Explanatory Statement – Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2016 (No. 2) amending the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1)

Purpose and operation of Anti-Money Laundering/Counter‑Terrorism Financing Rules (AML/CTF Rules) amending Chapter 11 and adding Chapters 72 and 73.

1. Section 229 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) provides that the AUSTRAC Chief Executive Officer (AUSTRAC CEO) may, by writing, make AML/CTF Rules prescribing matters required or permitted by any other provision of the AML/CTF Act.

Amendment to Chapter 11

2.                   Chapter 11 specifies the reporting and lodgment periods applicable to the compliance reporting obligation in section 47 (AML/CTF compliance reports) of the AML/CTF Act.  This obligation requires reporting entities to provide a report to the AUSTRAC CEO about their compliance with the AML/CTF Act, Rules and Regulations.

3.                   AUSTRAC provided an exemption for the 2012, 2013, 2014 and 2015 compliance reporting periods, for registered remittance network providers (RNPs) and registered remittance affiliates providing designated services relating to remittance arrangements under items 31, 32 or 32A in order to alleviate the regulatory burden of registration on the Remittance Sector Register.

4.                   If a registered remittance affiliate of a registered RNP provides a designated service in addition to items 31 or 32 of section 6 of the AML/CTF Act, or a registered RNP provides a designated service in addition to item 32A in 2016, then they are required to submit a compliance report for that year with respect to all designated services which they provide. 

Addition of Chapter 72

5. The MoneyGram and Western Union account-based money transfer (ABMT) services enable authorised deposit-taking institutions (ADIs), which are principally small banks, building societies and credit unions, to offer their customers the ability to undertake or receive remittance transfers through the respective MoneyGram and Western Union platforms. These include transactions involving internet, over-the-counter or telephone banking. Through the ABMT service the ADI customer is able to use their account as the source or destination of funds transferred between Australia and overseas.

6. Chapter 72 specifies both foreign MoneyGram and foreign Western Union agents as ordering institutions (for instructions transmitted into Australia) and beneficiary institutions (for instructions transmitted out of Australia) for the respective MoneyGram and Western Union ABMTs, and will ensure that international fund transfer instructions made using either of the ABMT services must be reported to AUSTRAC.

7. The Schedule to the Chapter is based upon the requirements specified in Chapter 17 (Reportable details for international funds transfer instructions under a designated remittance arrangement (items 3 and 4 in section 46)) of the AML/CTF Rules.

Addition of Chapter 73

8. Chapter 73 exempts from the AML/CTF Act Registered Plan Management Providers (RPMPs) who operate in the National Disability Insurance Scheme (NDIS), which is administered by the National Disability Insurance Agency (NDIA). The NDIS and the NDIA were established by the National Disability Insurance Scheme Act 2013 (NDIS Act).

9. Eligible persons may become participants in the NDIS which means that they will have the reasonable and necessary support to reach their goals and aspirations as funded by the NDIS.  The support funded by the NDIS is outlined in a plan prepared in conjunction with the participant and approved by the NDIS.  The plan must include a statement which specifies how the funding is to be managed, and by whom. 

10. Persons who may be specified in the statement as wholly or partially responsible for the management of the funding include RPMPs.  The funding manager’s role includes procuring the support identified in the plan, receiving and managing any funding provided by the NDIA, and acquitting any funding provided by the NDIA.

11. Typically, a RPMP would procure the support required from a service provider on behalf of the participant and, following the receipt of the invoice from the service provider, submit the claims for payment into the NDIA’s claim management system.

12. Without a complete exemption from the AML/CTF Act, RPMPs would be required to comply with the Act as they will be considered to be remitters under the item 31 and item 32 designated services under section 6 of the Act.  As a result, they must register on the Remittance Sector Register as remitters and enrol on the Reporting Entities Roll as reporting entities. They will also be responsible for carrying out other relevant obligations under the AML/CTF Act. These are likely to make the performance of the function of a RPMP prohibitive and deter persons and entities from taking on that role.

13. AUSTRAC considers that it was not an intended outcome of the AML/CTF Act that functions such as those performed by RPMPs should be captured by the legislation. In addition, the risk of money laundering and/or terrorism financing occurring in relation to the provision of those services is low.

Statement of Compatibility with the Human Rights (Parliamentary Scrutiny) Act 2011

14. The Human Rights (Parliamentary Scrutiny) Act 2011 requires a Statement of Compatibility declaring that the relevant instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act.

15. The Statement of Compatibility for the Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2016 (No. 2) is included in this Explanatory Statement at page 9.  The AUSTRAC CEO, as the rule-maker of this legislative instrument, has stated that it 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.

Notes on sections

Section 1

This section sets out the name of the Instrument, i.e. the Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2016 (No. 2).

Section 2

This section specifies that the Instrument commences on the day after it is registered.

Section 3

This section contains the details of the amendment:

Schedules 1 and 2 amend the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1).

Schedule 1

This schedule sets out the amendments to Chapter 11.

Schedule 2

This schedule adds Chapters 72 and 73.

Notes on Paragraphs

Schedule 1

Chapter 11

Item 1

This item amends Chapter 11 to extend the existing exemption for registered remittance network providers and registered remittance affiliates to cover the 2016 AML/CTF compliance reporting obligation.

