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Australian Senate Standing Committee for the Scrutiny of Bills - Scrutiny Digests |
2.1 This chapter considers the responses of ministers to matters previously raised by the committee.
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Purpose
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This bill seeks to amend the Anti-Money Laundering and Counter-Terrorism
Financing Act 2006 (the AML/CTF Act) and the Financial Transaction
Reports Act 1988 to:
• expand the objects of the AML/CTF Act to reflect the domestic
objectives of AML/CTF regulation;
• regulate digital currency exchange providers;
• amend industry regulation requirements relating to due diligence
obligations for correspondent banking relationships; the
cash-in-transit sector,
insurance intermediaries and general insurance providers; the term 'in the
course of carrying on a business';
and sharing information between related
bodies corporate;
• increase the investigation and enforcement powers of the Australian
Transaction Reports and Analysis Centre (AUSTRAC);
• provide police and customs officers broader powers to search and
seize physical currency and bearer negotiable instruments;
• provide police and customs officers broader powers to establish
civil penalties for failing to comply with questioning and
search powers;
• clarify other regulatory matters relating to the powers of the
AUSTRAC CEO
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Portfolio
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Justice
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Introduced
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House of Representatives on 17 August 2017
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Bill status
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Before House of Representatives
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Scrutiny principles
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Standing Order 24(1)(a)(i), (iii) and (iv)
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2.2 The committee dealt with this bill in Scrutiny Digest No. 10 of 2017. The Minister responded to the committee's comments in a letter received 26 September 2017. Set out below are extracts from the committee's initial scrutiny of the bill and the Minister's response followed by the committee's comments on the response. A copy of the letter is available on the committee's website.[1]
Initial scrutiny – extract
2.3 Proposed section 76A seeks to establish a number of offences in relation to an unregistered person providing digital currency exchange services. The basic offence[3] of breaching a requirement not to provide a digital currency exchange service unless registered is subject to a penalty of up to two years imprisonment or 500 penalty units. There are also three aggravated offences[4] with increased penalties of up to seven years imprisonment or 2,000 penalty units for breaching this requirement in circumstances where the person has previously been given a remedial direction or has been convicted of relevant offences. For all four offences, strict liability is stated as applying to whether a person engaged in the relevant conduct and whether their conduct breached the relevant requirement.
2.4 Under general principles of the criminal law, fault is required to be proved before a person can be found guilty of a criminal offence (ensuring that criminal liability is imposed only on persons who are sufficiently aware of what they are doing and the consequences it may have). When a bill states that an offence is one of strict liability, this removes the requirement for the prosecution to prove the defendant's fault. In such cases, an offence will be made out if it can be proven that the defendant engaged in certain conduct, without the prosecution having to prove that the defendant intended this, or was reckless or negligent. As the imposition of strict liability undermines fundamental criminal 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.[5]
2.5 In this instance the explanatory memorandum gives a detailed explanation for the imposition of strict liability. It states that it is appropriate to apply strict liability to ensure the integrity of the regulatory regime is maintained, and requiring proof of fault for the physical elements of the offences would undermine the deterrent effect as it would allow for entities to argue that they did not know or were reckless as to whether they had obligations under the Act.[6]
2.6 The Guide to Framing Commonwealth Offences states that applying strict liability may be appropriate where requiring proof of fault would undermine deterrence and there are legitimate grounds for penalising persons lacking fault in respect of that element.[7] The committee notes that while the explanatory memorandum explains that requiring proof of fault may undermine deterrence, it does not explain what the legitimate grounds are for penalising persons lacking fault in respect of conduct that breaches the requirement to be registered before providing a digital currency exchange service. The committee notes that the explanatory memorandum states that requiring proof of fault 'would allow for entities to argue that they did not know or were reckless as to whether they had obligations under the Act'.[8] However, while this may apply in relation to the question of whether a person's conduct intentionally or recklessly breaches a requirement that they be registered or comply with conditions of registration,[9] this would not seem to apply to the question of whether a person has intentionally engaged in the relevant conduct.
2.7 The explanatory memorandum also acknowledges that the penalties that apply in the bill 'do not align with the standard fine/imprisonment ratio set out in the Guide' but states that this is justified on the basis of the need to deter high-risk digital currency exchange providers.[10] 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.[11] In this instance, the bill proposes applying strict liability to offences that are subject to up to 7 years imprisonment. The committee reiterates its long-standing scrutiny view that it is inappropriate to apply strict liability in circumstances where a period of imprisonment may be imposed.
