New requirements regarding sender information for international funds transfer instructions

The Financial Transaction Reports Amendment Bill 2006 (Bill) has been introduced into Parliament and will refine Division 3A of Part II of the Financial Transaction Reports Act 1988 (FTRA) regarding sender information that accompanies international funds transfer instructions (IFTIs). This will be done by amending the definition of “account” (for Division 3A) and “customer information”. Division 3A will apply to authorised deposit taking institutions (ADIs) only and not to all “cash dealers”.

This Bill means that the new requirements for customer information to accompany IFTIs are restricted to ADIs such as banks and do not apply to “cash dealers” generally under the FTRA, such as non-bank remittance services.

Implementation

Senator Ellison introduced the Bill on 21 June 2006. The Bill will amend the new Division 3A of Part II of the FTRA which was inserted by Schedule 9 of the Anti-Terrorism (No.2) Act 2005 but which has not yet come into force. As the new Division 3A is due to come into force on 14 December 2006, the Bill also needs to come into operation by that time.

Purpose

The Bill implements the Financial Action Task Force Special Recommendation VII which requires customer information regarding the sender of funds to accompany an IFTI in order to combat money laundering and enable greater tracking of the movement of funds. The new Division 3A requires that:

• IFTIs out of Australia by ADIs must be accompanied by prescribed customer information, and
• the Australian Transaction Reports and Analysis Centre (AUSTRAC) can direct an ADI to request customer information for IFTIs into Australia.

The proposed amendments are expected to closely mirror the proposed provisions of the anticipated Anti-Money Laundering and Counter-Terrorism Financing Bill.

The proposed amendments to Division 3A under the Bill are:

• an amendment to the definition of “account” for the purposes of Division 3A of Part II of the FTRA
• clarification of the definition of “customer information” in section 17FA of the FTRA
• an amendment to the definition of “customer information” for incoming IFTIs under section 17FB of the FTRA, and
• an amendment to restrict the application of Division 3A of Part II of the FTRA to ADIs.

The Explanatory Memorandum (EM) notes that the definition of “account” in Division 3A of Part II of the FTRA will “assist industry by reducing the number of systems changes required at an institutional level” and restricts the application of this new division to ADIs only. Furthermore, the EM states that unless the amendments were restricted to ADIs, “certain legitimate non-bank money remitters assert that they could be put out of business.”

This restriction is also due to challenges with the current FTRA for non-bank money remittance businesses. As the EM explains:

“Presently, the FTR Act does not distinguish between non-bank IFTIs which are ‘same-institution’ funds transfer instructions and non-bank IFTIs involving ‘multiple’ institutions. It is impracticable to require IFTIs sent from one institution in one country to the same institution in another country to include originator information because in effect this would require the institution to ‘pass on’ the information to itself.”

Non-bank money remitters will continue to report IFTIs to AUSTRAC and as such, law enforcement authorities will retain access to the accompanying customer information. The proposed amendments do not change this.

Account

The new definition of “account” for Division 3A of Part II of the FTRA will include:

• “a credit card account
• a loan account (other than a credit card account), and
• an account of money held in the form of units in either a cash management trust or a trust of a kind prescribed by the regulations.”

It will be immaterial whether an account has a nil balance or whether any transactions have been allowed in relation to an account. Other definitions of “account” in other sections of the FTRA will remain unchanged.