By John Vaughan-Williams, Associate
The Anti-Money Laundering and Counter-Terrorism Financing and Other Legislation Amendment Bill 2019 (Cth) (Bill) was passed by the Australian Government and given royal assent on 17 December 2020, establishing a suite of reforms that will strengthen anti-money laundering and counter-terrorism measures in Australia.
The Bill achieves this through amending the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act).
What is the AML/CTF Act?
The AML/CTF Act establishes a regime to protect against money laundering and the financing of terrorism, by imposing a number of obligations concerning the use and transfer of money.
Australian Transaction Reports and Analysis Centre (AUSTRAC) is a government agency which monitors money laundering and terrorism financing in Australia, as well as having powers to implement the AML/CTF Act.
AUSTRAC regulates matters such as large cash transactions, as well as any other suspicious transactions, especially across borders.
Why have the changes been introduced?
Several reports have been conducted into the effectiveness of the AML/CTF Act, which recommended implementing some of the measures brought about through the Bill.
For example, in 2015, the Financial Action Task Force (FATF) assessed the effectiveness of Australia’s anti-money laundering and counter-terrorism measures. Further, in 2016, a statutory review of the AML/CTF Act was conducted by the Australian Government.
In the FATF’s report, it highlighted several gaps in Australia’s due diligence requirements, and indicated that AUSTRAC information is only marginally used by law enforcement.
What are the changes?
There is a suite of changes that has been implemented through the Bill (several of which apply specifically to providers of financial services). In this article, we will focus on changes which are most likely to affect not-for-profits of all different kinds and sizes.
Change 1 – Information-Sharing Powers
Previously, the AML/CTF Act allocated certain agencies which were entitled to view and share information from AUSTRAC.
It was always the case under the AML/CTF Act that the AUSTRAC CEO could pass on AUSTRAC information to the Australian Charities and Not-for-Profits Commission.
However, effective as at six months from the date of assent (that is, 18 June 2021), the Bill introduces a much more general information-sharing power which allows the AUSTRAC CEO to authorise officials of Commonwealth, State or Territory agencies to access AUSTRAC information for their ordinary duties.
This means that various government agencies will be able to more easily access information regarding money laundering and terrorism financing, leading to a more robust and comprehensive system of regulation.
Change 2 – Definition of “AUSTRAC Information”
In a similar vein, the definition of “AUSTRAC information” – and, therefore, the types of information which can be disseminated by AUSTRAC – has been broadened through the Bill. The change is effective as at six months from the date of assent (that is, 18 June 2021).
Whereas the previous definition focused on information obtained under the AML/CTF Act, the new definition encapsulates information obtained by an AUSTRAC entrusted person:
- for the purposes of the AML/CTF Act;
- for the purposes of any other law of the Commonwealth, a State or a Territory; and
- from another government body.
This similarly helps to expand the types of information which can be transferred between agencies.
Change 3 – Cross-Border Transfer of Money
The Bill expands the regime concerning the transfer of large sums of money overseas. It has always been a requirement to report any cross-border transfers of physical currency in amounts greater than $10,000.00.
The Bill now includes – as well as cash – bearer negotiable instruments, which includes cheques and any other type of promissory note (for example, traveller’s cheques). This change comes into effect on the first to occur of proclamation (which can be at any time), and 18 months after Royal Assent, which is 18 June 2022.
What do these changes mean for not-for-profits?
These changes continue a trend in greater regulation on the transfer of overseas funds following the introduction of the External Conduct Standards, contained within the Australian Charities and Not-For-Profits Commission Regulation 2013 (Cth).
Subject to some minor exceptions, the External Conduct Standards require all charities to have demonstrable measures in place to ensure that they comply with the law when operating overseas. Relevantly to the Bill, External Conduct Standard 3 requires charities to monitor conduct overseas to minimise any risk of corruption, fraud, bribery or other financial impropriety.
Charities which have been registered following the introduction of the External Conduct Standards have been required to demonstrate their compliance framework to the Australian Charities and Not-for-profits Commission (ACNC) as part of the application process.
However, many existing charities may never have reviewed their compliance with the External Conduct Standards, and risk losing their charity status and tax concessions if they are ever investigated by the ACNC and are unable to demonstrate their compliance. In particular, the greater information-sharing measures implemented by the Bill will expand the information to which the ACNC has access and will increase scrutiny on the methods that charities can use to bring funds overseas.
All charities should review whether they are currently compliant with the legal obligations when conducting overseas activities, especially when it comes to their use and transfer of funds.