2.8 The committee requests the Minister's advice as to the grounds for penalising persons lacking fault in respect of providing a digital currency exchange service without being registered (including providing any examples of where a person could unintentionally provide a digital currency exchange).
Minister's response
2.9 The Minister advised:
As noted in the Explanatory Memorandum and the Second Reading Speech, international organisations such as the Financial Action Task Force have identified high money laundering and terrorist financing risks associated with digital currencies. Digital currency exchanges are an emerging industry with new technologies that have been operating without any regulatory oversight since their inception. The offence for providing digital currency exchange services without being registered with AUSTRAC is an important sanction to ensure that the regulation of this sector is effective. Members of this emerging industry should not be able to avoid liability by arguing that they did not know that they had obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 ('AML/CTF Act') to register with AUSTRAC.
The provisions relating to digital currency exchange providers, including the offence in proposed section 76A, have been closely modelled on the existing provisions in the AML/CTF Act relating to remittance providers. The decision to impose strict liability is not taken lightly, and there are a number of safeguards. Firstly, the defence of honest and reasonable mistake of fact is available. Secondly, AUSTRAC has a range of enforcement powers available, including infringement notices, civil penalty orders and criminal sanctions. In most cases of inadvertent non-compliance with AML/CTF obligations, AUSTRAC would seek to work with the reporting entity to encourage compliance. Thirdly, there will be a transition period before commencement of the provisions, enabling AUSTRAC and the Attorney-General's Department to educate and work with industry to adjust their existing systems and take the time to understand their obligations before the digital currency exchange provisions commence.
As noted above, where instances of non-compliance are identified, AUSTRAC would have regard to relevant facts and circumstances and consider the most appropriate mechanism to address the issue. The offence provisions are part of the available tools, and would be used sparingly to address cases of serious and/or systemic non-compliance with AML/CTF obligations.
Committee comment
2.10 The committee thanks the Minister for this response. The committee notes the Minister's advice that the offence for providing digital currency exchange services without being registered with AUSTRAC is an important sanction to effectively regulate the digital currency sector, and that members of the industry should not be able to avoid liability by arguing they did not know they had obligations to register with AUSTRAC. The committee also notes the Minister's advice that in most cases of inadvertent non-compliance with the obligations AUSTRAC would seek to work with the reporting entity to encourage compliance, AUSTRAC would have regard to relevant facts and circumstances and would consider the most appropriate mechanism to address the issue and would only use the offence provisions sparingly.
2.11 The committee notes that from a scrutiny perspective the committee considers the maximum penalty applicable to a strict liability offence and whether it is appropriate, not whether in individual circumstances it is likely that a different penalty will be imposed or that action will only be taken sparingly. The committee notes that the Minister's response did not explain what the legitimate grounds are for penalising persons lacking fault.
2.12 The committee reiterates its long-standing scrutiny view that it is inappropriate to apply strict liability in circumstances where a period of imprisonment may be imposed. The committee draws its scrutiny concerns to the attention of Senators and leaves to the Senate as a whole the appropriateness of applying strict liability to offences that are subject to penalties of up to seven years imprisonment.
Initial scrutiny – extract
2.13 Proposed sections 76K and 76L provide that the rules (delegated legislation) may make provision for and in relation to the suspension and renewal of registrations by the AUSTRAC CEO. A number of important matters are thereby delegated to the rules, including the grounds on which suspension decisions may be made, the criteria for determining applications for renewal and whether decisions to suspend or not renew registration should be subject to review. The committee's view is that significant matters such as these should be included in primary legislation unless a sound justification for the use of delegated legislation is provided. In this instance, the explanatory memorandum gives no reason for including such matters in the rules as opposed to the primary legislation.
