Author: Nyman Gibson Miralis
Subject: Anti-Money Laundering and Counter-Terrorism Financing Act
Keywords: Bitcoin, bill, reforms, anti-money laundering (AML), counter-terrorism financing (CTF), AUSTRAC, Legal and Constitutional Affairs Legislation Committee
On 17 August 2017 the Honourable Michael Keenan MP, Minister for Justice and Minister Assisting the Prime Minister for Counter Terrorism announced a package of measures to amend the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).
The Minister stated that the Bill was the first stage of reforms to strengthen the AML/CTF Act and increase the powers of the Australian Transactions and Reporting Analysis Centre (AUSTRAC). Of particular concern to enforcement agencies is the proliferation of Bitcoin and other crypto-currency transactions which are widely considered to be used for illegal purposes. This is predominately due to the anonymity associated with Bitcoin users which makes it difficult for law enforcement agencies to identify and track users.
The reforms were prompted by the recommendations of the Report on the Statutory Review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and Associated Rules and Regulations which was tabled in Parliament on 29 April 2016.
What was Nyman Gibson Miralis’ submission?
It is clear that the legislative amendments contained within the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017 (“The Bill”) were seeking to enact the recommendations handed down by the Financial Action Task Force concerning the regulation of digital currency exchange providers.
Whilst there is a need for legislative reform in the area of Bitcoin and AML regulation this cannot come at the expense of infringing entrenched common law and international human rights principles that provide the foundation for Australia’s criminal justice system. These concerns were raised by Nyman Gibson Miralis in our published response to The Bill.
Nyman Gibson Miralis’ submissions sought to highlight that there was a critical need to strike the appropriate balance between strengthening law enforcement agencies’ powers to detect and prevent criminal activity concerning Bitcoin users and protecting the public interest in upholding the rule of law.
To see Nyman Gibson Miralis’ full submissions please view Nyman Gibson Miralis Response to AML and CTF Amendment Bill 2017
The Senate – Legal and Constitutional Affairs Legislation Committee Report
On October 18 2017, the Legal and Constitutional Affairs Legislation Committee published its report in response to the submissions it received from various concerned parties.
The particular concerns that were raised in our submissions to Parliament related to the following areas:
- Increase of Police Powers – Search and Seizure
- Refusal to Answer Police Question – Civil Penalties
- Sharing of Information with Overseas Agencies
- Jurisdictional Issues
These submissions are explored in more detail below.
View a full copy of the Legal and Constitutional Affairs Legislation Committee report
Increase Police Powers – Search and Seizure
The proposed legislative amendments in The Bill sought to expand police powers of search and seizure. In particular, police would be able to search and seize physical currency and bearer negotiable instruments (BNI) where there was either:
- A suspicion of money laundering, terrorism financing or other serious criminal offence, or
- A breach of the cross-border reporting requirements under the AML/CTF Act
Particular attention is then drawn to s199(3) of The Bill which states:
Powers of Examination and Search
(3) A police officer or a customs officer may, with such assistance as is reasonable and necessary, examine an article which a person has with him or her if:
(a) the person:
(i) is about to leave Australia or has arrived in Australia; or
(ii) is about to board or leave, or has boarded or left, any ship or aircraft…
Nyman Gibson Miralis submitted that ‘article’ had been left undefined in the existing Act or The Bill. Indeed, the Legislative Committee Report recognised this where it stated [paragraphs 2.20 – 2.24):
Nyman Gibson Miralis expressed concern that the word ‘article’ used in the proposed section 199(3) is not defined either in the bill or in the AML/CTF Act.
It stated that the word ‘article’ could be broadly interpreted to include items such as laptops, smart phones, tablets or smart watches. However, this was unclear in the Explanatory Memorandum [EM] and the bill. Moreover, they noted that the bill did not clarify whether the ability to seize items such as laptops or smartphones would also include the power to compel the provision of passwords or passcodes.
Nyman Gibson Miralis further noted the human rights implications of such a power to potentially compel the disclosure of personal information:
Notwithstanding entrenched human rights principles of a person’s right to the presumption of innocence and the right to privacy, it cannot be Parliament’s intention that Police can have unchecked and unlimited powers to search, seize, and force disclosure of a suspected person’s personal information (such as passwords, or disclosure of pseudonym identities) without a warrant.
