Federal Register of Legislation - Australian Government

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Rules/Other as made
These Rules have been made for the purposes of paragraph (e) of the definition of ‘correspondent banking relationship’ in section 5 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
Administered by: Attorney-General's
Made 29 Mar 2007
Registered 13 Apr 2007
Tabled HR 08 May 2007
Tabled Senate 09 May 2007
Date of repeal 11 Dec 2008
Repealed by Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2008 (No. 7)

Explanatory Statement – Anti-Money Laundering and Counter-Terrorism Financing Rules in Respect of the Definition of ‘Correspondent Banking Relationship’

 

1.         Purpose and operation of Anti-Money Laundering and Counter-Terrorism Financing Rules (AML/CTF Rules) in respect of definition of ‘correspondent banking relationship’

 

Section 229 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) provides that the AUSTRAC Chief Executive Officer (CEO) may, by writing, make AML/CTF Rules prescribing matters required or permitted by any other provision of the Act to be prescribed by the AML/CTF Rules.

 

These AML/CTF Rules have been made for the purposes of paragraph (e) of the definition of ‘correspondent banking relationship’ in section 5 of the AML/CTF Act.  Paragraph (e) permits the AML/CTF Rules to exclude banking services from the definition of correspondent banking relationship.

 

These AML/CTF Rules exclude all banking services except “nostro” or “vostro” accounts. While the terms nostro and vostro are not defined in the AML/CTF Act, it is commonly held that a ‘nostro’ account is a bank account established in a foreign country for the purpose of holding that country’s currency.  A bank that maintains a nostro account for a foreign entity refers to the same account as a ‘vostro’ account.

 

These AML/CTF Rules commence on the day after the date of registration.

 

2.         Legislative instruments

 

These AML/CTF Rules are legislative instruments as defined in section 5 of the Legislative Instruments Act 2003.

 

3.         Likely impact

 

These AML/CTF Rules provide a positive impact as they have the effect of narrowing the scope of the definition of ‘correspondent banking relationship’ to nostro or vostro accounts only.  They further clarify the meaning of ‘correspondent banking relationship’ to assist financial institutions to understand their obligations under the AML/CTF Act where such a relationship is involved.

 

A regulatory impact statement in respect of the AML/CTF Act including correspondent banking due diligence requirements was prepared prior to the passage of that Act.  The AML/CTF Rules in respect of the correspondent banking relationship definition are relevant to correspondent banking due diligence.

 

4.         Assessment of benefits

 

These AML/CTF Rules together with other AML/CTF Rules relating to correspondent banking, implement the requirements of the Financial Action Task Force’s Recommendation 7.  In brief, Recommendation 7 requires financial institutions to gather sufficient information about a respondent institution to understand fully the nature of the respondent’s business, as well as its reputation and the quality of supervision.

This in turn will result in improved financial intelligence which will help Australian law enforcement agencies to combat money laundering and financing of terrorism.  Increased financial intelligence will also help the Australian Taxation Office to detect tax evasion.

 

5.         Consultation

 

AUSTRAC has consulted with the Privacy Commissioner, the Australian Customs Service, the Australian Federal Police, the Australian Taxation Office and the Australian Crime Commission in relation to these AML/CTF Rules.

 

AUSTRAC also published a draft of these AML/CTF Rules on its website for public comment.  Industry was consulted extensively in the development of these AML/CTF Rules and AUSTRAC has considered industry’s comments.

 

6.         Ongoing consultation

 

AUSTRAC will conduct ongoing consultation with stakeholders on the operation of the AML/CTF Rules.