2.14 The committee also notes that these significant matters are to be included in 'rules' rather than in 'regulations'. The issue of the appropriateness of providing for significant matters in legislative rules (as distinct from regulations) is discussed in the committee's First Report of 2015.[13] In relation to this matter, the committee has noted that regulations are subject to a higher level of executive scrutiny than other instruments as regulations must be approved by the Federal Executive Council and must also be drafted by the Office of Parliamentary Counsel (OPC). Therefore, if significant matters are to be provided for in delegated legislation (rather than primary legislation) the committee considers they should at least be provided for in regulations, rather than other forms of delegated legislation which are subject to a lower level of executive scrutiny.[14]
2.15 In addition, where the Parliament delegates its legislative power in relation to significant regulatory schemes the committee considers that it is appropriate that specific consultation obligations (beyond those in section 17 of the Legislation Act 2003) are included in the bill and that compliance with these obligations is a condition of the validity of the legislative instrument. The committee notes that section 17 of the Legislation Act 2003 sets out the consultation to be undertaken before making a legislative instrument. However, section 17 does not strictly require that consultation be undertaken before an instrument is made. Rather, it requires that a rule-maker is satisfied that any consultation, that he or she thinks is appropriate, is undertaken. In the event that a rule maker does not think consultation is appropriate, there is no requirement that consultation be undertaken. In addition, the Legislation Act 2003 provides that consultation may not be undertaken if a rule-maker considers it to be unnecessary or inappropriate; and the fact that consultation does not occur cannot affect the validity or enforceability of an instrument.[15]
2.16 The committee's view is that significant matters, such as the grounds on which suspension decisions may be made, the criteria for determining applications for renewal and whether decisions to suspend or not renew registration should be subject to review, should be included in primary legislation unless a sound justification for the use of delegated legislation is provided. In this regard, the committee requests the Minister's detailed advice as to:
• why it is considered necessary to leave details about renewal and suspension of registrations to delegated legislation;
• if significant matters are to be included in delegated legislation, why it is appropriate to include these in rules rather than regulations;
• why the bill only provides that the rules may provide for the review of decisions relating to suspension and applications for renewal, rather than providing that such decisions will be subject to merits review; and
• the type of consultation that it is envisaged will be conducted prior to the making of the rules and whether specific consultation obligations (beyond those in section 17 of the Legislation Act 2003) can be included in the legislation (with compliance with such obligations a condition of the validity of the legislative instrument).
Minister's response
2.17 The Minister advised:
As noted above, the digital currency exchange provisions are modelled closely on equivalent provisions for the registration of remittance service providers, which were considered by the Scrutiny of Bills Committee in its report dated 23 March 2011. The same considerations, set out below, apply in relation to the registration of digital currency exchange service providers.
The inclusion of detail in the AML/CTF Rules rather than the Act is consistent with the broader approach of the AML/CTF regime. The AML/CTF Rules are an important part of Australia's AML/CTF regime, which set out the details of technical and procedural matters as well as providing flexibility for the AUSTRAC CEO to consider matters that may not be possible to conclusively address through primary legislation. The techniques used by money launderers are continually changing, and services and technologies that may present a money laundering or terrorist financing risk are also constantly evolving. It is important that the AML/CTF regulatory framework is designed so that it can adapt quickly to the nature of the threat posed by these serious crimes. The AML/CTF Rules are disallowable instruments which must be tabled in Parliament and registered on the Federal Register of Legislation.
Regulations can also be made under the AML/CTF Act, but have tended to be used sparingly.[16] As noted above, it is the Rules that are well-known to industry and regulated entities to be the source of the detail that sits under the AML/CTF Act. Changing the approach for the digital currency sector would be inconsistent with the broader framework of the AML/CTF Act.
As context, the Rules made under Chapter 59 of the AML/CTF Rules for the equivalent provision relating to suspension of remitters (under section 75H), provide for internal review and notice to be given which includes the grounds on which the decision was made.
Moreover, the decisions that have a greater effect on the operation of a digital currency exchange, such as a decision by the AUSTRAC CEO not to register a person or cancel a registration, will be subject to merits review. Decisions on suspensions are better left to the Rules to give AUSTRAC flexibility in its response.
AUSTRAC consults extensively with regulated entities during the development of the AML/CTF Rules. AUSTRAC's consultation procedures require draft AML/CTF Rules to be published on the AUSTRAC website for a minimum period of four weeks. AUSTRAC liaises with relevant industry associations during the development and implementation of AML/CTF Rules who in turn keep their members informed of the issues. If a new or amended Rule is of particular interest to a segment of AUSTRAC's regulated population, AUSTRAC sends targeted emails and letters to regulated entities it considers to be most affected.
