Senate

Supplementary Explanatory Memorandum

(Circulated by authority of the )

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024

1. The amendments to the Bill are 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.

Overview of the Bill

2. The amendments to Schedule 1, Schedule 2, Schedule 3, Schedule 5, Schedule 8, Schedule 9 and Schedule 10 of the Bill would make changes to provisions in the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) to provide clarity to industry and the Australian Transaction Reports and Analysis Centre (AUSTRAC) as Australia's anti-money laundering and counter-terrorism financing (AML/CTF) regulator.

Schedule 1 - AML/CTF programs and business groups

3. Schedule 1 would replace Part 7 of the AML/CTF Act to provide a set of outcomes-focused obligations to ensure reporting entities undertake appropriate action to manage and mitigate their risks. Schedule 1 would also provide a new simplified reporting group framework for related reporting entities.

4. The amendments to Schedule 1 would include changes to the reporting group framework to permit reporting entities to be members of multiple groups in certain circumstances and amend the civil penalty provisions in new sections 26F and 26G, to clarify the timing at which civil penalties occur, and the calculation of civil penalties.

5. The amendments also clarify the governing body requirements for reporting entities that only provide designated services at item 54 of table 1 of the AML/CTF Act.

Schedule 2 - Customer due diligence

6. Schedule 2 would reframe and clarify the core customer due diligence (CDD) requirements for reporting entities, and clarify when enhanced CDD must be applied and when simplified CDD may be applied.

7. The amendments to Schedule 2 would clarify the application of civil penalty provisions in new sections 28 and 30, the operation of the exception to initial CDD in section 29, and the definition of a domestic politically exposed person.

Schedule 3 - Regulating additional high-risk services

8. Schedule 3 would establish new designated services that would extend AML/CTF regulation to high-risk services provided by real estate professionals, dealers in precious metals and stones, and professional service providers, including lawyers, conveyancers, accountants and trust and company service providers (also known as 'tranche two' entities).

20. 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. 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'.

9. Further, the amendments would also introduce a rule-making power that would allow the AML/CTF Rules to prescribe activities that are exempt from item 46 of table 1 of section 6. 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.

Schedule 5 - Tipping off offence and disclosure of AUSTRAC information to foreign countries or agencies

10. Schedule 5 would reform the current prohibition against reporting entities 'tipping off' their customer about the formation of a suspicion of a serious crime. The new offence framework would focus on preventing the disclosure of information to a customer that could reasonably prejudice an investigation.

11. The amendments to Schedule 5 would bring forward the commencement date of the offence to 31 March 2025.

Schedule 8 - Transfers of value and international value transfer services

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 make technical amendments to certain provisions to clarify minor drafting issues, and will move the definitions of 'ordering institution' and 'beneficiary institution' to the AML/CTF Rules.

Schedule 9 - Powers and definitions

14. Amongst other matters, Schedule 9 would update 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.

15. The amendment to Schedule 9 would extend the definition of 'qualified accountant' to include a person who is a member of the Institute of Public Accountants.

Schedule 10 - Exemptions

16. Schedule 10 of the Bill would move exemptions that are intended to be enduring from the AML/CTF Rules into the AML/CTF Act either by reframing the primary obligation to avoid the need for the exemption, or incorporating an express exception in the AML/CTF Act. This will ensure that enduring exemptions are codified in the AML/CTF Act, and subject to appropriate parliamentary scrutiny.

17. The amendments to Schedule 10 would allow the AML/CTF Rules to prescribe activities that are exempt from item 47 of table 1 of section 6. 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.

Human rights implications

Schedule 1 - AML/CTF programs and business groups

18. The amendments to the Bill would amend the new civil penalty provisions in Schedule 1. However, the amendments do not alter the number or scope of the civil penalties as proposed in the Schedule. As such, the amendments engage the same rights as were engaged by the Schedule prior to the amendments.

19. Schedule 1 of the Bill engages the right to a fair trial and public hearing in Article 14(1) of the International Covenant on Civil and Political Rights (ICCPR).

Right to a fair trial and fair hearing

20. Article 14(7) of the ICCPR guarantees the right not to be tried or punished twice for the same offence.

21. The amendments will promote the right to a fair trial through the clarification of civil penalties where they may have been interpreted to have been applied separately to the same contravention. This would promote the intent of the ICCPR to prevent a person from being punished more than once for the same offence. The amendments also clarify the point in time at which civil penalties are incurred, and cease being incurred.

Schedule 2 - Customer due diligence

22. The amendments to Schedule 2 would clarify the application of civil penalty provisions in sections 28 and 30, as well as the definition of a domestic politically exposed person.

23. Schedule 2 engages the following rights:

•

right to a fair trial contained in Article 14 of the ICCPR, and

•

right to privacy and attacks on reputation contained in Article 17 of the ICCPR.

