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Australian Bitcoin Regulations now in Effect

The Australian Transactions and Reporting Analysis Centre (AUSTRAC) has announced that new regulatory obligations are now in effect as from 3rd April 23018. They recently reminded the Australian Cryptocurrency exchanges of the regulations which include:

Adopting and maintaining an AML/CTF program to identify, mitigate and manage money laundering and terrorism financing risks
Identifying and verifying the identities of their customers
Reporting to AUSTRAC suspicious matters, and transactions involving physical currency of $10,000 or more
Keeping certain records for seven years

There are penalties for non-compliance, both civil and criminal depending on the non-compliance and severity of the offence including providing digital exchange services without being registered.

According to CNN, "In a public statement today, Australia’s Minister for Justice Michael Keenan confirmed that the country’s bitcoin and digital currency exchanges will be regulated for the first time. The move is part of a wider impetus to strengthen the country’s money laundering laws within days of a financial scandal involving the Commonwealth Bank of Australia. The nation’s biggest bank is alleged by the Australian Transactions and Reporting Analysis Centre (AUSTRAC) of breaching its AML and terrorism financing laws."

Exchanges have a grace period of six months to become registered if they are not already. Any who are not registered after that time will be considered in breach of the regulations.

The Australian Taxation Office are also considering how they will approach the question of taxation and are seeking public consultation to assist in understanding the issues surrounding taxation of crypto currencies.

This article is for information purposes only and is not to be construed as financial information for any purposes such as investment or speculation and it is the responsibility of the reader to perform proper due diligence before acting upon any of the information provided. We recommend that you consult with a licensed, qualified investment advisor before making any investment decisions.

Bitcoin in Australia

AUSTRAC Regulations in Australia affecting Bitcoin With the introduction of bitcoin and bitcoin transactions in Australia the Australian regulatory body called AUSTRAC (Australian Transaction Reports and Analysis Centre) is now set to include any bitcoin transactions under their financial umbrella along with fiat currency.

AUSTRAC is the Australia’s government financial intelligence agency set up to monitor financial transactions to identify money laundering, organised crime, tax evasion, welfare fraud and terrorism.  All financial transactions of 10,000 Australian dollars and over must be reported to AUSTRAC and each financial institution from the banks down to Australian Post and now crypto currency exchanges are included in this reporting system. This has been set up since the Australian Senate passed legislation giving AUSTRAC the power to set rules on the registration of bitcoin exchanges in Australia making all Australian crypto currency exchanges required to report financial transaction of a value of 10,000 Australian dollars or more.

Australian currency exchanges all now require the application of the KYC (Know your customer) policies including gathering ID in much the same way bank do when a new account is opened. One of AUSTRAC’s duties is to oversee compliance with the Anti-Money Laundering and Counter- Terrorism Financing Act 2006 and the Financial Transaction Reports Act 1988 by businesses across diverse industry sectors. These businesses include financial services providers, the gambling industry, bullion dealers and remittance service providers.

As Australia's Financial Intelligence Unit (FIU), AUSTRAC analyses and disseminates financial intelligence to its government partner agencies and certain international counterparts to assist in the investigation and prosecution of serious criminal activity, including terrorism financing, organised crime and tax evasion.

AUSTRAC has been unable to prevent one of Australia’s largest bank, the Commonwealth Bank from apparently being heavily involved with money laundering worth millions (www.afr.com/business/banking-and- finance/financial-services/commonwealth- bank-safe- haven-for- criminal-activity-20170804-gxp54g) in an ongoing case in which it is alleged the bank was complicit in (and has admitted to) 53,000 counts of money laundering in that it did not institute safeguards to prevent money laundering despite legislation already in place. The case is ongoing.

Bitcoin exchanges have been brought into the fold and are now subject to the same regulations as other financial institutions. According to FinTech Australia, the amended rules will require bitcoin exchanges to institute measures to identify and reduce money laundering and terrorism financing risks while following know your customer (KYC) policies to identify their users. Exchanges will also be required to report any suspicious transactions, international transactions and fiat cash deposits of AU$10,000 or more. To what extent is still moot. For example an individual could, add 2000 dollars to his account with an Australian currency exchange each day and at the end of the week use the accumulated funds to buy 10,000 dollars’ worth of bitcoin. Does the exchange have to report that financial transaction to AUSTRAC? It seems safe to assume that yes it does. The 2000 dollars per day is simply moving funds from one account to another and under the limit but the purchase of 10,000 dollars’ worth of bitcoin would fall with the reporting guidelines of AUSTRAC. Sending any amount to an overseas currency exchange is reported so there is no avoiding the reporting system that way.

FinTech Australia chief executive Danielle Szetho has revealed the government had collaborated with the country’s fintech sector to develop the newly enforced legislation, stating:

“Now it is in place, the legislation will help bring further legitimacy to exchanges operating in Australia, unlocking the benefits of digital currency usage and trading whilst ensuring this is done in an appropriate way.” He went on optimistically, “this will stamp out fraud and allow innovation to flourish; a bold move that will benefit Australians for years to come,”

As reported in October, the new legislation will also bestow enhanced powers to AUSTRAC’s chief executive, enabling the official to “make rules to expand or narrow the scope of the digital currency definition.” This is somewhat disturbing as it leaves it wide open for AUSTRAC to institute over regulation so as to make the purchase, sale and exchange of bitcoin too difficult to process. Of course if that were the case people would likely take their bitcoin and transact off shore and simply suffer the reporting of overseas transactions in fiat currency.

The bill follows another noteworthy piece of legislation in October when the Australian Parliament passed the bill to put an end to the double taxation of transactions involving cryptocurrencies such as bitcoin. The amended law now deems bitcoin and other digital currencies as the equivalent of a “foreign currency”, under applicable GST treatment.

None of this should affect the purchase or sale or exchange of bitcoin however. It is simply a reporting mechanism and there is no current policy in place or apparently being set up to restrict or curb the use of bitcoin in Australia.

For digital currency exchange providers the Australian Parliament passed the Anti-Money Laundering and Counter-Terrorism Financial Amendment act 2017A bill in December last year (2017) and this is expected to come into force on April the first 2018. The regulation has been expanded to include regulation of digital currency exchange providers. This regulation will be in the form of mandatory registration and compliance obligations, including customer identification and due diligence, the adoption and maintenance of an Anti-Money Laundering and Counter-Terrorism Financing Rules (AML/CTF Rules) including requirements to identify, manage and mitigate money laundering and terrorism financing (ML/TF) risk, suspicious matter reporting, threshold transaction reporting and record-keeping requirements.

One issue worthy of note is that it pays to be up front about ones activities as there are reports of Australian Banks, Specifically NAB and Westpac, closing accounts of unauthorised traders in crypto currencies.

This article is for information purposes only and is not to be construed as financial information for any purposes such as investment or speculation and it is the responsibility of the reader to perform proper due diligence before acting upon any of the information provided. We recommend that you consult with a licensed, qualified investment advisor before making any investment decisions.