The submission further noted that material obtained in such searches could be susceptible to court actions seeking to declare the searches invalid and unlawful.
Nyman Gibson Miralis recommended that the term ‘articles’ be explicitly defined, including the kinds of articles that are intended to be searched.
Civil penalties for refusing to comply with questioning and search powers
The Bill sought to enact civil penalties that would apply to suspects should they fail to answer police questions.
Undoubtedly, the inclusion of such an amendment contravenes the common law privilege against self-incrimination. This privilege entitles a person to refuse to answer any question if the answer could potentially incriminate that person. The proposed inclusion of civil penalties for those that refuse to answer police questions is a direct violation of entrenched principles afforded to an accused person.
Indeed the Legislative Committee noted our concern where it stated [paragraph 2.39]:
Nyman Gibson Miralis expressed concern that the application of a civil penalty for refusing to give certain information to police or customs officers may contravene the common law privilege against self-incrimination
Sharing of Information with Overseas Agencies
One of the key concerns arising from the proposed legislative amendments was the sharing of and providing access to AUSTRAC information to overseas agencies. As there is no domestic or international organization that controls what information can be shared, the problem with providing unlimited and unfettered access to overseas agencies is that a person’s right to privacy will undoubtedly be violated.
The Legislative Committee noted our concerns [paragraph 2.57 – 2.58]
Nyman Gibson Miralis raised concerns regarding the proposed increase of AUSTRAC’s functions to share information with overseas agencies:
The Bill is silent on how the sharing of Australian citizens’ information will reconcile with the statutory protections in the Privacy Act 1988 (Cth). There is also a lack of oversight from any organisation (nationally or internationally) that controls what information can lawfully be shared. This oversight is amplified considering an accused person has an entrenched human right to privacy.
Nyman Gibson Miralis noted that the provision of information to overseas jurisdictions may have consequences on individuals that ‘would not be tolerated in Australian society’. It recommends a uniform approach to the dissemination of intelligence to foreign law enforcement, including the application of express limits on the use of information and protection from misuse.
The Bill sought to provide identification to digital currency users by requiring digital currency exchange providers to register and disclose personal details on a Digital Currency Exchange Register. It should be noted that this only occurs when someone wants to “cash in” on their crypto-currency to actual money.
What is unclear from The Bill is whether the legislative amendments capture a person who exchanges with a digital currency provider outside of Australia. The very nature of Bitcoin and other crypto-currencies are that they transcend Australia’s national jurisdiction. It is not difficult to envisage a situation where an individual could circumvent the proposed legislative amendments by seeking to exchange with a currency provider extra-territorially.
The Legislative Committee noted in their report [at paragraph 2.71]:
Nyman Gibson Miralis stated in their submission that the bill is not clear on whether it will capture individuals exchanging a digital currency outside Australia. It notes in its submission that digital currencies could transcend Australian laws, and individuals may be able to circumvent the proposed amendments by seeking to exchange with a currency provider outside Australia’s jurisdiction:
The proposed legislative amendments do not seem to contemplate for the likely scenario that an individual can simply choose to exchange with a digital currency provider outside of Australia’s national jurisdiction, one where the rule of law and reporting requirements in according with [Financial Action Task Force] guidelines are not adhered to stringently. In light of the highly mobile nature of offshore criminal networks, this is a matter that does not appear to have been adequately considered.
The Legislative Committee made two recommendations in its report after reviewing the entirety of the submissions that were sent to Parliament. This included a recommendation based on the concerns identified by Nyman Gibson Miralis
The Committee’s Recommendations were as follows:
- The committee recommends that the government consider whether the terms ‘article’, ‘stored value card’ and ‘in the course of carrying on a business’ in the bill and Explanatory Memorandum, could be better defined with a view to addressing the uncertainty expressed by some submitters, and amendments where relevant.
- The committee recommends that the bill be passed.
Nyman Gibson Miralis specialise in all aspects of Bitcoin, digital currency & Anti-Money Laundering/Counter-Terrorism Financing Law. We assist companies and individuals who are the subject of investigations by AUSTRAC, the AFP, ATO and ACIC. If you require assistance, contact one of our expert criminal defence lawyers.