Received​ a Notice from AUSTRAC? What do you do?

What do you do when you receive a Notice from AUSTRAC? A Notice from AUSTRAC will generally be a Section 167 Notice or a Section 202 Notice, although there are several other types of formal Notice. Both a 167 Notice and a 202 Notice are formal requests for information or documents. Both must be replied to but each has a different emphasis.

What to Do When You Receive a Notice from AUSTRAC?

• Ascertain immediately what type of Notice is it – a 202 or a 167 or another type of notice?
• Read the Notice from AUSTRAC in its entirety, then read it again.
• If it is a 202 check whether it has a non-disclosure clause. This clause may be at the end of the document. If it does, make sure that you do not discuss the contents with anybody outside your organisation or your legal practitioner.
• Seek professional advice. If it is a 202 Notice you can only discuss the contents with a legal practitioner.
• Take a note of the time limit for reply. Diarise that time limit with reminders.
• Advise AUSTRAC that you have received the Notice.
• Read the questions carefully. Decide if you can answer the questions. Consider if the questions are related to the power to seek the information, especially 202 questions.
• Begin to draft answers the questions. Remember to answer the question posed, not the question you think has been posed.
• Discuss the draft answers with your professional adviser.
• Consider instructing your professional adviser to liaise with AUSTRAC with regard to questions and potential answers, especially if it is a 202 Notice.
• Draft a response letter to AUSTRAC.
• Consider the draft response letter with your professional adviser.
• Make the necessary changes to the draft letter.
• Finalise the letter together with the supporting documents.
• Send the response via email and registered post to ensure that the documents arrive with AUSTRAC within the time limit.
• Await follow up from AUSTRAC.

AUSTRAC’s Powers to Request Information

A regulator is generally granted powers to require information to be provided from a regulated entity. Under the AML/CTF regime AUSTRAC has been granted its information-gathering powers under Sections 167 and 202 of the AML/CTF Act, 2006 (the Act). This article explores the extent, limitations, and self-incrimination provisions of those respective sections.

Section 167

Section 167 is contained in Part 14 of the Act entitled "Information-gathering powers".

What is the Scope of Section 167?

Section 167 applies to a person if an authorised officer (appointed by AUSTRAC CEO) believes on reasonable grounds that:

• the person is or has been a reporting entity; or
• the person is or has been an officer, employee or agent of a reporting entity;
• the person's name is or has been entered on the Remittance Sector Register; and

that the person has information or a document that is relevant to the operation of the AML/CTF Act, the regulations or the AML/CTF Rules.

Note the phrase "information or a document that is relevant to the operation of the AML/CTF Act, the regulations or the AML/CTF Rules." This is a broad requirement. In other words, a section 167 notice it is a notice given to a reporting entity, or a former reporting entity, to provide information or documents relevant to the operation of the overall AML/CTF Act regime, not just the operation of the Act or the AML/CTF Rules (the Rules) within the reporting entity.

What Must be Provided by the Reporting Entity?

The authorised officer may, by written notice given to the person, require the person:

• to give to the authorised officer, within the period and in the manner specified in the notice, any such information; or
• to produce to the authorised officer, within the period and in the manner specified in the notice, any such documents; or
• to make copies of any such documents and to produce to the authorised officer, within the period and in the manner specified in the notice, those copies.

The information required will most likely be in the form of a question or questions accompanied by a request to provide supporting documents. A time limit will be placed upon the reporting entity to reply. Any time limit stated in the Notice must be met. There is no provision for an extension or withdrawal of the Notice.

What is the Offence of Failing to Reply?

The reporting entity, or person, named in the Notice, commits an offence they fail to answer the Notice. The penalty is a maximum of imprisonment for 6 months or 30 penalty units, or both. There are also related offences contained in Section 136 – giving false or misleading information, and Section 137 – producing false or misleading documents.

What must be set out in the Notice?

A Section 167 Notice must advise the recipient of the Notice of the following:

• That the person commits an offence if the person has been given a Notice and fails to respond to a requirement in the notice; and
• The person must not give false or misleading information (Section 136)
• The person must not produce false or misleading documents (Section 137)

Defence against Self Incrimination under Section 169

It is important to note the defence against self-incrimination. If a person provides the information required by the Notice they may very well incriminate themselves for potential breaches of the AML/CTF Act or Rules. There is an important, but narrowly drawn, safeguard built into Section 169.

A person is not excused from giving information or producing a document under section 167 on the ground that the information or the production of the document might tend to incriminate the person or expose the person to a penalty.

