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International funds transfer instructions (IFTIs)

Contents


What are the IFTI reporting obligations?

The 'sender' of an IFTI transmitted out of Australia, or the 'recipient' of an IFTI transmitted into Australia, must report the instruction to AUSTRAC within 10 business days after the day the instruction was sent or received.

There are two categories of IFTIs:

  • international electronic funds transfer instructions (IFTI-E)
  • instructions given under a designated remittance arrangement (IFTI-DRA)

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International electronic funds transfer instruction (IFTI-E)

What is an electronic funds transfer instruction (EFTI)?

Under the AML/CTF Act, an electronic funds transfer instruction (EFTI) is an electronic instruction sent between an 'ordering institution' and a 'beneficiary institution'.

An ordering institution or beneficiary institution can be:

  • an ADI
  • a bank, building society or a credit union
  • persons specified in the AML/CTF Rules.

The instruction or the funds must be passed on or transferred in whole or in part by one or more electronic means of communication.

An electronic funds transfer instruction can be either a domestic electronic funds transfer instruction or an international electronic funds transfer instruction (IFTI-E). There are different reporting requirements for domestic and international EFTIs.

This section of the chapter describes the reporting obligations for IFTI-Es. See AUSTRAC Public Legal Interpretation No. 11 - Electronic funds transfer instructions and international funds transfer instructionsfor information about domestic EFTIs.

What is an international electronic funds transfer instruction?

An IFTI-E occurs when:

  • the ordering institution accepts the instruction at or through a permanent establishment in Australia and the transferred money is made available to the payee at or through a permanent establishment of the beneficiary institution in a foreign country, (an outgoing IFTI-E)
  • the ordering institution accepts the instructions at or through a permanent establishment in a foreign country and the money is transferred to a permanent establishment of the receiving institution in Australia (an incoming IFTI-E).

Who are the key parties involved in an IFTI-E?

The key parties of an IFTI-E are:

  • the 'payer', who requests the 'ordering institution' (institution that accepts the instruction from the payer) to transmit the instruction
  • the 'sender' (either the ordering institution or another institution), who transmits the instruction to the 'beneficiary institution' via any 'interposed institutions' (that is, institutions that take part in the instruction between the sender and the beneficiary institution)
  • the beneficiary institution, which ultimately makes the funds available to the 'payee' (the person who receives the transferred funds) (figure 1).

Figure 1: Parties involved in an international electronic funds transfer instruction

What information must be reported in an IFTI-E?

Chapter 16 of the AML/CTF Rules sets out the reportable details that must be included in IFTI-E reports for each party involved in the funds transfer.

Additional information

Additional information on EFTIs and IFTI-Es can be found in:

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IFTI under a designated remittance arrangement (IFTI-DRA)

What is an IFTI-DRA?

An IFTI-DRA involves:

  • an instruction accepted at or through a permanent establishment of a 'non-financier' in Australia, where the person who receives the instruction is to make, or arranges to make, money or property available to the ultimate transferee at or through a permanent establishment of a person in a foreign country; or,
  • an instruction accepted at or through a permanent establishment of a person in a foreign country where a 'non‑financier' is to make, or arranges to make, money or property available to the ultimate transferee through a permanent establishment of the non-financier in Australia.

Example 1

Customer A wants to send AUD5,000 to his brother (Mr A) who lives in Vietnam. Customer A contacts ABC Remittance Ltd, a registered remittance provider and instructs them to send AUD5,000 to Mr A in Vietnam.

ABC Remittance Ltd arranges to make AUD5,000 available to Mr A by sending an SMS text message to its agent in Vietnam. The agent arranges to have AUD5,000 delivered to Mr A the next business day.

ABC Remittance Ltd and the agent in Vietnam arrange to reconcile funds between them using a variety of methods. One method is to reconcile through a third party, which may occur at a later date.

ABC Remittance Ltd must submit an IFTI-DRA report to AUSTRAC, detailing the international funds transfer instruction within 10 business days of receiving the instruction.

Example 2

Customer B wants to send AUD2,000 to her family in India. Customer B contacts ABC Remittance Ltd, a registered remittance provider and instructs them to send AUD2,000 to Mr B in India. Customer B provides ABC Remittance Ltd with a cheque for AUD2,000.

ABC Remittance Ltd contacts its agent in India via email. ABC Remittance Ltd deposits the funds in its bank account with DEF Bank in Australia and transfers the AUD2,000 from its bank account to the agent's bank account with DEF Bank in India. The agent arranges to have the AUD2,000 delivered to Mr B in India.

