The report by the Senate Legal and Constitutional Affairs Legislation Committee on the Anti-Money Laundering and Counter- Terrorism Financing Amendment Bill 2024 features the following recommendations
1 The committee recommends that the bill be amended to move the commencement of the ‘tipping off’ offence to 31 March 2025.
2 The committee recommends that the bill be amended to include a note that reflects the policy intent for the AML/CTF regime to not capture barristers acting on the instructions of a solicitor.
3 The committee recommends the bill be amended to ensure entities providing custodial, depository or safe deposit box services without associated transaction elements are not unintentionally captured by the AML/CTF regime.
4 The committee recommends that the bill be amended to ensure uniform exemptions for item 54 entities from governing body requirements.
5 The committee recommends that the bill be amended to move the criteria for ordering institutions and beneficiary institutions to the AML/CTF Rules to increase flexibility and allow for further consultation with industry.
6 The committee recommends that the bill be amended to ensure that where a civil penalty is being considered, there is a clear connection to the customer that should have been subject to customer due diligence, by amending s28 and s30 to read ‘the customer’ instead of ‘a customer’.
7 The committee recommends the bill be amended to ensure that where a reporting entity has previously provided delayed verification in a defective way, it can provide a designated service to a customer once any non- compliance has been remedied.
8 The committee recommends the bill be passed, subject to the above amendments.
The report states
The bill’s purpose is set out in the Explanatory Memorandum as follows: Australia’s AML/CTF regime establishes a regulatory framework for combatting money laundering, terrorism financing and other serious financial crimes. At its core, the AML/CTF regime is a partnership between the Australian Government and industry. Through the regulatory framework, businesses play a vital role in detecting and preventing the misuse of their sectors and products by criminals seeking to launder money and fund terrorism. The reforms in the Bill would ensure Australia’s AML/CTF regime continues to effectively deter, detect and disrupt illicit financing, and protect Australian businesses from criminal exploitation. The reforms would improve the ability of Australian national security and law enforcement agencies and the Australian Transaction Reports and Analysis Centre (AUSTRAC), as the AML/CTF regulator and Financial Intelligence Unit, to target illicit financing. This will impact the ability of transnational, serious and organised crime groups to invest their illicit funds into further criminal activities in Australia and our broader region.
1.4 In addition, the Explanatory Memorandum states that the bill would bring Australia’s AML/CTF framework into line with international standards set by the Financial Action Task Force (FATF), the global financial crime body, of which Australia is a founding member: The FATF Standards...are a comprehensive framework of measures to combat money laundering, terrorist financing and proliferation financing. These standards set an international benchmark for countries to implement and adapt to their legal, administrative and operational frameworks and financial systems. The FATF Standards are regularly revised to strengthen requirements and adapt to emerging crime trends and threats.
1.5 According to the Explanatory Memorandum, the three key objectives of the bill are: to extend the AML/CTF regime to certain high-risk services provided by lawyers, accountants, trust and company service providers, real estate professionals, and dealers in precious metals and stones—also known as ‘tranche two’ entities to improve the effectiveness of the AML/CTF regime by making it simpler and clearer for businesses to comply with their obligations, and to modernise the regime to reflect changing business structures, technologies and illicit financing methodologies.5
1.6 In his second reading speech, the Attorney-General, the Hon Mark Dreyfus MP, stated that the bill would make significant and timely reforms to the AML/CTF Act that was established in 2006. The Attorney-General commented that in introducing this AML/CTF framework, the then-Coalition government committed to undertaking a second tranche of reforms, which were not subsequently delivered, and that: [The bill] delivers on the Albanese government's commitment to protecting Australians from the serious harm caused by criminals. The bill will bolster Australia's anti-money laundering and counter-terrorism financing regime to prevent criminals from hiding their illicit profits and funding illegal activities. It will also stop funds from falling into the hands of terrorists and disrupt activities of authoritarian and corrupt regimes. The reforms in this bill are long overdue. The former government's inaction has led to significant regulatory gaps and vulnerabilities. We are acting now to make sure that Australia stops being an attractive destination for illicit financing.
Inclusion of new high-risk services
1.7 The bill would introduce new designated services into the AML/CTF Act, so that lawyers, accountants, real estate agents, precious stone dealers and other professionals that provide such services are required to comply with AML/CTF obligations.
1.8 The Attorney-General’s Department (AGD) submitted that money laundering strategies are constantly evolving to take advantage of changes, both in Australia and internationally. It stated that current regulatory gaps left certain services and products unregulated, including ‘tranche two’ entities: ...such as lawyers, accountants, trust and company service providers, real estate professionals and dealers in precious metals and stones. Such services are globally recognised as being high-risk for money laundering.