Committee comment
2.18 The committee thanks the Minister for this response. The committee notes the Minister's advice that the rules provide flexibility for the AUSTRAC CEO to consider matters that it may not be possible to conclusively address through primary legislation, as the techniques used by money launderers are continually changing and services and technologies that may present a risk are constantly evolving. The committee also notes the Minister's advice that the regulatory framework is designed so it can adapt quickly to the nature of the threat posed by serious crimes, and rules are well-known to industry and regulated entities to be the source of detail that sits under the Act. The committee also notes the Minister's advice that the rules relating to similar provisions regarding suspension provide for internal review and that decisions that have a greater effect on the operation of a digital currency exchange will be subject to merits review, and decisions on suspensions are better left to rules to give flexibility to AUSTRAC. The Minister also advised that AUSTRAC has consultation procedures that require a certain level of consultation prior to the making of rules.
2.19 The committee appreciates the need for flexibility to address techniques and technologies that are constantly evolving. However, the committee notes that the bill does not set out any ground on which registration may be suspended or renewed, the effect of suspension, the period for which suspensions have effect or whether review of decisions relating to suspension or applications for renewal is available. It is not clear to the committee that all of these matters are continually evolving, such that it is not possible to set out some guidance in the primary legislation. In particular, the committee remains concerned that the bill does not provide for merits review of decisions to suspend registration or refuse to renew registration. The committee notes that in response to its question as to why these matters are included in rules rather than regulations, the Minister's response simply stated that industry and regulated entities know rules are the source of detail under the Act, though the committee notes that if regulations were made this would clearly be the source that industry and regulated entities would turn to. The committee also notes the Minister's advice that consultation may be undertaken as a matter of practice; however, the committee reiterates its view that specific consultation obligations should be included in the legislation, with compliance with such obligations a condition of the validity of the legislative instrument.
2.20 The committee draws its scrutiny concerns to the attention of Senators and leaves to the Senate as a whole the appropriateness of leaving significant matters to be dealt with by delegated legislation, particularly whether decisions to suspend or not renew registrations should be subject to merits review.
Initial scrutiny – extract
2.21 The bill proposes to make four provisions in the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the Act) into civil penalty provisions. Section 175 of the Act states that the maximum pecuniary penalty payable by an individual for a civil penalty provision is 20,000 penalty units (or $4.2 million) and for a body corporate 100,000 penalty units (or $21 million). The changes made by this bill would mean that an individual could be liable to a civil penalty of up to $4.2 million for a failure to notify the AUSTRAC CEO of a change in circumstances that could materially affect the person's registration;[18] a failure to declare an amount of currency or a bearer negotiable instrument when leaving or entering Australia;[19] or providing a registrable digital currency exchange service if not registered.[20] These are extremely significant penalties, yet no justification has been provided in the explanatory memorandum as to the appropriateness of making these provisions subject to such high civil penalties. The committee also notes that the equivalent financial criminal penalties in relation to two of the provisions are up to 60 penalty units,[21] which is substantially lower than up to 20,000 penalty units for an individual or 100,000 for a body corporate for breach of the proposed civil penalty provisions.
2.22 The committee requests the Minister's advice as to the appropriateness of making certain provisions, including a failure to notify of a change of circumstances, subject to civil penalties of up to 20,000 penalty units for an individual (or $4.2 million) and 100,000 penalty units (or $21 million) for a body corporate.
Minister's response
2.23 The Minister advised:
It is well recognised that money laundering can be a very lucrative crime, and therefore penalties for behaviour that may allow money laundering to occur need to be sufficiently high to be an effective deterrent. All civil penalty provisions in the AML/CTF Act carry a maximum fine of 100,000 penalty units for corporations and 20,000 penalty units for individuals. Pursuant to section 175 of the AML/CTF Act, the Federal Court may order a person to pay a pecuniary penalty and in determining the pecuniary penalty must have regard to all relevant matters, including:
• the nature and extent of the contravention; and
• the nature and extent of any loss or damage suffered as a result of the contravention; and
• the circumstances in which the contravention took place; and
• whether the person has previously been found by the Federal Court in proceedings under this Act to have engaged in any similar conduct; and
• if the Federal Court considers that it is appropriate to do so-whether the person has previously been found by a court in proceedings under a law of a State or Territory to have engaged in any similar conduct; and
• if the Federal Court considers that it is appropriate to do so-whether the person has previously been found by a court in a foreign country to have engaged in any similar conduct; and
• if the Federal Court considers that it is appropriate to do so-whether the person has previously been found by a court in proceedings under the Financial Transaction Reports Act 1988 to have engaged in any similar conduct.
