Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 - Initial Scrutiny [2024] AUSStaCSBSD 190 (18 September 2024)

1.1 The committee comments on the following bills and, in some instances, seeks a response or further information from the relevant minister.

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Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024^[2]

Purpose	The bill seeks to reform Australia’s anti-money laundering and counter-terrorism financing regime through amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the AML/CTF Act), and the repealing of the Financial Transaction Reports Act 1988 (FTR Act). Schedule 1 seeks to replace Part 7 of the AML/CTF Act with outcomes-focused obligations for reporting entities. Schedule 2 seeks to update procedures relating to customer due diligence for reporting entities. Schedule 3 seeks to expand the AML/CTF regime to additional high-risk services such as real estate, professional services and dealers of precious metals and stones. Schedule 4 seeks to institute changes regarding legal professional privilege. Schedule 5 seeks to introduce new offences for ‘tipping off’ and provides for delegated legislation to determine which Commonwealth agencies, authorities, bodies and organisations are able to disclose Australian Transaction Reports and Analysis Centre (AUSTRAC) information to foreign governments and agencies. Schedule 6 seeks to extend the AML/CTF regime to virtual asset-related services, and in doing so, amends and inserts new definitions related to virtual assets. Schedule 7 seeks to repeal and substitute a new description of a ‘bearer negotiable instrument’. Schedule 8 seeks to reform frameworks which set out electronic fund transfer instructions and internation funds transfer instructions as well as the reporting requirements for these services. Schedule 9 seeks to provide new powers for AUSTRAC, primarily an examination power which allows the AUSTRAC CEO to require an individual produce documents to AUSTRAC or appear before an examiner on oath or affirmation and answer questions. Schedule 10 seeks to move exemptions from the AML/CTF Rules into the AML/CTF Act, while also amending exemption thresholds for various bodies. Schedule 11 seeks to repeal the FTR Act. Schedule 12 would provide for the making of transitional rules under the bill such as allowing the Attorney-General to make rules concerning any amendment introduced by the bill for up to four years after the bill’s commencement.
Portfolio	Attorney-General
Introduced	House of Representatives on 11 September 2024
Bill status	Before the House of Representatives

Significant matters in delegated legislation^[3]

1.2 Currently, the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) provides that the heads of specified Commonwealth, State or Territory agencies, authorities, bodies and organisations are authorised to disclose AUSTRAC information to foreign governments and agencies.^[4] AUSTRAC information includes financial reports and information relevant to anti-money laundering and counter-terrorism financing and financial intelligence.^[5] This bill seeks to replace the existing limited list with a power for the Commonwealth, State or Territory agency to be prescribed by the rules.^[6]

1.3 The committee's view is that significant matters should be included in primary legislation unless a sound justification for the use of delegated legislation is provided. A legislative instrument, made by the executive, is not subject to the full range of parliamentary scrutiny inherent in bringing proposed changes in the form of an amending bill.

Item 5 repeals the list of agencies, authorities, bodies or organisations of the Commonwealth authorised to disclose AUSTRAC information to the government of a foreign country, or to a foreign agency under subsection 127(3). This list is intended to be moved into the AML/CTF Rules when they are remade. Moving the list of agencies to the AML/CTF Rules would enable a greater degree of flexibility and would ensure this provision does not easily become outdated and require legislative amendment to correct.^[7]

1.5 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 delegated 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.

1.6 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.

1.7 In light of the above, the committee requests the Attorney-General’s detailed advice as to why it is considered necessary and appropriate to leave the designation of Commonwealth, State and Territory entities who can disclose AUSTRAC information to foreign governments to delegated legislation.