Improving the AML/CTF framework and meeting our international obligations
1.9 As well as providing regulators and law enforcement with more information for their oversight and investigation work uncovering criminal activity, the AGD noted that the bill’s reforms would ‘better protect Australian businesses, communities and the economy from criminal exploitation’, and provide them ‘with the necessary tools to identify and report suspicious behaviour’.
1.10 The AGD noted the bill would improve Australia’s compliance with FATF standards in other ways, including: clarifying risk assessment requirements aligning with the FATF principles for foreign branches and subsidiaries clarifying the availability of simplified CDD where the money laundering or terrorism financing risk of the customer is low better aligning the requirements for politically exposed persons in the AML/CTF Act and AML/CTF Rules with international standards updating the CDD exemption for gambling services to align with FATF’s threshold, and enhancing the transparency of value transfers involving virtual assets.
1.11 The Explanatory Memorandum stated that the bill’s reforms would bring Australia’s AML/CTF frameworks into line with the international standards of the FATF, of which Australia is a founding member.
1.12 The FATF is an intergovernmental group that sets and oversees the quality of implementation of AML/CTF and proliferation standards. Australia has been a member of the FATF since its inception in 1989, and currently takes on a leadership role, including as the chair of the Asia-Pacific Group on Money Laundering.
1.13 FATF assesses the compliance of members with the mutually agreed standards. The Explanatory Memorandum states that these: ...are a comprehensive framework of measures to combat money laundering, terrorist financing and proliferation financing. These standards set an international benchmark for countries to implement and adapt to their legal, administrative and operational frameworks and financial systems. The FATF Standards are regularly revised to strengthen requirements and adapt to emerging crime trends and threats.
1.14 The FATF assessment process includes ‘grey listing’ jurisdictions that have strategic deficiencies. The AGD submitted that the reforms in the bill would bring Australia into line with international best practice and improve compliance with FATF standards in certain areas where it is currently rated as ‘non-compliant’ (regulation of tranche two entities), or only ‘partially compliant’ (regulation of virtual asset services and value transfer transparency).
1.15 The next FATF assessment of Australia’s compliance with these standards will be conducted over 2026-2027.
Overview of the bill
1.16 The bill contains 12 schedules, which this section will discuss briefly in turn.
Schedule 1—AML/CTF programs and business groups
1.17 The Explanatory Memorandum states that the current Act requires reporting entities to have programs that identify, mitigate and manage AML/CTF risks that they may face when providing a designated service.
1.18 Schedule 1 of the bill would replace Part 7 of the current AML/CTF Act with: ...a set of outcomes-focused obligations that will ensure reporting entities undertake appropriate measures to mitigate and manage risk. This includes: introducing new, flexible concepts for reporting entities that organise themselves into groups to manage risks more efficiently clarifying the roles and responsibilities of a reporting entity’s governing body and its AML/CTF compliance officer, and clarifying obligations for Australian companies operating overseas through a foreign branch of an Australian reporting entity, or a foreign subsidiary of an Australian parent company.
Schedule 2—Customer due diligence
1.19 Customer due diligence (CDD) is a foundational aspect of the AML/CTF regime, which requires reporting entities to identify and verify customer identity and associated persons, and understand and mitigate any risks associated with providing services to the customer.
1.20 Schedule 2 would ‘reframe and clarify core requirements’ for initial and ongoing CDD–including enhanced CDD processes, and streamline where a simplified CDD may be used.
Schedule 3—Regulating additional high-risk services
1.21 This schedule expands the AML/CTF regime to certain services that are ‘recognised globally as high risk for money laundering exploitation’, including 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).
Schedule 4—Legal professional privilege
1.22 The Explanatory Memorandum states that: Schedule 4 would clarify the treatment of information subject to legal professional privilege for the purposes of the reporting and information disclosure obligations in the AML/CTF Act. Existing section 242 already provides that the AML/CTF Act does not affect the law relating to legal professional privilege. The Bill provides stronger protections for the disclosure of information or documents subject to legal professional privilege once legal practitioners are brought into the AML/CTF regime, in response to stakeholder feedback. These amendments preserve the core intention of the doctrine of legal professional privilege in both common law and statute, and ensure that regulated entities who handle client information that is subject to legal professional privilege can comply with their reporting and information disclosure obligations under the AML/CTF Act.