The significance of the offences that have been highlighted by the Committee should not be understated. For example, failure to notify AUSTRAC of changes in circumstances that could materially affect a person's registration can have serious consequences. Changes in key personnel or beneficial ownership of a digital currency exchange could expose the business to money laundering and terrorism financing risks. Notifying AUSTRAC is important to ensure that AUSTRAC has correct information to consider the ongoing suitability for that business to provide designated services, to consider whether the risk of ML/TF continues to be sufficiently mitigated and also to ensure that valuable information that may be of relevance to law enforcement and other investigatory agencies is accurate.
The proposed civil penalty provisions in the Bill are consistent with other existing provisions in the Act. This is in accordance with the Guide to Framing Commonwealth Offences (The Guide), which notes that 'a penalty should be formulated in a manner that takes account of penalties applying to offences of the same nature in other legislation and to penalties for other offences in the legislation in question'. These businesses have the potential to generate significant criminal proceeds far exceeding the maximum penalties available under the standard ratio. The Guide contemplates the use of higher penalties to combat corporate or white collar crime to counter the potential financial gains from committing an offence.
Committee comment
2.24 The committee thanks the Minister for this response. The committee notes the Minister's advice that the applicable penalties need to be sufficiently high to be an effective deterrent and notes the matters that the Federal Court is to have regard to in setting the penalty. The committee also notes the Minister's advice regarding the serious consequences of failure to notify AUSTRAC of changes in circumstances, that the proposed civil penalty provisions are consistent with other existing provisions in the Act, and that the relevant businesses have the potential to generate significant criminal proceeds far exceeding the maximum penalties available under the standard ratio.
2.25 The committee reiterates that civil penalties of up to 20,000 penalty units for an individual (or $4.2 million) and 100,000 penalty units (or $21 million) for a body corporate are extremely significant penalties. The committee notes that while the Minister's advice stated that these penalties are consistent with other penalties in the AML/CTF Act (as existing section 175 states that all civil penalties in the AML/CTF Act are subject to the same maximum penalty), no examples were given of penalties applying to offences of the same nature in other legislation.
2.26 The committee requests that the key information provided by the Minister be included in the explanatory memorandum, noting the importance of this document as a point of access to understanding the law and, if needed, as extrinsic material to assist with interpretation (see section 15AB of the Acts Interpretation Act 1901).
2.27 The committee draws its scrutiny concerns to the attention of Senators and leaves to the Senate as a whole the appropriateness of imposing civil penalties of up to 20,000 penalty units for an individual (or $4.2 million) and 100,000 penalty units (or $21 million) for a body corporate in these circumstances.
Initial scrutiny – extract
2.28 Proposed section 76R provides that no action, suit or proceeding (whether criminal or civil) lies against the Commonwealth, the AUSTRAC CEO or a member of the staff of AUSTRAC in relation to the publication of the Digital Currency Exchange Register or a list of the names of persons whose registration has been cancelled. This therefore removes any common law right to bring an action to enforce legal rights (for example, a claim of defamation). The committee notes that this applies even if the action taken was not done in good faith.
2.29 The committee expects that if a bill seeks to provide immunity from liability, particularly where such immunity could affect individual rights, this should be soundly justified. In this instance, the explanatory memorandum provides no explanation for this provision, merely restating the terms of the provision.[23]
2.30 The committee requests the Minister's advice as to why it is considered appropriate to provide immunity from civil or criminal liability so that affected persons will no longer have a right to bring an action to enforce their legal rights. The committee considers it may be appropriate, at a minimum, for proposed section 76R to be amended to provide that the immunity only applies to actions taken in good faith, and requests the Minister's response in relation to this matter.