Abrogation of privilege against self-incrimination^[8]

1.8 The AML/CTF Act currently provides that an authorised officer may require a person to give information or documents relevant to the operation of the AML/CTF Act, regulations or rules.^[9] Section 169 also provides that a person is not excused from giving that information or producing a document on the grounds that it might tend to incriminate them.^[10] However, subsection 169(2) provides that the information or document is not admissible in evidence against the person in most civil or criminal proceedings (this provides a ‘use’ immunity). However, it then excludes certain proceedings, meaning the information or documents can be used against the person in those specified proceedings. This bill seeks to expand the proceedings that are excluded, in which case no use immunity would apply.^[11] This is in relation to proceedings for an offence against a provision covered by the definitions of money laundering, the financing of terrorism, and proliferation financing in section 5 of the AML/CTF Act.

1.9 In addition, proposed section 172K of the bill provides that it would not be a reasonable excuse for an individual to refuse or fail to answer a question, produce a document or sign a record under new provisions in the bill on the grounds that doing so may incriminate them. However, the information would not be admissible in evidence against the individual in civil or criminal proceedings or in a proceeding for the imposition of a penalty other than in respect of making a false statement.^[12] This provides a use immunity.

1.10 These provisions therefore override (or expand the existing overriding of) 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.^[13]

1.11 The committee recognises there may be certain circumstances in which the privilege can be overridden. However, abrogating the privilege represents a serious loss of personal liberty. In considering whether it is appropriate to abrogate the privilege against self-incrimination, the committee will consider whether the public benefit in doing so significantly outweighs the loss to personal liberty. The committee considers that any justification for abrogating the privilege against self-incrimination will be more likely to be considered appropriate if accompanied by both a 'use immunity' and a 'derivative use immunity'. A use immunity provides that information or documents produced are not admissible in evidence in most proceedings. By contrast, a derivative use immunity provides that anything obtained as a direct, or indirect, consequence of the information or documents is not admissible in most proceedings. The committee will also consider the extent to which safeguards to protect individual rights and liberties, such as a use or a derivative use immunity, are included within the bill.

1.12 In relation to the expansion of subsection 169(2) the explanatory memorandum states:

This expansion of the abrogation of the privilege against self-incrimination is proportionate and reasonable, as it balances the rights and interests of the individual with benefits to the public that arise from the investigation and prosecution of serious criminal offences such as money laundering and the financing of terrorism. Further, the abrogation is no more than necessary to ensure AUSTRAC’s effectiveness in monitoring and ensuring compliance with the AML/CTF Act, the AML/CTF Rules and the regulations.^[14]

1.13 The committee notes with concern that in this instance these amendments mean that neither use nor derivative use immunity has been provided. It is unclear to the committee why the explanatory materials state that the abrogation is ‘no more than necessary’ given these important safeguards have not been provided for. It is also not clear why it is necessary to remove all immunities in relation to criminal proceedings relating to offence against a provision covered by the definitions of money laundering, the financing of terrorism, and proliferation financing.

1.14 Further, in relation to proposed section 172K the explanatory memorandum states:

If the criteria at subsection 172K(2) are met, subsection 172K(3) provides that the statement or the fact that the individual has signed the record of the examination is not admissible in evidence against the person other than in a proceeding relating to the falsity of the statement or the falsity of any statement contained in a signed record of the examination.

The Guide to Framing Commonwealth Offences indicates that where a law excludes the privilege against self-incrimination as in section 172K, it is ‘usual to include a use immunity or a derivative use immunity provision’. The Guide explains that the rationale for this protection is that ‘removing the privilege against self-incrimination represents a significant loss of personal liberty for an individual who is forced to give evidence that would tend to incriminate him or herself’.^[15]

1.15 It is clear to the committee that a use immunity has been provided for in proposed subsection 172K(3). However, it does not appear that a derivative use immunity, preventing anything obtained as an indirect, consequence of the information or documents provided from being admitted in proceedings, has been provided. The committee considers that the information set out in the explanatory memorandum does not provide a justification for not including a derivative use immunity.

