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Chapter 10 - Financial Transaction Reports Act

Contents


Introduction

The Financial Transaction Reports Act 1988 (FTR Act) operates alongside the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). The FTR Act was introduced in 1988 to assist in administering and enforcing taxation laws as well as other Commonwealth, state and territory legislation.

When the AML/CTF Act was introduced in 2006, certain parts of the FTR Act were repealed and others became inoperative.

However, the FTR Act still requires the reporting of certain transactions and imposes obligations in relation to certain services provided by 'cash dealers' under the Act. This chapter provides an overview of the obligations that remain operational under the FTR Act.

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Background

Who has obligations under the FTR Act?

The FTR Act applies to 'cash dealers', which are defined under section 3 of the FTR Act and include the following:

  • financial institutions
  • financial corporations
  • insurer or insurance intermediaries
  • securities dealers and futures brokers
  • cash carriers
  • trustees or a manager of a unit trust
  • persons that deal in travellers cheques and money orders
  • persons who collect, hold, exchange or remit currency on behalf of other persons
  • currency and bullion dealers
  • casinos and gambling houses
  • totalisator agency boards.

Under the FTR Act, solicitors are not cash dealers. However, the FTR Act imposes certain reporting obligations on solicitors (including a solicitor corporation or a partnership of solicitors) and these are outlined below.

Can an entity be both a 'cash dealer' under the FTR Act and a 'reporting entity' under the AML/CTF Act?

Generally, if a service offered by a cash dealer is a designated service under the AML/CTF Act, obligations under the FTR Act about that service no longer apply. For example, the provision of accounts is now wholly captured under the AML/CTF Act.

However, a reporting entity under the AML/CTF Act may also provide other services as a cash dealer under the FTR Act. For example, where a reporting entity provides a designated service under the AML/CTF Act and also provides general insurance services. The provision of general insurance services is not listed as a designated service under section 6 of the AML/CTF Act but is captured under the FTR Act. In this example, the reporting entity would have obligations under both the AML/CTF Act and the FTR Act.

What are the reporting obligations under the FTR Act?

Under the FTR Act, cash dealers must report:

  • significant cash transactions under section 7 of the FTR Act
  • solicitor significant cash transactions under section 15A of the FTR Act
  • suspect transactions under section 16 of the FTR Act.

Do international funds transfer instruction (IFTI) reporting obligations apply under the FTR Act?

No. The IFTI reporting obligations under the FTR Act ceased on 11 September 2010. Section 45 of the AML/CTF Act prescribes the obligation to report IFTIs to AUSTRAC.

Does an entity have an obligation to report transactions under both the FTR Act and the AML/CTF Act?

The reporting obligations under the FTR Act apply only to transactions to which the AML/CTF Act does not apply. Specifically, the FTR Act reporting obligations no longer apply if:

  • the cash dealer is an AML/CTF Act reporting entity for the designated service under which the transaction occurs
  • the transaction occurred after the AML/CTF Act reporting obligations commenced - that is, after 11 March 2010 for suspicious matter reports (SMRs) or threshold transaction reports (TTRs) and after 11 September 2010 for international funds transfer instructions (IFTIs); and
  • the transaction is a 'designated service transaction'.

Section 3 of the FTR Act defines a designated service transaction as a transaction involved in providing a designated service by a reporting entity to a customer within the meaning of the AML/CTF Act.

What are the penalties for failing to report under the FTR Act?

Part V of the FTR Act provides for penalties of up to two years imprisonment if convicted by a court for refusing or failing to communicate information (as prescribed under Parts II and III of the Act) to AUSTRAC.

The Act also provides for penalties of up to five years imprisonment if convicted by a court where a cash dealer or solicitor knowingly provides incomplete information to AUSTRAC and makes it an offence to conduct a transaction in such a way as to avoid a reporting obligation.

How does a cash dealer or solicitor report to AUSTRAC?

Cash dealers and solicitors can create an AUSTRAC Online business account to submit transaction reports electronically. Please visit the Enrolment and registration page to find out more about creating an AUSTRAC Online business account.

Cash dealers or solicitors without internet access may submit paper reports. Reporting forms may be requested from the AUSTRAC Contact Centre.

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Significant cash transaction reports

What are the significant cash transaction reporting obligations for cash dealers?

A cash dealer which is not a reporting entity but is a party to a significant cash transaction must submit to AUSTRAC a significant cash transaction report (SCTR).

The FTR Act defines a cash transaction as a transaction involving transferring physical currency of AUD10,000 or more (or foreign currency equivalent). This includes banking amounts of currency which, when aggregated, amount to AUD10,000 or more (or foreign currency equivalent).

