5 (definition of security )

863. This Item inserts a new definition of 'security' in section 5 of the AML/CTF Act, which refers to the meaning of security in subsections 8(1) and (2) of the AML/CTF Act.

Item 28 – Section 5 (definition of service )

864. Item 16 removes the existing definition of 'service' in section 5 of the AML/CTF Act. As outlined in Item 25 the carve outs in the CCA are not appropriate in the context of the AML/CTF Act, therefore ordinary meaning is preferred.

Item 29 – After section 7

865. This Item inserts new section 7A into the AML/CTF Act, which sets out the meaning of 'security' and 'derivative'.

866. The terms 'security' and 'derivative' are to have the same meaning as in Chapter 7 of the Corporations Act. The new definition also provides flexibility for the AUSTRAC CEO to make Rules to provide that a specific thing is or is not a security or a derivative.

867. The 2016 Statutory Review found that the potentially wide interpretation of derivative and security used within the AML/CTF Act could result in confusion as to whether AML/CTF obligations apply to a wide range of instruments, transactions and relationships that need not be issued by a financial institution as defined by the FATF, for example, executory contracts. To address this finding, and to also ensure the definition is not unnecessarily narrowed, the new definition includes a carve-in and carve-out rule-making power to allow the AUSTRAC CEO to prescribe particular securities and derivatives as securities and derivatives (or not) under the AML/CTF Act as investment products continue to rapidly evolve.

Part 4—Contingent amendment

Anti-Money Laundering and Counter-Terrorism Financing Act 2006

Item 30 – Subsection 123(8B)

868. This Item is a contingent amendment relating to the relationship between section 123 of the AML/CTF Act, as amended by this Bill, and the Intelligence Services Legislation Amendment Bill 2023, which is currently before Parliament.

869. If the ISLA Act commences, it would insert a new subsection 123(8B) in the AML/CTF Act, and would create an exception to the tipping off offence to permit the disclosure of SMR or section 49-related information to an official of the IGIS for the purpose of the IGIS performing oversight functions.

870. In the event the ISLA Act commences before Schedule 5 of this Bill, an amendment is required to subsection 123(8B) to update the tipping off offence to protect against the disclosure of s49B-related information. Item 30 amends subsection 123(8B) of the AML/CTF Act inserted by the ISLA Act to omit 'and (2) do not apply to the disclosure of information by a reporting entity' and substitute it with ', (2) and (2A) do not apply to the disclosure of information by a person'. Once Schedule 5 of this Bill commences, it will then wholly replace the tipping off offence in section 123 of the AML/CTF Act.