Remitter Registration requirements for reporting entities that provide other designated services

These rule changes follow the good news from June when AUSTRAC issued revised guidance narrowing its view of remitter registration and IFTI-DRA reporting requirements. The changes relate to circumstances where a reporting entity that provides another designated service (that is not a designated remittance arrangement) may incidentally to that activity also, on occasion, remit funds overseas. AUSTRAC's view is, now, that this scenario does not amount to providing a remittance service, as long as these transactions are conducted through a financial institution.

Examples of reporting entities potentially affected (identified by AUSTRAC in its guidance) are online gaming providers, stockbrokers, managed investment schemes, custodians and businesses in the superannuation sector. Any reporting entity in these industries may be required to send funds overseas on behalf of their customers.

You may wonder why this clarification is necessary. However, the scope of the three designated services relating to remittance activities under the AML/CTF regime is very broad. The AML/CTF regime focuses on reporting entities that provide designated remittance arrangements by:

  • accepting an instruction to transfer money or property under a designated remittance arrangement (regardless of whether or not they actually accept money and/or property as part of this instruction);
  • making money or property available, or arranging for it to be made available, to an ultimate recipient as a result of a designated remittance arrangement;
  • operating a network which provides a platform or operation system to facilitate transferring money or property under a designated remittance arrangement.

A remittance arrangement is an arrangement for the transfer of money or property. The meaning of 'transfer' in the Act extends to any act or thing that 'may reasonably be regarded as the economic equivalent of a transfer (for example, debiting an amount from a person's account and crediting an equivalent amount to another person's account)'.3 It thus includes circumstances where the terms of a particular investment permit payments (including where interest may be paid or the funds invested repaid) to a person other than the account holder.

An example of the unintended impact of this broad definition is that the redemption of investments by an executor, or trustee in bankruptcy, on the death or insolvency of the account holder would amount to a remittance transaction because it is a transfer, in economic terms from the account holder themselves to a third party acting in the capacity of their trustee. Similarly, if the terms of an investment product permit payments to a third party (including bill payment or 'pay anyone' facilities or donation of interest derived on the investment to, for example, a charitable cause) then they are within the scope of a 'remittance arrangement' under the Act and the reporting entity should be entered on the remittance register and (in the case of international transactions) lodge an IFTI report with AUSTRAC.

Reporting entities on the remittance register may wish to reconsider registration and their IFTI reporting obligations at the next opportunity. Other reporting entities may wish to celebrate the removal of a problem they didn't know they had.

Footnote

3 Section 10, Anti-Money Laundering and Counter-Terrorism Financing Act 2016 ("the Act").

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.