Minister's response
2.31 The Minister advised:
Publication of the Digital Currency Exchange Register, or a list of persons whose registration has been cancelled, is largely procedural and administrative. It will be a question of fact whether a person is registered or their registration has been cancelled. Specifying a requirement for "good faith" publication does not appear necessary. The matter that will have greater relevance to the person is the decision preceding publication as to whether or not to register or cancel registration as a digital currency service provider. Those decisions are subject to appropriate review mechanisms.
As with the current Remittance Sector Register, the Digital Currency Exchange Register will be a central record for AUSTRAC of registered entities. If appropriate, AUSTRAC may permit others to have access to the Register. For example, financial institutions use the Remittance Sector Register to confirm that a person is legally authorised to conduct a remittance business, and the Digital Currency Exchange Register may similarly be used by an exchange counterpart to know that the person it is exchanging with is registered.
Committee comment
2.32 The committee thanks the Minister for this response. The committee notes the Minister's advice that publication of the list of persons whose registration has been cancelled is largely procedural and administrative and a question of fact and as such requiring 'good faith' in publishing that information does not appear necessary, as it is the decision preceding publication as to whether or not to register or cancel registration that is of greater relevance, and those decisions are subject to appropriate review mechanisms.
2.33 However, the committee notes that while a decision to cancel registration is subject to review, proposed subsection 76J(4) provides that the AUSTRAC CEO may publish, in the manner specified in the rules, a list of the names of persons whose registration has been cancelled and the date it takes effect. This would appear to occur immediately once registration is cancelled, which may occur prior to any review of the decision. Giving immunity to the Commonwealth in relation to the publication of this list would mean that where a person's registration is cancelled and published on the Register, but the decision to cancel is later overturned, the person would have no action against the Commonwealth for any damage done to their reputation by the publication of a cancellation decision that was later overturned. The committee also notes that while the publication of the list is largely procedural and a question of fact, it would seem that not requiring, at a minimum, that the action be taken in good faith, could result in immunity being provided to the publication of names in bad faith.
2.34 The committee considers it would be appropriate if the bill were to be amended to, at a minimum, provide that the immunity from civil and criminal liability in proposed section 76R applies only to actions taken in good faith.
2.35 The committee draws its scrutiny concerns to the attention of Senators and leaves to the Senate as a whole the appropriateness of granting civil and criminal immunity in relation to the publication of a list of persons whose registration has been cancelled.
Initial scrutiny – extract
2.36 Proposed subsection 76S(1) states that before the AUSTRAC CEO makes a decision to refuse to register a person as a digital currency exchange provider, to impose conditions on registration or to cancel a person's registration, they must give a written notice to the person, with reasons provided, allowing the affected person to make a submission in relation to the proposed decision. However, proposed subsection 76S(2) provides that the AUSTRAC CEO is not required to give this notice if satisfied that it is inappropriate to do so because of the urgency of the circumstances. This would appear to remove the fair hearing requirements in these circumstances. The explanatory memorandum does not give a justification for limiting the right to a fair hearing in this way.
2.37 The committee notes it is unclear what circumstances may be so urgent in relation to a decision not to register a person. It is also unclear why it is necessary to remove the requirement to give notice regarding cancellation in urgent circumstances, given proposed section 76K gives a power to suspend registration, which could be used in urgent situations before a decision is made to cancel registration.
2.38 The committee therefore requests the Minister's advice as to why it is necessary and appropriate to remove the requirement to notify an affected person before a decision is made not to register the person, to impose conditions on registration or to cancel registration.
Minister's response
2.39 The Minister advised:
The need for urgent refusal of registration or cancellation of registration of a digital currency exchange is likely to be a rare occurrence in practice. Cancellation without prior notice under equivalent provisions applicable to the remittance sector has not been done to date. However, the availability of the power of refusal or cancellation of registration without notice remains appropriate in circumstances where law enforcement agencies and AUSTRAC identify an ongoing threat of terrorism financing, money laundering or serious crime for which the circumstances require an urgent response. For example, if suspected terrorism financing or other serious offences were being carried out by the digital currency exchange at the time of the decision, and providing notice may risk the criminal activities continuing to occur and/or risk the loss of vital evidence. It should also be noted that both internal review and merits review by the Administrative Appeals Tribunal continue to be available for decisions made without prior notice on the basis of urgency.