Right to fair trial and fair hearing

24. As above, Article 14(7) of the ICCPR guarantees the right not to be tried or punished twice for the same offence.

25. The calculation of civil penalty provisions in new sections 28 and 30 may be interpreted as applying to every designated service provided to every customer if a reporting entity fails to meet initial CDD or ongoing CDD requirements.

26. The amendments to Schedule 2 promote the right to a fair trial by clarifying for reporting entities the relationship between the civil penalty and the customer that should have been subject to CDD requirements.

Protections against arbitrary or unlawful interference with privacy and attacks on reputation

27. Schedule 2 provides that a reporting entity is required to identify and conduct enhanced CDD on certain politically exposed persons due to their positions of power.

28. The amendments to Schedule 2 would clarify the obligations on reporting entities to identify certain politically exposed persons. However, the amendments do not change the operation of the provisions as introduced, and engage the same rights as were engaged by the Schedule prior to the amendments.

29. The enhanced CDD requirements reflect the attractiveness for certain positions to be exploited or targeted for serious financial crimes, and do not imply that these persons are susceptible or complicit with these crimes.

30. The amendments will promote the protection against attacks on reputation and ensure the personal information of these politically exposed persons is not collected arbitrarily. The amendment is proportionate to facilitating the overarching, legitimate objectives of the AML/CTF Act to address serious financial crime.

Schedule 3 - Regulating additional high-risk services

31. The amendments to Schedule 3 of the Bill would clarify and put beyond doubt the application of the new designated services to barristers.

32. The amendments would also allow the AML/CTF Rules to specify professional service provider activities that are exempt from item 46 (custodial and depository services) of table 1 of section 6. This approach replaces the concept of an 'exempt legal practitioner service' in existing item 46 to allow for low-risk activities to be carved out while adopting a profession-neutral stance.

33. 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'.

34. Schedule 3 would engage the protection against arbitrary or unlawful interference with privacy, and unlawful attacks on honour or reputation in Article 17 of the ICCPR.

Protections against arbitrary or unlawful interference with privacy

35. The amendment to clarify application of the designated services to barristers would ensure AML/CTF obligations, including the obligation to collect and retain CDD information that may include personal information, are not required of barristers who provide a designated service on instruction of a solicitor who is already subject to AML/CTF obligations. This promotes the right against arbitrary interference with personal privacy.

36. The amendments would also ensure that personal information is not collected arbitrarily, by further limiting the definition of 'real estate' and ensuring the designated services are targeted at legitimate money laundering, terrorism financing and proliferation financing risk. This promotes the right against arbitrary interference with personal privacy.

37. The amendments would allow the AML/CTF Rules to provide that AML/CTF obligations, including the obligation to collect and retain CDD information that may include personal information, are only triggered in relation to custodial or depository provided by professional service providers in circumstances posing legitimate money laundering, terrorism financing and proliferation financing risk. This promotes the right against arbitrary interference with personal privacy.

38. To the extent the Bill as introduced does impact the right to privacy, the impact is reasonable, proportionate and justified in the circumstances, noting the limited scope of collection and the intent to address serious financial crimes and unlawful activity.

Schedule 5 - Tipping off offence and disclosure of AUSTRAC information to foreign countries or agencies

39. The amendment to Schedule 5 of the Bill would not engage any of the applicable rights or freedoms, as its only effect would be to change the commencement date of the measure.

Schedule 8 - Transfers of value and international value transfer services

40. The amendments to Schedule 8 of the Bill would not engage any of the applicable rights or freedoms, as their only effect would be to rectify minor language changes to provide clarity to the existing Schedule or remove proposed definitions to delegated legislation.

41. While the effect of the amendment to move the definitions of 'ordering' and 'beneficiary institutions' into the Rules would allow the changes to be made via delegated legislation, this is appropriate as these definitions are highly technical and may be subject to change, given changing technologies and developments at the Financial Action Task Force. This would also allow the definitions to remain current without unnecessarily burdening parliamentary resources. Changes made under the rule-making power are unlikely to engage any of the applicable rights or freedoms.

Schedule 9 - Powers and definitions

42. The amendments to Schedule 9 of the Bill would not engage any of the applicable rights or freedoms, as its only effect would be to amend the definition of 'qualified accountant' in section 5 of the AML/CTF Act in line with feedback from stakeholders.

Schedule 10 - Exemptions

43. The amendment to Schedule 10 of the Bill would allow the AML/CTF Rules to specify professional service provider activities that are exempt from item 47 (safe deposit box services) of table 1 of section 6. This approach replaces the concept of an 'exempt legal practitioner service' in existing item 47 to allow for low-risk activities to be carved out while adopting a profession-neutral stance.

Protections against arbitrary or unlawful interference with privacy

44. This amendment would allow the AML/CTF Rules to provide that AML/CTF obligations, including the obligation to collect and retain CDD information that may include personal information, are only triggered in relation to safe deposit box or similar facility services provided by professional service providers in circumstances posing legitimate money laundering, terrorism financing and proliferation financing risk. This promotes the right against arbitrary interference with personal privacy.