Example

ABC Cars is a motor vehicle dealer and offers its customers motor vehicle insurance policies on behalf of DEF Insurance. ABC Cars is an insurance intermediary and a cash dealer under the FTR Act.
Mr K purchased a motor vehicle from ABC Cars and paid a deposit of AUD10,000 in cash on Monday and returned the following day to pay the balance of AUD15,000 in cash. ABC Cars accepted the payments.

In this example, ABC Cars must submit two SCTRs to AUSTRAC:

  • SCTR for the cash deposit of AUD10,000
  • SCTR for the final cash payment of AUD15,000.

What is the definition of currency under the FTR Act?

The FTR Act defines currency as the coin and paper money of Australia or of a foreign country that:

  • is designated as legal tender; and
  • circulates as, and is customarily used and accepted as, a medium of exchange in the country of issue.

What are the reportable details for a significant cash transaction?

The FTR Act (refer to Schedule 1 Part A and Part B) specifies the reportable details for a significant cash transaction.

What are the reporting periods for a significant cash transaction?

Section 3 of the FTR Act states that significant cash transactions must be reported within the following reporting periods:

  • If the transaction involves foreign currency, the reporting period ends the day after the day the transaction occurred
  • If the transaction does not involve foreign currency, the reporting period ends 15 days after the day the transaction occurs.

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Solicitor significant cash transaction reports (solicitor SCTRs)

What are 'solicitor SCTRs'?

The FTR Act requires a solicitor to report cash transactions which are entered into by, or on behalf of, a solicitor, a solicitor corporation, or a partnership of solicitors in the course of practicing as a solicitor, where the cash transaction involves the transfer of currency of AUD10,000 or more (or foreign currency equivalent) in value.

The following examples indicate when a significant cash transaction reporting obligation may arise:

  • A client enters into a transaction with their solicitor and the transaction involves the transfer of cash to the value of AUD10,000 or more to the solicitor
  • Solicitor A, who is acting on behalf of a client, enters into a transaction with Solicitor B which involves the transfer of cash to the value of AUD10,000 or more to Solicitor B
  • A person makes a payment of cash to the value of AUD10,000 or more into a solicitor's trust account.

Whether or not a transaction is entered into 'in the course of practising as a solicitor' and 'entered into by, or on behalf of, a solicitor' can only be determined on a case-by-case basis.

This reporting obligation does not apply to a solicitor in relation to a transaction where:

  • the solicitor is a reporting entity under the AML/CTF Act; and
  • the transaction occurred after 11 March 2010; and
  • the transaction is a designated service under the AML/CTF Act.

This reporting obligation also does not apply where a solicitor provides a threshold transaction report under section 43 of the AML/CTF Act in relation to the transaction.

What are the reportable details for a solicitor SCTR?

Schedule 3A of the FTR Act specifies the reportable details for a solicitor SCTR.

What are the reporting periods for a solicitor SCTR?

Section 3 of the FTR Act provides that solicitor significant cash transactions must be reported within the following reporting periods:

  • If the transaction involves foreign currency, the reporting period ends the day after the day the transaction occurred
  • If the transaction does not involve foreign currency, the reporting period ends 15 days after the day the transaction occurs.

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Suspect transaction reports

What are the suspect transaction reporting obligations?

Under section 16 of the FTR Act, cash dealers who are a party to a 'suspect' transaction must report that transaction to AUSTRAC. The cash dealer must submit a suspect transaction report (SUSTR) to AUSTRAC as soon as practicable after forming the suspicion.

Example

ABC Cars is a motor vehicle dealer and offers its customers insurance policies on behalf of DEF Insurance. ABC Cars is an insurance intermediary and a cash dealer under the FTR Act.

Mr G purchased a motor vehicle from ABC Cars and entered into a contract for an insurance policy with DEF Insurance. Mr G purchased the motor vehicle for AUD25,000 and offered to pay in cash. Mr G also provided ABC Cars AUD7,000 towards the car insurance policy. The cash payments were made over several days in bundles of AUD5,000 and AUD7,000.

Mr G claimed the cash was the proceeds from his house sale, but the customer service representative noticed the funds appeared to be damp and dirty. Further, Mr G insisted on purchasing the motor vehicle using cash and would not proceed with the purchase if ABC Cars did not accommodate his request. The customer service representative considered Mr G's behaviour and the transaction to be suspicious and submitted a SUSTR to AUSTRAC.

Several weeks later, Mr G contacted ABC Cars and requested ABC Cars cancel the insurance policy and refund the remaining insurance premium as a cheque. The customer service representative regarded this request also to be suspicious and submitted another SUSTR to AUSTRAC with this additional information.