ABC Remittance Ltd must submit an IFTI-DRA report to AUSTRAC, detailing the international funds transfer instruction within 10 business days of receiving the instruction.

What information must be reported in an IFTI-DRA?

Chapter 17 of the AML/CTF Rules specifies the reportable details for an IFTI-DRA.

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Is a registered affiliate of a remittance network provider required to report IFTIs?

No. The remittance network provider is responsible for reporting IFTIs on behalf of its affiliates where the reportable transaction uses the network provided by the remittance network provider.

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Scenarios of common international funds transfers conducted by casino licence holders

Below are six examples of the common types of international funds transfers conducted by licensed casinos that are required to be reported to AUSTRAC. While the examples cover common scenarios faced by casinos, they are not exhaustive. 

Some of these scenarios would also require the financial institution facilitating the funds transfer to report IFTIs in relation to the funds transfer; however, this obligation does not affect the casino’s own obligation to submit an IFTI-DRA report. IFTI-DRA reports submitted by casinos have significant intelligence value as casinos are required to report information about the beneficiary of the transferred funds – this information would not necessarily be known or reported by the financial institution(s) facilitating the transfer.

Scenario 1: Incoming IFTI-DRA 

An overseas customer (Customer A) negotiates a ‘casino player’ agreement with the Australian casino. The casino player agreement is finalised at the casino’s international office in a foreign country. The casino player agreement contains the date of the visit and the amount to be deposited in the casino’s bank account by customer A prior to that visit. 

As agreed in the casino player agreement, customer A instructs their local bank in a foreign country to transfer AUD150,000 to the Australian casino’s bank account, held with a bank in Australia. 

Once the funds are received into the casino’s bank account in Australia, the casino makes the funds available to customer A by crediting his/her casino gaming account.

Reporting obligation

The Australian casino is the recipient of the IFTI-DRA transmitted into Australia and is required to report an incoming IFTI-DRA as it is within the meaning of item 4 in the table in section 46 of the AML/CTF Act. 

Instructions into Australia must contain information in a report regarding the transferor entity (given that Customer A is an individual) and ultimate transferee entity as detailed in Chapter 17 of the AML/CTF Rules. Further details are also required to be reported as set out in Chapter 17 of the AML/CTF Rules.

Scenario 2: Outgoing IFTI-DRA  

Customer B instructs the Australian casino to transfer AUD150,000 from their casino gaming account to their personal bank account with an overseas bank, or to a third-party bank account outside Australia (for example, another casino’s bank account or an account held by another person). 

The Australian casino instructs the Australian bank to transfer the equivalent of AUD150,000 to the customer B’s personal bank account with an overseas bank (or any other overseas bank account specified by the customer).

Reporting obligation

The Australian casino is the sender of the IFTI-DRA transmitted out of Australia and is required to report an outgoing IFTI-DRA as it is within the meaning of item 3 in the table in section 46 of the AML/CTF Act. 

Instructions transmitted outside of Australia must contain details in a report about the transferor entity (includes at a minimum their full name, date of birth, residential address), transmitter and ultimate transferee entity. Further details are also required to be reported as set out in Chapter 17 of the AML/CTF Rules.

Scenario 3: Outgoing IFTI-DRA – inter-company transfer 

The Australian casino has a related casino in a foreign country (that is, the two casinos are owned or operated by the same parent company).

Customer C instructs the Australian casino to transfer AUD150,000 held in their casino gaming account to his/her casino gaming account held with the related casino in a foreign country. 

There is no physical transfer of the funds (that is, no bank transfer is involved) and there is an inter-company journal entry to recognise the position so that the funds can be made available to customer C when they arrive at the related casino in a foreign country.

The related casino in a foreign country makes the equivalent of AUD150,000 available to customer C through their gaming account, on the basis of the funds available in customer C’s gaming account with the Australian casino.   

Reporting obligation

The Australian casino is the sender of the IFTI-DRA transmitted out of Australia and is required to report an outgoing IFTI-DRA as it is within the meaning of item 3 in the table in section 46 of the AML/CTF Act. 

Instructions transmitted out of Australia must contain details in a report about the transferor entity and ultimate transferee entity (in this case Customer C is both the transferor entity and ultimate transferee entity) and mandatory information as detailed in Chapter 17 of the AML/CTF Rules. 

 

Scenario 4: Incoming IFTI-DRA – inter-company transfer 

The Australian casino has a related casino in a foreign country (that is, the two casinos are owned or operated by the same parent company).

