A levy to fund AUSTRAC's supervisory activities under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) was introduced last year through new legislation.
In December 2011, AUSTRAC proposed increases to the various components of the levy for the 2011/2012 financial year. These proposals are contained in an exposure draft "Cost Recovery Impact Statement". Submissions on the Cost Impact Recovery Statement can be made to AUSTRAC until 25 January 2012, in the ways described on the AUSTRAC website.
While AUSTRAC's operational budget for 2011/2012 is unchanged at A$29.6 million, it now estimates that fewer entities will be subject to the levy which means substantial increases for those who are subject to the levy. The previous figures were based on an estimated 11,726 leviable entities and following the enrolment process that number has fallen to 8,512 and the number of large entities has fallen from 199 to 140. We understand these reductions are largely due to the fact that a significant number of entities who had registered with AUSTRAC no longer provide designated services and the fact that AUSTRAC had to estimate 'large entities' earnings and the enrolment process provided more accurate data.
The levy is imposed on entities that provide "designated services" under the AML/CTF Act (Leviable Entities). Designated services typically encompass banking, lending, certain financial services (such as derivatives), gambling services, bullion dealing and certain cash handling activities.
Calculation of the levy
The levy will consist of a base component, a large entity component and a transaction reporting component.
The base component is to be A$300 per annum (it had previously been expected to be A$284) and will be imposed on all Leviable Entities with five or more employees (or with earnings of more than A$100 million).
The large entity component will be calculated on the basis of the earnings of the entity (or the entity's corporate group). AUSTRAC proposes to increase this component and adjust the earnings tiers as set out below:
|Entity/group earnings||Amended Large Entity||Previous Large Entity Component|
|Less than A$100m||Nil||Nil|
|A$100m- A$150m||A$20,000||A$14,000 (for entities earning A$100m-A$200m)|
|A$150m- A$350m||A$150m- A$350m||A$35,000 (for entities earning A$200m-A$500m)|
|A$350m-A$700m||A$130,000||A$70,000 (for entities earning A$500m-A$1bn)|
|A$700m-$A1.5bn||A$300,000||A$350,000 (for entities earning A$1bn-A$5bn)|
|A$5bn-A$6bn||A$1.95m||A$425,000 (for entities earning greater than A$5bn)|
|Greater than A$6bn||Greater than A$6bn|
For the purpose of determining the Large Entity Component for a foreign entity or a local subsidiary of a foreign group, only the Australian business earnings will be taken into account. However, if the Australian business earnings are less than A$100 million but the entity or group's worldwide earnings are more than A$100 million, a large entity component of A$20,000 will still be imposed.
The transaction reporting component is to be A$0.01 (unchanged) per transaction which is required to be reported to AUSTRAC, plus A$0.000005991 (up from $0.000005066) per dollar of such transactions. For example, a A$100 million transaction which is reported to AUSTRAC would attract a transaction reporting component of A$599.11.
Impact on Leviable Entities
The rationale for basing the large entity component of the levy on the earnings of the entity or group is that AUSTRAC incurs greater expenses in regulating larger entities, because larger entities have more customers and typically provide more complex products.
To recognise that AUSTRAC's costs of regulating an entity do not increase indefinitely, AUSTRAC now proposes to cap the transaction reporting component of the levy at A$1.346 million. Accordingly, the maximum total levy that could be imposed is A$3.646 million.
The calculation does not, however, take into account the extent to which a Leviable Entity's earnings are related to the provision of "designated services". As a result, an entity with high earnings may incur a large entity component, even though the entity only provides a small volume of "designated services".
Accordingly, while the levy is unlikely to represent a material or significant cost for most Leviable Entities, it may have a disproportionate effect on those Large Entities which only provide "designated services" as an incidental part of their business.
Exemptions under the AML/CTF Act
"Exempt Entities" will not be required to pay the levy. "Exempt Entities" are those entities which provide designated services but are not obliged to establish an AML/CTF Program because the designated services fall within an exemption set out in the AML/CTF Rules. For example, energy participants registered in certain specified classes under the National Electricity Rules or Wholesale Electricity Market Rules are not obliged to establish an AML/CTF Program for over-the-counter derivatives relating to the wholesale price of electricity, gas or renewable energy certificates, when transacting with each other.
These entities are excluded from the levy requirement on the basis that AUSTRAC does not incur material costs in regulating these entities. However, such entities which have even a single transaction which is not covered by an exemption as at the census date (which is to be 10 February 2012 for the 2011/2012 year) would be required to pay the levy, calculated on the basis of their total Australian earnings.
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.