Schedule 2

Item 1

Chapter 72

Paragraph 72.1

This paragraph specifies that these AML/CTF Rules have been made under section 229 of the AML/CTF Act for the purposes of subparagraphs 8(1)(c)(v), 8(1)(d)(v), 9(1)(c)(v) and 9(1)(d)(v) of the AML/CTF Act and paragraph 45(3)(b) of that Act.

Paragraph 72.2

This paragraph specifies MoneyGram as an ordering institution for the purposes of subparagraphs 8(1)(c)(v) and 9(1)(c)(v).

Paragraph 72.3

This paragraph specifies MoneyGram as a beneficiary institution for the purposes of subparagraphs 8(1)(d)(v) and 9(1)(d)(v).

Paragraph 72.4

This paragraph lists the two conditions that, if either are met, then for the purposes of paragraph 45(3)(b) (Reports of International Funds Transfer Instructions) of the AML/CTF Act, the report to the AUSTRAC CEO of the International Funds Transfer Instruction must contain the information specified in the Schedule to Chapter 72.

Paragraph 72.5

This paragraph specifies Western Union as an ordering institution for the purposes of subparagraphs 8(1)(c)(v) and 9(1)(c)(v).

Paragraph 72.6

This paragraph specifies Western Union as a beneficiary institution for the purposes of subparagraphs 8(1)(d)(v) and 9(1)(d)(v).

Paragraph 72.7

This paragraph lists the two conditions that, if either are met, then for the purposes of paragraph 45(3)(b) (Reports of International Funds Transfer Instructions) of the AML/CTF Act, the report to the AUSTRAC CEO of the International Funds Transfer Instruction must contain the information specified in the Schedule to Chapter 72.

Paragraph 72.8

This paragraph defines the terms, ‘MoneyGram’, ‘MoneyGram Money Transfer Service’, ‘Western Union’ and ‘Western Union Money Transfer Service’.

Schedule

This schedule specifies the reportable details for International Funds Transfer Instructions sent or received via the MoneyGram Money Transfer Service or the Western Union Money Transfer Service.

Chapter 73

Paragraph 73.1

This paragraph specifies that these AML/CTF Rules have been made under section 229 of the AML/CTF Act for the purposes of subsection 247(3) of that Act.

Paragraph 73.2

This paragraph specifies that the AML/CTF Act does not apply to designated services of a kind described in item 31 or item 32 of table 1 in subsection 6(1) of the AML/CTF Act, subject to circumstances as listed in paragraph 73.3.

Paragraph 73.3

This paragraph specifies that the exemption will apply if the designated service is being provided by a person who is a Registered Plan Management Provider under the National Disability Insurance Scheme Act 2013, and the provision of the designated service relates solely to managing the funding for supports for a participant in the National Disability Insurance Scheme.

Paragraph 73.4

This paragraph defines the terms, ‘Managing the funding for supports’, ‘National Disability Insurance Scheme’, ‘Participant’ and ‘Registered Plan Management Provider’.

Legislative instruments

These AML/CTF Rules are legislative instruments as defined in section 8 of the Legislation Act 2003.

Likely impact

The amendments to Chapter 11 and the additions of Chapters 72 and 73 will have an impact on reporting entities, while Chapter 72 will also have an impact on AUSTRAC.

Assessment of benefits

The amendments to Chapter 11 would reduce the regulatory burden on registered remittance network providers and registered remittance affiliates, through the continuance in 2016 of the exemption from compliance reporting obligations which commenced in 2012 and was continued in 2013, 2014 and 2015.

The addition of Chapter 72 would have a positive effect on MoneyGram and Western Union due to their implementation of their account-based money transfer services, while AUSTRAC would benefit from the reporting of international funds transfer instructions which otherwise would not have occurred without the addition of the chapter.

The Office of Best Practice Regulation (OBPR) advised AUSTRAC that the changes were minor and therefore regulatory costings have not been developed in regard to Chapter 11 and Chapter 72.

The addition of Chapter 73 would have a positive impact on NDIS providers who would otherwise have had to perform obligations under the AML/CTF Act.

The Chapter 73 regulatory savings as calculated under the OBPR Regulatory Burden Measurement Framework are detailed below:

Total offset savings

Consultation

AUSTRAC did not consult on the amendment to Chapter 11 as it was considered to be minor and continued existing regulatory arrangements for relevant reporting entities. This is in accordance with previous iterations of Chapter 11 relating to this exemption.

AUSTRAC initially consulted on Chapter 72 in July 2015 when it related to Western Union. With the subsequent addition of MoneyGram to the chapter, it was republished for further public consultation on the AUSTRAC website from 22 July 2016 to 19 August 2016. AUSTRAC also consulted directly with Western Union and MoneyGram on drafts of the chapter before publication and the version published was with their agreement.

Chapter 73 was published on the AUSTRAC website from 7 September 2016 to 5 October 2016. AUSTRAC also consulted directly with NDIA on drafts of the chapter before publication and the version published was with their agreement.

AUSTRAC has consulted with the Australian Taxation Office, the Department of Immigration and Border Protection, the Australian Federal Police, the Australian Criminal Intelligence Commission and the Office of the Australian Information Commissioner.

Ongoing consultation

AUSTRAC will conduct ongoing consultation with stakeholders on the operation of these AML/CTF Rules.