Committee comment
2.40 The committee thanks the Minister for this response. The committee notes the Minister's advice that the need for urgent refusal of registration or cancellation is likely to be a rare occurrence in practice but it is appropriate for circumstances requiring an urgent response, for example where providing notice may risk the criminal activities continuing to occur and/or risk the loss of vital evidence.
2.41 It is not clear to the committee how giving notice of a decision not to register a person as a digital currency exchange provider, to impose conditions on registration or to cancel registration (in circumstances where there is also a power to first suspend registration, without notice, in urgent situations), could result in a risk that criminal activities continues to occur or risks the loss of vital evidence.
2.42 The committee draws its scrutiny concerns to the attention of Senators and leaves to the Senate as a whole the appropriateness of limiting the right to a fair hearing in these circumstances.
Seizure powers[25]
Initial scrutiny – extract
2.43 A number of items in the bill propose broadening the search and seizure powers currently exercisable by police and customs officers at the border. These powers would enable police and customs officers to seize physical currency and bearer negotiable instruments produced or found during a search, in certain circumstances. As recognised in the explanatory memorandum,[26] the Guide to Framing Commonwealth Offences provides that seizure should only be allowed under a warrant, noting that seizure is a significant coercive power and the Commonwealth has consistently taken the approach that it should require authorisation under a search warrant.[27] The Guide also states that there is a very limited range of circumstances where it may be appropriate to allow officers the ability to seize pending issue of a warrant, such as where reasonably necessary to resolve a situation of immediate emergency.[28] The explanatory memorandum appears to reinterpret this to say that the Guide contemplates there is a limited range of circumstances where it may be appropriate to allow for seizure, such as where it may not be possible or practical to obtain a warrant.[29] The committee does not consider this is the appropriate test and affirms its scrutiny view that seizure should only take place under a warrant, unless seizure is necessary to resolve a situation of immediate emergency.
2.44 The committee notes that it is possible to provide that a police or customs officer may, without a warrant, secure an item pending issue of a warrant authorising seizure. The explanatory memorandum does not explain why this approach was not adopted. The committee also notes that provisions in the Act currently give certain powers to police and customs officers to seize such items (in more limited circumstances), and notes that the fact that powers already exist in the Act to enable the seizure of certain items does not, of itself, provide a justification for including such powers in the bill currently under consideration.
2.45 The committee requests the Minister's detailed justification for provisions that give police and customs officers the power to seize physical currency and bearer negotiable instruments without a warrant. In particular, the committee seeks the Minister's advice as to:
• why the proposed power is to seize the relevant items rather than a power to secure the items pending the obtaining of a warrant;
• whether, if the seizure power remains, there could be increased accountability for the exercise of this power, such as requiring senior police or executive authorisation for the exercise of the power; and
• whether legislative requirements are in place (and if not, why not) regulating:
• the period of time seized items can be retained;
• the process for seized material to be reviewed on a regular basis; and
• the procedure for the return of the seized items.
Minister's response
2.46 The Minister advised:
The provisions relating to search and seizure are intended to address the known risk of money-laundering and terrorism financing through the movement of cash and bearer negotiable instruments across the border. The primary rationale for the 'seizure without warrant' power in the Bill is the time-sensitive nature of operations at the border. In the international airport environment, there may be only a limited opportunity between identifying physical currency/BNIs and the departure of the target on an international flight. Obtaining a warrant prior to seizure, or allowing physical currency/BNIs to be secured pending a warrant, would not be possible in these tight timeframes. If the AFP or Customs officers are not able to seize physical currency/BNIs at the time before the cross border movement is made, the money is unlikely to be able to be traced or recovered. This would undermine the very purpose of AML/CTF measures designed to prevent money laundering, terrorism financing and other serious crimes.
A power to secure an item pending obtaining a warrant is similarly problematic, because the situation is still one where time is limited, and while the money or BNI could be secured, there may be limited capacity for the person to be delayed while waiting for a warrant to be obtained. It is preferable for the search and seizure powers to be able to be exercised effectively and decisive action taken where a suspicion of money laundering or terrorist financing arises. The powers are intended to prevent funds from being used for these purposes, while also balancing the interests of legitimate travellers who may be carrying cash and BNIs for legitimate purpose and seeking to move through the border without unnecessary delay.