Schedule 5—Tipping off offence and disclosure of AUSTRAC information to foreign countries or agencies
1.23 Schedule 5 would make reforms to: ...the current prohibition against reporting entities ‘tipping off’ their customer about the formation of a suspicion. The new offence will focus on preventing the disclosure of suspicious matter report (SMR) information or information related to a notice issued under section 49 or 49B of the AML/CTF Act where it would or could reasonably prejudice an investigation. The new offence framework would be more flexible for reporting entities seeking to share information for legitimate purposes, including within reporting groups to manage risk and prevent further crime.
Schedule 6—Services relating to virtual assets
1.24 Schedule 6 would extend the AML/CTF regime to digital and virtual assets, which are ‘an increasingly popular conduit to represent, store and move value’, and have been identified as a money laundering framework vulnerability by AUSTRAC.
1.25 This provision would also amend the current terminology of ‘digital currency’ to ‘virtual asset’, in line with FATF recommendations, to ‘ensure that the rapidly growing virtual asset sector is hardened against exploitation by criminals’.
Schedule 7—Definition of bearer negotiable instrument
1.26 Schedule 7 would clarify which monetary instruments are captured by the definition of a ‘bearer negotiable instrument’ and its subsequent reporting requirements. The Explanatory Memorandum states this is in response to industry concerns the current definition is too unclear and broad, and to maintain compliance with FATF standards.
Schedule 8—Transfer of value and international value transfer services
1.27 The Explanatory Memorandum states that: Schedule 8 would simplify and modernise the framework for electronic funds transfer instruction obligations, designated remittance arrangements and international funds transfer instruction (IFTI) reporting purposes. The amendments in Schedule 8 replace the previous funds transfer chain concept with an updated and simplified value transfer chain. Streamlining value transfer chains would reduce undue regulatory burden on industry. The value transfer chain concept will provide a framework for key AML/CTF reporting obligations for certain entities that transfer value on behalf of customers, like the travel rule and IFTI/international value transfer service reporting obligations.
Schedule 9—Powers and definitions
1.28 According to the Explanatory Memorandum, Schedule 9 introduces a number of new information gathering powers for AUSTRAC to monitor, investigate and enforce compliance with the AML/CTF regime. This includes: ...an examination power, an important investigatory tool to enable AUSTRAC to obtain relevant information needed to make enforcement decisions and obtain evidence to be used in proceedings, and additional notice to produce powers allowing AUSTRAC to gather information to assist with its financial intelligence functions. [and] updates to 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.
Schedule 10—Exemptions
1.29 Schedule 10 would move exemptions from certain AML/CTF obligations (which can currently be made by the AUSTRAC CEO) from the AML/CTF Rules into the Act. This will allow for greater parliamentary scrutiny of appropriate exemptions from designated services.26 Schedule 11—Repeal of the Financial Transaction Reports Act 1988 1.30 This schedule repeals the FTR Act in its entirety, and makes consequential minor amendments to other Acts. According to the Explanatory Memorandum, this would streamline the AML/CTF regime by establishing a single source of obligations for industry.
Schedule 12—Transitional rules
1.31 According to the Explanatory Memorandum: Schedule 12 would provide a power for the Minister to make rules concerning any amendments introduced by this Bill. This modification power is limited to 4 years to address any unforeseen issues that may arise after the reforms commence and to accommodate the extensive time needed for industry to effectively implement each measure.
Financial and human rights implications
1.32 The Explanatory Memorandum states that the bill would have no financial impact.
1.33 The Explanatory Memorandum comments that the bill is compatible with the human rights and freedoms recognised or declared in the international instruments Australia is a party to, listed in Section 3 of the Human Rights (Parliamentary Scrutiny) Act
Consideration by other committees
1.34 The bill was considered by the Senate Committee for the Scrutiny of Bills (Scrutiny Committee), and the Parliamentary Joint Committee on Human Rights (PJCHR).
Concerns raised by the Senate Committee for the Scrutiny of Bills
1.35 The Scrutiny Committee raised a number of concerns with the bill, namely: Significant matters in delegated legislation; Abrogation of privilege against self-incrimination; Reversal of the evidential burden of proof; and Strict liability offences.
Significant measures in delegated legislation
1.36 The Scrutiny Committee noted the current AML/CTF framework empowers some heads of Commonwealth agencies and bodies to share AUSTRAC information with foreign governments and agencies.31
1.37 Noting, that the bill would amend this existing limited list with a power prescribed by rules, the Scrutiny Committee expressed a preference that ‘significant matters should be included in primary legislation unless a sound justification for the use of delegated legislation is provided’, so as to assure more robust Parliamentary scrutiny. Moreover: Allowing the rules to designate the Commonwealth, State and Territory entities which can disclose AUSTRAC information to foreign governments is a significant delegation of legislative power over matters that are more appropriate for Parliament to consider. While noting this explanation, the committee has generally not accepted a desire for administrative flexibility to be a sufficient justification, of itself, for leaving significant matters to dele gated legislation. Noting that these matters are being removed from their existing status in primary law, the committee expects that a stronger justification should have been provided. Further, it is unclear to the committee why flexibility may be needed in this instance given the list of Commonwealth, State and Territory agencies who can disclose such information is necessarily limited and not liable to frequent change. This issue has not been sufficiently explored in the explanatory materials.