What are the 'grounds for suspicion'?

The FTR Act provides that a cash dealer must submit a SUSTR to AUSTRAC if the cash dealer has reasonable grounds to suspect that:

  • information that the cash dealer has concerning the transaction may be relevant to an investigation of an evasion or attempted evasion of a taxation law; or
  • information that the cash dealer has concerning the transaction may be relevant to an investigation or prosecution of an offence against a law of the Commonwealth or of a territory; or
  • information that the cash dealer has concerning the transaction may assist with the enforcement of the Proceeds of Crime Act 1987 or the Proceeds of Crime Act 2002; or
  • the transaction is preparatory to committing a financing of terrorism offence or information may be relevant to investigating or prosecuting a financing of terrorism offence. A 'financing of terrorism offence' is defined as meaning an offence under section 102.6 or Division 103 of the Criminal Code, or section 20 or 21 of the Charter of the United Nations Act 1945.

Is a SUSTR required if no physical cash is involved in the transaction?

Suspect transaction reporting requirements apply to all types of transactions, whether or not physical cash is involved.

What are the reporting time frames for SUSTRs?

The cash dealer must submit a SUSTR to AUSTRAC as soon as practicable after forming the suspicion. 'As soon as practicable' is not defined in the FTR Act. In keeping with the reporting periods set out in section 41 of the AML/CTF Act for suspicious matter reports, AUSTRAC considers 24 hours is an appropriate time frame for reporting terrorism financing matters and three business days for reporting all other matters.

Does the transaction need to be completed?

No. Even if a transaction does not proceed, cash dealers must submit a SUSTR to AUSTRAC if they form the required suspicion in relation to a proposal for a transaction or in the course of negotiations concerning the transaction.

Is a cash dealer immune from any action, suit or proceeding for submitting SUSTRs?

Yes. The FTR Act provides immunity from any action, suit or proceeding for any cash dealer or agent of the cash dealer that submitted a SUSTR. However, section 29 of the FTR Act makes it an offence punishable by imprisonment for a period of up to five years if a cash dealer is convicted of intentionally communicating false or misleading information in a report submitted to AUSTRAC.

Is a cash dealer allowed to disclose information concerning a SUSTR that was submitted to AUSTRAC to any other person?

No. A cash dealer submitting a SUSTR must not disclose to anyone (including the customer) that it formed the suspicion or that the transaction was reported to AUSTRAC. This includes disclosing any other information from which a person could reasonably infer the cash dealer formed a suspicion or submitted a SUSTR to AUSTRAC.

It is a criminal offence under the FTR Act, punishable by imprisonment for up to two years, for a cash dealer to disclose to any person information concerning forming a suspicion or submitting a SUSTR to AUSTRAC.

Can a cash dealer be required to provide further information about a SUSTR?

Yes. The FTR Act provides that a cash dealer who submits a SUSTR to AUSTRAC must provide further information if requested by the:

  • AUSTRAC CEO
  • a relevant authority (meaning the Commissioner of the Australian Federal Police, the Integrity Commissioner, the Chief Executive Officer of the Australian Crime Commission, the Commissioner of Taxation, or the Chief Executive Officer of Customs)
  • aninvestigating officer carrying out an investigation arising from, or relating to, the matters referred to in the SUSTR (meaning a taxation officer, an Australian Federal Police member, a customs officer, a staff member of the Australian Commission for Law Enforcement Integrity, an examiner or member of the staff of the Australian Crime Commission).

Further information could include any subject or topic relevant to the information provided by the cash dealer in a SUSTR; for example, transactions and any information in a cash dealer's possession which is in written form.

Can a cash dealer continue a business relationship with a customer if the cash dealer has formed a suspicion about that customer?

The FTR Act does not direct a cash dealer to stop providing services to, or terminate a business relationship with a customer, even if the cash dealer has formed a suspicion about that particular customer. A cash dealer must determine whether to terminate the relationship with the customer, based on its own assessment.

If the cash dealer does decide to terminate the business relationship with the customer, the cash dealer must not disclose to anyone (including the customer) that it formed the suspicion, or that the transaction was reported to AUSTRAC.

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Record-keeping obligations

The FTR Act requires cash dealers to retain:

  • financial transaction documents
  • account and signatory information.

This information must be held for seven years (as specified in section 40E of the FTR Act).

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Exemptions

The FTR Act (refer to section 41A) enables the AUSTRAC CEO to issue a written instrument which exempts a specified person from an obligation or obligations under the FTR Act. An exemption may apply unconditionally or be subject to conditions.

For further information on how to apply for an exemption see AUSTRAC's exemption policy.

Further information

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Last modified: 20/08/2015 15:40