Committee comment
2.47 The committee thanks the Minister for this response. The committee notes the Minister's advice that the primary reason for allowing for seizure of items without a warrant is the time-sensitive nature of operations at the border and that the targeted person may be departing on an international flight. The committee also notes the Minister's advice that obtaining a warrant prior to seizure, or securing an item pending obtaining a warrant would not be possible in these tight timeframes as while the money or bearer negotiable instrument could be secured, there may be limited capacity for the person to be delayed while waiting for a warrant to be obtained.
2.48 It is not clear to the committee why it would be strictly necessary to delay a person departing on an international flight when an item is secured by a police or customs officer, as it would seem that those persons who wished to contest the issuing of a warrant could elect to delay boarding their flight while those who did not wish to contest the warrant could elect to leave. The committee also notes that the Minister's response did not address the committee's queries in relation to whether, if the seizure power remains, there could be increased accountability for the exercise of this power, such as requiring senior police or executive authorisation for the exercise of the power. It also did not address whether legislative requirements are in place (and if not, why not) regulating the period of time seized items can be retained; the process for seized material to be reviewed on a regular basis; and the procedure for the return of the seized items.
2.49 The committee reiterates its scrutiny view that seizure of items should only take place under a warrant, unless seizure is necessary to resolve a situation of immediate emergency. The committee draws its scrutiny concerns to the attention of Senators and leaves to the Senate as a whole the appropriateness of broadening the search and seizure powers currently exercisable by police and customs officers at the border.
[1] See correspondence relating to Scrutiny Digest No. 12 of 2017 available at: www.aph.gov.au/senate_scrutiny_digest
[2] Schedule 1, item 20, proposed section 76A. The committee draws Senators' attention to this provision pursuant to principle 1(a)(i) of the committee's terms of reference.
[3] See proposed subsection 76A(3).
[4] See proposed subsections 76A(5), (7) and (9).
[5] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp 22–25.
[6] Explanatory memorandum, p. 19.
[7] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, p. 23.
[8] Explanatory memorandum, p. 19.
[9] See proposed paragraphs 76A(3)(c); (5)(c); (7)(c); and 9(c).
[10] Explanatory memorandum, p. 19.
[11] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, p. 23.
[12] Schedule 1, item 20, proposed sections 76K and 76L. The committee draws Senators' attention to these provisions pursuant to principle 1(a)(iv) of the committee's terms of reference.
[13] Senate Standing Committee for the Scrutiny of Bills, First Report of 2015, 11 February 2015, pp 21–35.
[14] See also Senate Standing Committee on Regulations and Ordinances, Delegated Legislation Monitor No. 17 of 2014, 3 December 2014, pp 6–24.
[15] See sections 18 and 19 of the Legislation Act 2003.
[16] Currently, there is only one regulation in operation under the AML/CTF Act: Anti-Money Laundering and Counter-Terrorism Financing (Prescribed Foreign Countries) Regulation 2016.
[17] Schedule 1, item 20, proposed subsections 76A(11) and 76P(3); item 73, proposed subsection 199(13); and item 75, proposed subsection 200(16). The committee draws Senators' attention to these provisions pursuant to principle 1(a)(i) of the committee's terms of reference.
[18] See Schedule 1, item 20, proposed subsection 76P(3).
[19] See Schedule 1, item 73, proposed subsection 199(13) and item 75, proposed subsection 200(16).
[20] See Schedule 1, item 20, proposed subsection 76A(11).
[21] See sections 199 and 200 of the Act.
[22] Schedule 1, item 20, proposed section 76R. The committee draws Senators' attention to this provision pursuant to principle 1(a)(i) of the committee's terms of reference.
[23] See explanatory memorandum, p. 24.
[24] Schedule 1, item 20, proposed subsection 76S(2). The committee draws Senators' attention to this provision pursuant to principle 1(a)(iii) of the committee's terms of reference.
[25] Schedule 1, item 67, proposed subsection 199(2A); item 71, proposed subsection 199(5); item 72, proposed subsection 199(10); and item 74, proposed subsection 200(13A). The committee draws Senators' attention to these provisions pursuant to principle 1(a)(i) of the committee's terms of reference.
[26] Explanatory memorandum, p. 39.
[27] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp 82–83.
[28] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, p. 39.
[29] Explanatory memorandum, p. 39.
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