In August this year, the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017 (AML/CTF Bill) was introduced to parliament. The AML/CTF Bill has now been passed by both houses of parliament and is expected to become law.
Among other things, the bill will bring digital currency exchanges (which have so far remained largely unregulated) within Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime.
This development comes at a time of growing public interest in digital currencies, with the price of the most widely-known digital currency Bitcoin soaring above AUD$20,000. It also follows closely after the publication of an information sheet by the Australian Securities and Investments Commission, giving guidance about the potential application of the Corporations Act 2001 to “Initial Coin Offerings” (in which companies seek to raise money by issuing new digital currency tokens), discussed in our recent article.
The AML/CTF Bill will come into effect upon proclamation, or six months after the date on which it receives royal assent - whichever comes first.
The Explanatory Memorandum to the bill suggests that digital currency exchange providers “would not have to comply with AML/CTF obligations until at least six months after the assent of the Bill”, during which period the financial regulatory body AUSTRAC would develop rules and guidance materials “to assist digital currency exchange providers to understand and comply with their obligations”.
Once the AML/CTF Bill comes into effect, digital currency exchange providers will be required to register on a new “Digital Currency Exchange Register” to be maintained by AUSTRAC.
Registered exchange providers will then be required to:
- implement “Know Your Customer” (KYC) procedures to verify the identity of customers;
- implement a program to identify and address money-laundering and terrorism-financing risks;
- report suspicious transactions and cash transactions exceeding $10,000 in value; and
- maintain records relating to transactions, KYC checks and other AML/CTF procedures for seven years.
These obligations largely mirror those imposed on other “designated services” in the financial sector which already fall within the AML/CTF regulatory regime (such as banks and other lenders). Failure to comply can lead to stringent civil and criminal penalties.
Once the AML/CTF Bill comes into effect, digital currency exchange providers will be required to register with financial regulator AUSTRAC and comply with a range of registration, due diligence, record-keeping and reporting obligations.
Exchange providers should ensure that they are aware of, and able to comply with these obligations once the bill comes into effect, as failure to do so may carry stringent civil and criminal penalties.