Abrogation of privilege against self-incrimination
1.38 The Scrutiny Committee noted that provisions of the bill would override, or expand ‘the common law privilege against self-incrimination which provides that a person cannot be required to answer questions or produce material which may tend to incriminate them’.
1.39 The Scrutiny Committee noted there may be certain circumstances in which this privilege can be overridden, but that abrogating the privilege ‘represents a serious loss of personal liberty’. Moreover, it noted the bill does not provide for any use or derivative use immunity in this context, which may mitigate the abrogation of privilege against self-incrimination.
Reversal of the evidential burden of proof–significant measures in delegated legislation
1.40 The Scrutiny Committee made comment on the bill’s addition of the new ‘tipping off’ offence into the AML/CTF Act, which is discussed earlier in this chapter, and noted that two exceptions for this offence reversed the evidential burden of proof ‘due to the operation of the Criminal Code’.
1.41 The Scrutiny Committee found this was not justified and explained in the Explanatory Memorandum: At common law, it is ordinarily the duty of the prosecution to prove all elements of an offence. This is an important aspect of the right to be presumed innocent until proven guilty. Provisions that reverse the burden of proof and require a defendant to disprove, or raise evidence to disprove, one or more elements of an offence, interferes with this common law right. The committee expects any such reversal of the evidential burden of proof to be justified and for the explanatory memorandum to address whether the approach taken is consistent with the Attorney-General’s Department’s Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers which states that a matter should only be included in an offence-specific defence (as opposed to being specified as an element of the offence) where: it is peculiarly within the knowledge of the defendant; and it would be significantly more difficult and costly for the prosecution to disprove than for the defendant to establish the matter.
Strict liability offences
1.42 The Scrutiny Committee observed that: The bill provides that persons required to appear for examination in accordance with a notice given under the bill may be required by the examiner to take an oath or give an affirmation that the statements made will be true. The bill proposed that this be an offence of strict liability to fail to comply with these requirements, which would carry a sentence of up to three months imprisonment.
1.43 The Scrutiny Committee noted that there may be some discrepancy between penalties included in the bill (including three months imprisonment), and the Commonwealth Guide to Framing Offences, and that there was no justification made for this in the Explanatory Memorandum: As the imposition of strict liability undermines fundamental common law principles, the committee expects the explanatory memorandum to provide a clear justification for any imposition of strict liability, including outlining whether the approach is consistent with the Guide to Framing Commonwealth Offences. The committee notes in particular that the Guide to Framing Commonwealth Offences states that the application of strict liability is only considered appropriate where the offence is not punishable by imprisonment and only punishable by a fine of up to 60 penalty units for an individual.
1.44 The committee requested an explanation from the Attorney-General for the bill’s inclusion of strict liability offence, and why it was necessary to impose a period of imprisonment in relation to a strict liability offence.
Attorney-General’s response to Scrutiny Committee
1.45 The Attorney-General responded in detail to the concerns raised by the Scrutiny Committee. A summary of the response is as follows.
Significant matters in delegated legislation
1.46 Following 2022 machinery of government changes, responsibility for administering the AML/CTF Act moved from the Minister for Home Affairs to the Attorney-General. This led to an error in subsection 127(3) listing the AGD twice and omitting the Department of Home Affairs from coverage.
1.47 The proposed amendments aim to increase flexibility and efficiency in response to government changes and agency name updates, enhancing timely information-sharing to combat financial crime. Safeguards in subsection 127(2) ensure information protection and purpose-driven use.
1.48 Moving the agency list to AML/CTF Rules would reduce legislative updates and enhance Parliamentary efficiency.
1.49 AML/CTF Rules are legislative instruments, subject to Parliamentary oversight and disallowance, with proposed amendments restricting AUSTRAC information sharing to Commonwealth, State, or Territory agencies.
1.50 Amendments would grant the AUSTRAC CEO the authority to update agency names under the AML/CTF Rules, enhancing regulatory agility and addressing outdated legislative listings.
