House of Representatives

Explanatory Memorandum

(Circulated by authority of the Attorney-General, the Honourable Philip Ruddock MP)

Schedule 3 - Financing terrorism

This Schedule contains amendments to the terrorist financing provisions of the Criminal Code . The amendments strengthen the existing terrorist financing offences and confirm Australia's commitment to the principles behind the Financial Action Task Force on Money Laundering's (FATF's) Special Recommendations on Terrorist Financing, the International Convention for the Suppression of the Financing of Terrorism and United Nations Security Council Resolution 1373. In particular, the proposed amendments better implement FATF's Special Recommendation II, which was developed with the objective of ensuring that countries have the legal capacity to prosecute and apply criminal sanctions to a person who finances terrorism.

Criminal Code Act 1995

Item 1

Currently, subsections 102.6(1) and (2) of the Criminal Code criminalise the receiving of funds from, or making funds available to, a terrorist organisation, whether directly or indirectly. The difference between the two provisions is that subsection 102.6(1) deals with the situation where the offender knows the organisation is a terrorist organisation, and subsection 102.6(2) deals with the situation where the offender is reckless as to whether the organisation is a terrorist organisation. New subsection 102.6(1) carries a maximum penalty of 25 years imprisonment and subsection 102.6(2) 15 years imprisonment.

'Knowledge' and 'recklessness' are defined in sections 5.3 and 5.4 respectively of the Criminal Code . Section 5.3 provides that a person has knowledge of a circumstance (in this case that an organisation is a terrorist organisation) if they are aware that the circumstance exists or will exist in the ordinary course of events. Section 5.4 provides that a person is reckless with respect to a circumstance if (a) they are aware of a substantial risk that the circumstance exists or will exist, and (b) having regard to the circumstances known to them, it is unjustifiable to take the risk.

'Terrorist organisation' is defined in section 102.1 of the Criminal Code . 'Funds' are broadly defined in section 100.1 of the Criminal Code , and cover property and assets of every kind.

This item amends subsections 102.6(1) and (2) by adding a third form of conduct to these offences for which a person could be prosecuted. The amendments criminalise the collection of funds for, or on behalf of, an organisation, whether directly or indirectly, that the person either knows to be a terrorist organisation (102.6(1)) or is reckless as to whether it is a terrorist organisation (102.6(2)). The maximum penalties for the offences under subsections 102.6(1) and (2) will not change.

These amendments are in response to the FATF requirement that the wilful collection of funds for terrorist organisations be explicitly covered by terrorist financing offences.

A note at the end of this item amends the heading of section 102.6 of the Criminal Code consistent with the amendments made by this item.

Item 2

This item repeals subsection 103.1(3) of the Criminal Code , which provides that extended geographical jurisdiction - category D applies to the financing terrorism offence in subsection 103.1(1). Subsection 103.1(3) will be replaced by new section 103.3 (see item 3 below), which will apply extended geographical jurisdiction - category D to both existing subsection 103.1(1) and new subsection 103.2(1) (also see item 3).

Item 3

Existing subsection 103.1(1) of the Criminal Code makes it an offence to provide or collect funds being reckless as to whether those funds will be used to facilitate or engage in a terrorist act. The offence in new subsection 103.2(1) deals with similar conduct, but explicitly requires that the funds be made available to or collected for, or on behalf of, another person . If the person providing or collecting the funds is reckless as to whether that other person will use the funds to facilitate or engage in a terrorist act, the offence will be made out.

Recklessness as it applies to a result, as in new subsection 103.2(1) is defined in subsection 5.4(2) of the Criminal Code . This provision provides that a person is reckless with respect to a result if they are aware of a substantial risk that the result will occur, and having regard to the circumstances known to them it is unjustifiable to take that risk. As recklessness is a relatively high standard fault element, the proposed offence will not apply to a person who provides or collects funds believing those funds will be used for an innocuous purpose, irrespective of whether the funds are in fact used for a terrorist act.

Terrorist act is defined in subsection 100.1(1) of the Criminal Code .

This amendment is intended to better implement FATF's Special Recommendation II. Special Recommendation II in part requires that countries' terrorist financing offences explicitly cover the wilful provision or collection of funds intending or knowing that they will be used by an individual terrorist . The other characteristics of Special Recommendation II already exist under Australian law.

New subsection 103.2(1) carries a maximum penalty of life imprisonment. This is the same penalty for offences committed under existing section 103.1 of the Criminal Code .

New subsection 103.2(2) ensures consistency with amendments made by Schedule 1 to this Bill. The effect of this provision is that as long as the elements of the offence can be proven it does not matter whether a terrorist act actually occurs, that the funds will be used for a different terrorist act to that which the offender thought they may be used for, or that the funds will be used to fund a number of terrorist acts, instead of just the one act.

New subsection 103.2(1) carries a maximum penalty of life imprisonment. This is the same penalty for offences committed under existing section 103.1 of the Criminal Code .

This item also inserts new section 103.3, which provides for the application of extended geographical jurisdiction - category D, as set out in section 15.4 of the Criminal Code , to offences under Division 103 (existing subsection 103.1(1) and new subsection 103.2(1)). Category D extended geographical jurisdiction is unrestricted and means that an offence under one of these provisions is committed whether or not the conduct constituting the alleged offence or the result of that conduct occurs in Australia.

Financial Transaction Reports Act 1988

Item 4

Under subsection 16(1A) of the Financial Transaction Reports Act 1988 (FTR Act ), a cash dealer (as defined in subsection 3(1) of that Act) must make a report to AUSTRAC about any transaction it is involved in that it has reasonable grounds to suspect is either:

•

preparatory to the commission of a financing of terrorism offence, or

•

relevant to the investigation or prosecution of a financing of terrorism offence.

Currently, paragraph (a) of the definition of 'financing of terrorism offence' in subsection 16(6) of the FTR Act includes an offence under section 103.1 of the Criminal Code . This item amends the definition to include offences committed under section 102.6 (Getting funds to, for or from a terrorist organisation) or Division 3 (Financing terrorism).

The offence in section 102.6 of the Criminal Code , dealing with providing funds to or receiving funds from, for, or on behalf of a terrorist organisation, clearly comes within the ordinary meaning of 'financing of terrorism offence'. Section 102.6 should have originally been included in this definition and this amendment corrects this oversight.

The proposed reference to Division 3 of the Criminal Code , rather than just section 103.1, ensures that the new terrorist financing offence added to Division 3 by item 3 of this Schedule falls within the definition of 'financing of terrorism offence'.