Customer D instructs a related casino in a foreign country to transfer AUD150,000 held in their casino gaming account to his/her casino gaming account held by the related casino in Australia.  

There is no physical transfer of the funds (that is, no bank transfer is involved) and there is an inter-company journal entry to recognise the position so that the funds can be made available to the customer when they arrive at the related casino in Australia.

The related casino in Australia makes the equivalent of AUD150,000 available to customer D through their gaming account, on the basis of the funds available in the customer D’s gaming account with the related casino in a foreign country.   

Reporting obligation

The Australian casino is the recipient of the IFTI-DRA transmitted into Australia and is required to report an incoming IFTI-DRA as it is within the meaning of item 4 in the table in section 46 of the AML/CTF Act. 

The IFTI-DRA must contain information in a report regarding the transferor entity and ultimate transferee entity as detailed in Chapter 17 of the AML/CTF Rules. Further details are also required to be reported as set out in Chapter 17 of the AML/CTF Rules.

Scenario 5: Incoming IFTI-DRA – international transfer of funds originating from a cheque  

Customer E is based outside of Australia and holds a casino gaming account with an Australian casino. Customer E provides a cheque for AUD150,000 to the staff at the Australian casino’s international office (in a foreign country) on the basis that the funds equivalent to the amount of the cheque will be made available by the Australian casino in customer E’s gaming account.  

The staff at the international office deposit the cheque into the Australian casino’s bank account held in an overseas bank. The proceeds of the cheque remain in the Australian casino’s bank account held at an overseas bank. 

The Australian casino is notified of the transaction by staff at the international office. The Australian casino prepares the funds for the customer for when they arrive in Australia in recognition of the funds held in the Australian casino’s account with the overseas bank. 

Customer E arrives at the Australian casino and AUD150,000 is made available in the customer’s casino gaming account. 

Reporting obligation

The Australian casino is the recipient of the IFTI-DRA transmitted into Australia and is required to report an incoming IFTI-DRA as it is within the meaning of item 4 in the table in section 46 of the AML/CTF Act. 

The IFTI-DRA must contain information in a report regarding the transferor entity and ultimate transferee entity as detailed in Chapter 17 of the AML/CTF Rules. Further details are also required to be reported as set out in Chapter 17 of the AML/CTF Rules.

 

Scenario 6: Outgoing IFTI-DRA – international transfer of funds through a bank account held by a subsidiary company

The Australian casino has a 100 per cent owned and controlled subsidiary company located in Australia which operates a bank account with an Australian bank. The state casino regulator has approved and authorised the bank account on the basis that the subsidiary company is a 100 per cent owned and controlled entity of the Australian casino (where required by the state casino regulator). 

Customer F instructs the Australian casino to transfer AUD150,000 (from the bank account held by the subsidiary company) into their personal overseas bank account.

Reporting obligation

The Australian casino is the sender of the IFTI-DRA transmitted out of Australia and is required to report an outgoing IFTI-DRA as it is within the meaning of item 3 in the table in section 46 of the AML/CTF Act. 

Instructions transmitted outside of Australia must contain details in a report about the transferor entity (includes at a minimum their full name, date of birth, residential address), transmitter and ultimate transferee entity. Further details are also required to be reported as set out in Chapter 17 of the AML/CTF Rules.

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Is a registered affiliate of a remittance network provider required to report IFTIs?

No. The remittance network provider is responsible for reporting IFTIs on behalf of its affiliates where the reportable transaction uses the network provided by the remittance network provider.

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When must a reporting entity provide further information about an IFTI?

AUSTRAC (and officials from certain AUSTRAC partner agencies in certain circumstances) can issue a written notice to a reporting entity (or any other person), requiring it to produce further information about an IFTI submitted to AUSTRAC. This further information may be information the entity has about the customer or a particular transaction that can assist in an investigation (for example, account information, customer details or a statement of transactions).

A reporting entity failing to comply with such a notice may incur a civil penalty.

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What are the penalties for failing to report an IFTI?

If an IFTI report is submitted after the reporting period of 10 business days or not submitted at all, AUSTRAC can apply to the Federal Court of Australia for a civil penalty order of up to 100,000 penalty units for a body corporate, and up to 20,000 penalty units for a person other than a body corporate.

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Are there any exemptions to the IFTI reporting obligations?

The AML/CTF Rules can specify exemptions from the IFTI reporting obligations. To date, no exemptions have been made from the IFTI reporting obligation.

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Last modified: 15/03/2017 15:40