Senate

Supplementary Explanatory Memorandum

(Circulated by authority of the )

AMENDMENTS TO THE ANTI-MONEY LAUNDERING AND COUNTER-TERRORISM FINANCING AMENDMENT BILL 2024

(Government)

GENERAL OUTLINE

1. The purpose of these government amendments to the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 ('the Bill') and the Explanatory Memorandum to the Bill is to make changes to Schedule 1, Schedule 2, Schedule 3, Schedule 5, Schedule 8, Schedule 9 and Schedule 10 of the Bill.

2. The amendments respond to recommendations in the final report from the Senate Legal and Constitutional Affairs Legislation Committee's inquiry into the provisions of the Bill. There are also minor amendments to refine drafting and provide clarity to reporting entities.

3. Schedule 1 of the Bill would amend the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the AML/CTF Act) to make changes to the anti-money laundering and counter-terrorism financing (AML/CTF) programs requirements, including by replacing the current 'designated business group' concept with a simplified and flexible 'reporting group' concept.

4. The amendments to Schedule 1 would empower the Australian Transaction Reports and Analysis Centre (AUSTRAC) Chief Executive Officer (CEO) to make AML/CTF Rules that would specify the circumstances to allow reporting entities to be members of more than one reporting group. The amendments would also clarify the application and calculation of civil penalties regarding developing and maintaining AML/CTF policies, and clarify governing body requirements for reporting entities that only provide designated services in item 54 of table 1 of the AML/CTF Act.

5. Schedule 2 of the Bill would amend the AML/CTF Act to reframe and clarify the core requirements for customer due diligence (CDD).

6. The amendments to Schedule 2 would clarify the definition of a domestic 'politically exposed person' to ensure the AUSTRAC CEO is empowered to make AML/CTF Rules to cover all domestic positions that pose significant illicit financing risk. The amendments would also clarify the application of civil penalties pertaining to CDD.

7. Schedule 3 of the Bill would extend AML/CTF regulation to certain services provided by gatekeeper professions: real estate professionals, dealers in precious metals and precious stones, and professional service providers, including lawyers, conveyancers, accountants and trust and company service providers (also known as 'tranche two' entities).

8. The amendments to Schedule 3 would clarify the application of the designated services to barristers and ensure that court-ordered sales and purchases of 'real estate', bodies corporate or other 'legal arrangements' are treated in the same manner as court-ordered transfers.

9. The amendments would also provide that a leasehold interest for a term (excluding options for further terms) of 30 years or less be excluded from the definition of 'real estate'.

10. Further, the amendments would also introduce a general rule-making power for the AML/CTF Rules to specify professional service provider activities that are exempt from item 46 of table 1 of section 6 (custodial or depository services). This approach replaces the concept of an 'exempt legal practitioner service' in existing item 46 to allow for low-risk activities to be excluded from the designated service.

11. Schedule 5 of the Bill would reform the current prohibition against reporting entities 'tipping off' their customer about the formation of a suspicion. The amendments to Schedule 5 would bring forward the commencement of the new 'tipping off' offence to 31 March 2025, and provide a bridging provision to clarify who would be captured by the tipping off offence ahead of the AML/CTF programs and business groups provisions in Schedule 1 commence on 31 March 2026.

12. Schedule 8 of the Bill would simplify and modernise the framework for transfers of value and the reporting obligations of certain institutions that transfer value on behalf of customers.

13. The amendments to Schedule 8 would delegate the definitions of an ordering or a beneficiary institution to the AML/CTF Rules in order to make the criteria for the definition more flexible and adjustable. These definitions would be developed in consultation with relevant industry stakeholders and make the definitions more flexible and responsive to changes in technology and Financial Action Task Force (FATF) Recommendation 16.

14. A number of technical amendments would also clarify minor drafting issues in Schedule 8. These amendments do not change the substance of the law, or the intended policy outcomes of the measures in the Bill.

15. Schedule 9 of the Bill updates a number of definitions to respond to issues identified by the 2016 Statutory Review of the AML/CTF Act, AML/CTF Rules and the Associated Regulations, or where updates are otherwise required to modernise and simplify the AML/CTF regime.

16. The amendment to Schedule 9 would also extend the definition of 'qualified accountant' in section 5 of the AML/CTF Act to include a member of the Institute of Public Accountants.

17. Amongst other matters, Schedule 10 of the Bill would move current exemptions under the AML/CTF Rules to the AML/CTF Act.

18. The amendments to Schedule 10 would allow the AML/CTF Rules to specify professional service provider activities that are exempt from item 47 of table 1 of section 6 (safe deposit box services or similar). This approach replaces the concept of an 'exempt legal practitioner service' in existing item 47 to allow for low-risk activities to be excluded from the designated service.

FINANCIAL IMPACT

19. Nil.