On 4 July 2008 the Australian Transaction Reports and Analysis Centre (AUSTRAC) released the fourth publication of its Public Interpretation Series. Through the Public Interpretation Series, AUSTRAC sets out its views on some of the more common and complex issues posed by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cwlth) (AML/CTF Act).

In Public Legal Interpretation No. 4 of 2008 - What constitutes a reporting entity (Public Legal Interpretation), AUSTRAC outlines its view in relation to, amongst other things:

• what is meant by “carrying on a business” and acting “in the capacity of a provider of designated services”
• not-for-profit activities, and
• the obligation to lodge a compliance report.

“Business” and “carrying on a business” are defined broadly

A reporting entity under the AML/CTF Act is an entity that provides a “designated service”. Many designated services in the AML/CTF Act are described as being made in the course of “carrying on a business”.

The Public Legal Interpretation indicates that AUSTRAC has adopted a very broad view of the concept of “carrying on a business” on the basis that:

• the definition of “business” is defined broadly to fit the objects and purposes of the AML/CTF Act to mean “an activity that is conducted, whether or not it is regular, repetitive or continuous”
• the AML/CTF reference to business “whether or not conducted on a regular, repetitive or continuous basis” is broader than in other legislative constructions of this concept (eg in tax legislation), and
• whether an activity is a “core activity” of an entity should be given lesser consideration when determining what constitutes “business” in relation to the provision of financial services.

The third consideration listed above represents a departure from the discussion in the Replacement Explanatory Memorandum to the Anti-Money Laundering and Counter-Terrorism Financing Bill 2006 (Replacement EM). This is because AUSTRAC considers that the reasoning in the Replacement EM differs from the definition of “carrying on a business” in the AML/CTF Act and accordingly should be given lesser consideration.

Not-for-profit activities may be considered a business

AUSTRAC express the view that not-for-profit activities may be considered a “business” for the purposes of the AML/CTF Act. In particular, AUSTRAC notes that:

• the AML/CTF Act does not require a business to be undertaken for profit or with the expectation and intention of gain or profit making (this is in contrast to the requirements of taxation legislation)
• activities of a “business” nature must, however, occur as part of “a venture or concern in trade or commerce as this is consistent with the objects of the AML/CTF Act
• activities need not be conducted on a regular, repetitive or continuous basis
• the “trade and commerce” requirement of the definition of “business” relates to the issues surrounding how a transaction is carried out, not to whether it has been done for profit or is of a continuous of repetitive basis, and
• the AML/CTF Act does not differentiate between an entity that does not charge for facilitating transactions and one that does.

Compliance reporting

Under the AML/CTF Act, a reporting entity must submit a compliance report to AUSTRAC if it has provided designated services at any time within the reporting period.

AUSTRAC has clarified some confusion as to when compliance reporting is not required to be lodged for a particular reporting period. These are if:

• an entity ceases to provide or offer to provide a designated service prior to the commencement of a reporting period (as the entity is not deemed to be a “reporting entity” for the purposes of that reporting period), and
• an entity that occasionally provides or offers to provide designated services but which has not done so in that reporting period.

Other aspects of the Public Legal Interpretation

The Public Legal Interpretation also provides commentary in respect of different aspects of many of the designated services described in section 6 of the AML/CTF Act in tables 1, 2 and 3. Relevant interpretations include:

• the expression “allowing transactions to be conducted on an account” for the purposes of item 3 of table 1 in section 6 includes debits and withdrawals but not transactions which relate to becoming a signatory or opening an account as these are covered by items 1 and 2
• the nature of the transaction must be considered in determining whether a loan has in fact been made and case law on corporations legislation is relevant in this context
• a loan account is opened no later than when a customer is able to withdraw or transfer funds from the account, and
• “stored value cards” that are covered by the designated services in items 21 to 24 of table 1 in section 6 are cards which are capable of being electronically scanned and examples include telephone cards, pre -paid cards, student university cards and some gift cards.

What are the implications for your organisation?

You should re-assess your business to consider whether the Public Legal Interpretation impacts on your activities, particularly if you undertake activities on an occasional or not-for-profit basis.