1.17 The committee's consideration of the appropriateness of this response will be assisted if it explicitly addresses relevant principles as set out in the Guide to Framing Commonwealth Offences.^[16]

Reversal of the evidential burden of proof
Significant matters in delegated legislation^[17]

1.18 The bill proposes inserting a new offence of ‘tipping off’ into the AML/CTF Act for specified persons,^[18] such as reporting entities and their employees who disclose specified information^[19] to a person other than an AUSTRAC entrusted person, where the disclosure would or could reasonably be expected to prejudice an investigation of a Commonwealth offence or one being undertaken under the Proceeds of Crime Act 2002 or equivalent State and Territory laws.^[20]

1.19 There are two exceptions to this offence. The first is where a person is a reporting entity or an officer, employee or agent of a reporting entity who is a lawyer, an accountant, or a person specified in the rules, and the information relates to a customer of that entity.^[21] The information must be disclosed in good faith for the purpose of dissuading the customer from engaging in conduct that does or may constitute an offence.^[22] The second exception is where the disclosure is made to another reporting entity for the purposes of detecting, deterring or disrupting money laundering, the financing of terrorism, proliferation financing or other serious crimes and the conditions prescribed in the regulations are met.^[23] The evidential burden of proof is reversed for each of these offence-specific exceptions due to the operation of the Criminal Code.

1.20 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.

1.21 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:

1.22 The committee notes in this instance that the exceptions require evidence of the reason a defendant has made a disclosure, which is likely to be a matter that is peculiarly within a defendant’s knowledge. However, the explanatory memorandum does not provide any justification as to why it is appropriate to reverse the evidential burden of proof in this context.

1.23 In addition, the explanatory memorandum should have addressed why elements relevant to the exceptions, such as whether a person is a person specified in the rules or the conditions prescribed by regulations are met, are appropriate to be left to delegated legislation. The committee’s expectation is that offence provisions are limited to primary law and including matters relevant to the exceptions in delegated legislation should have been justified in the explanatory materials.

1.24 The committee considers that where a provision reverses the burden of proof the explanatory memorandum should explicitly address relevant principles as set out in the Attorney-General’s Department’s Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers.^[25]

1.25 The committee requests that an addendum to the explanatory memorandum containing a justification of these reverse burden provisions be tabled in the Parliament as soon as practicable, noting the importance of these explanatory materials as a point of access to understanding the law and, if needed, as extrinsic material to assist with interpretation.^[26]

Strict liability offences^[27]

1.26 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.^[28] 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.^[29]

1.27 Under general principles of the common law, fault is required to be proven before a person can be found guilty of a criminal offence. This ensures 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 had the intention to engage in the relevant conduct or was reckless or negligent while doing so. 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.^[30] 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.^[31]

The strict liability offence in subsection 172C(3) is appropriate as the information that would be obtained through an examination will be critical to AUSTRAC’s ability to monitor compliance with the AML/CTF Act, the AML/CTF Rules or the regulations. In turn, this information will assist AUSTRAC in detecting, deterring and disrupting money laundering, the financing of terrorism, and other serious offences. The penalty is sufficient enough as a deterrent to potential conduct that may undermine the exercise of the power, and falls well below the threshold for strict liability offences under the Guide to Framing Commonwealth Offences.^[32]

1.29 It is unclear to the committee why the explanatory memorandum argues that the penalty in this instance is below the threshold in the Guide to Framing Commonwealth Offences, as three months imprisonment is a considerably higher penalty than 60 penalty units, and is not consistent with the requirement that offences subject to strict liability are not punishable by imprisonment. Further, the explanatory memorandum has not provided any justification as to why this particular offence is appropriate for strict liability, including why it is necessary and appropriate to remove the fault element.

1.30 The committee requests a detailed justification from the Attorney-General for the proposed strict liability offence in section 172C of the bill with reference to the principles set out in the Guide to Framing Commonwealth Offences, and in particular why it is considered necessary and appropriate to impose a period of imprisonment in relation to a strict liability offence.

^[8] Schedule 9, item 5, proposed section 172K and item 17, proposed subparagraphs 169(2)(d)(iii), (iv) and (v) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. The committee draws senators’ attention to this provision pursuant to Senate standing order 24(1)(a)(i).

Australian Senate Standing Committee for the Scrutiny of Bills - Scrutiny Digests