Abrogation of Privilege Against Self-Incrimination
1.51 The privilege may be overridden for public benefit if justified. Expanding section 169 ensures information provided to authorised officers under section 167 can be used in criminal proceedings related to money laundering, terrorism financing, and proliferation financing offences.
1.52 This expansion supports AUSTRAC’s role in investigating and prosecuting serious crimes, enhancing compliance and effectiveness under the AML/CTF regime.
1.53 Removal of self-incrimination privileges typically includes ‘use’ immunity but not necessarily ‘derivative use’ immunity for serious offences, aligning with regulatory norms for agencies like ASIC and ACCC. 1.54 The provisions would ensure evidence can be used to prosecute serious offences uncovered during compliance activities without undermining AUSTRAC’s regulatory duties.
1.55 Section 172K’s ‘use’ immunity prevents self-incriminating evidence use but allows necessary prosecution of serious offences.
Reversal of the Evidential Burden of Proof
1.56 Subsection 123(4) and (5) would create exceptions to the tipping-off offence for disclosures made in good faith for deterring criminal activity or detecting serious crimes, placing the evidential burden on the accused.
1.57 The reversal of the burden of proof is appropriate, as evidence regarding the accused’s intention of disclosing the information in good faith and for the purposes of dissuading the prohibited conduct, or for the purposes of detecting, deterring, or disrupting money laundering, the financing of terrorism, proliferation financing, or other serious crimes is particularly within the defendant’s knowledge, and would be significantly more difficult and costly for the prosecution to disprove than for the defendant to establish the matter. It follows then that evidence to this effect could be readily and more easily provided by the accused.
1.58 The Attorney-General indicated that an addendum to the Explanatory Memorandum containing this justification will be tabled in the Parliament as soon as practicable.
Strict Liability Offences
1.59 Strict liability should apply only where necessary, with appropriate constraints. Subsection 172C(3) would impose strict liability for failure to comply with examination requirements under subsection 172A(2).
1.60 The penalty is limited to three months imprisonment, aligning with criteria for strict liability offences. This supports AUSTRAC’s enforcement capabilities without imposing unnecessary regulatory burdens.
1.61 Similar strict liability provisions exist for other regulators, like ASIC, reflecting consistency and necessity for effective regulatory enforcement. Consideration by the Parliamentary Joint Committee on Human Rights
1.62 The PJCHR identified several issues of concern, regarding: the abrogation of privilege against self-incrimination, and the right to a fair trial; significant civil penalties; and sharing AUSTRAC information internationally.
The abrogation of privilege against self-incrimination and the right to a fair trial
1.63 The PJCHR noted that the bill would expand the existing section 169 of the Act, which abrogates the privilege against self-incrimination for the purposes of giving information or producing a document under existing information gathering powers.
1.64 The committee expressed concern that these measures may engage and limit the right to a fair trial and related criminal process rights, and recommended: ...that consideration be given to the inclusion of a derivative use immunity in proposed section 172K. [and] ...that the statement of compatibility be updated to provide information in relation to a derivative use immunity.
Significant civil penalties
1.65 The PJCHR noted that the bill’s amendments would introduce numerous civil penalty provisions, and amend existing penalties. It noted that the maximum civil penalty under the Act is 20 000 penalty units (or $6.26 million). It considered that there may be a risk these penalties could be regarded as criminal, under international human rights law and, that if this were the case, ...they must be shown to be consistent with the criminal process guarantees, including the right to be presumed innocent until proven guilty according to law. The committee notes that as they are characterised as civil penalties under Australian law, those requirements would not be met.
1.66 The PJCHR concluded: The committee recommends that the statement of compatibility be updated to provide a more fulsome assessment of the compatibility of each civil penalty created (or otherwise amended) by the bill, in particular whether any of those penalties may operate in relation to persons who are not direct participants in the scheme this Act seeks to regulate (for example, proposed section 49B).
Sharing AUSTRAC information internationally
1.67 The PJCHR noted that the bill’s provisions relating to the sharing of AUSTRAC information internationally may, in some cases, provide information to a foreign government or entity that could ‘expose a person to a risk of the death penalty or to torture or other cruel treatment’.
1.68 The PJCHR concluded that: The committee recommends that the statement of compatibility be updated to assess whether and how this measure is compatible with the right to life and freedom from torture and other cruel, inhuman and degrading treatment or punishment, including information as to whether there are guidelines to assist decision-makers in identifying and considering any risks that a person may be exposed to the death penalty or to torture as a result of the sharing of particular information, and if so, how those risks are managed. The committee recommends that, in the event compatibility cannot be assured, that amendments to the bill be considered to address this.