However; the information given, or the document produced, or giving the information or producing the document, is not admissible in evidence against the person:

• In civil proceedings other than proceedings under this Act; or the Proceeds of Crime Act 2002 that relate to this Act; or
• In criminal proceedings other than:
  • Proceedings for an offence against this Act; or
  • Proceedings for an offence against the Criminal Code that related to this Act.

Read this article on changes to immunity under Section 169

The Defence Provision under Section 172

If a person, or an officer, employee or agent of a person, provides information under a notice under subsection 167(2), the person, officer, employee or agent is taken, for the purposes of Division 400 and Chapter 5 of the Criminal Code, not to have been in possession of that information at any time.

Section 202 Notices to Reporting Entities

Section 202 is contained in Part 15 of the Act entitled "Enforcement".

Who can give a Section 202 Notice?

There is a long list of people authorised to give a Section 202 Notice. They include:

1. the AUSTRAC CEO;
2. an authorised officer (authorised by the AUSTRAC CEO);
3. the Commissioner of the Australian Federal Police;
4. a Deputy Commissioner of the Australian Federal Police;
5. a senior executive AFP employee (within the meaning of the Australian Federal Police Act 1979) who is:
   1. a member of the Australian Federal Police; and
   2. authorised in writing by the Commissioner of the Australian Federal Police for the purposes of this section;
6. the Chief Executive Officer of the Australian Crime Commission;
7. an examiner of the Australian Crime Commission;
8. an approved examiner (within the meaning of the Proceeds of Crime Act 2002).

So a 202 Notice may come from a number of law enforcement agencies as well as AUSTRAC.

What is the Scope of Section 202?

There are strict criteria for the giving of a 202 Notice. If an Authorised Person believes on reasonable grounds that another person is a reporting entity, then the authorised person may give a written notice to the other person requiring the other person to give the authorised person any information, or produce to the authorised person any documents, relevant to any or all of the following:

• determining whether the other person provides designated services at or through a permanent establishment of the other person in Australia;
• ascertaining details relating to any permanent establishment in Australia at or through which the other person provides designated services;
• ascertaining details relating to designated services provided by the other person at or through a permanent establishment of the other person in Australia.

Note the linkage between the request for information and its relevance to the provision of designated services. It would appear that the 202 Notice is a device for authorities to decide whether or not a person is a reporting entity under the Act and what designated services are provided by that entity. If, say AUSTRAC, are already aware that the person is a reporting entity and / or are already aware of its designated services the Notice may very well be invalid.

Further, the Authorised Person must not give a 202 Notice unless the person reasonably believes that giving the notice is required to determine whether to take any action under this Act, or in relation to proceedings under this Act. It is important to note that the Authorised Person is contemplating proceedings under the AML Act against the person. Most likely for providing designated services whilst not being registered or enrolled.

Complying with a Section 202 Notice.

A person must comply with a Notice. This means answering the Notice even if the Notice questions, or requests for information, are outside the scope of the 202.

The Notice must also be answered within the time limit stated on the Notice. Note, there is no power for AUSTRAC to extend or withdraw the Notice.

What Must a Section 202 Notice Contain?

A 202 Notice must:

• state that the Authorised Person believes that the notice is required:
  1. to determine whether to take any action under this Act; or
  2. in relation to proceedings under this Act; and
• specify the name of the other person; and
• specify the kind of information or documents required to be given or produced; and
• specify the form and manner in which that information or those documents are to be given or produced; and
• state that the information or documents must be given or produced within 14 days after the notice is given; and
• set out the effect of section 204 (breaching a requirement under a notice); and
• if the notice specifies that information about the notice must not be disclosed—set out the effect of section 207 (disclosing existence or nature of a notice).

What is the Offence of Failing to Reply?

The person named in the Notice, commits an offence the person fails to comply with the Notice. The penalty is a maximum of imprisonment for 6 months or 30 penalty units, or both. There are also related offences contained in Section 136 – giving false or misleading information, and Section 137 – producing false or misleading documents.

Defence against Self Incrimination under Section 205

The self incrimination provisions are narrow, and similar to Sect 167. A person is not excused from giving information or producing a document under section 202 on the ground that the information or the production of the document might tend to incriminate the person or expose the person to a penalty.

However: the information given or the document produced; or giving the information or producing the document; is not admissible in evidence against the person:

• In civil proceedings other than:
  1. proceedings under this Act; or
  2. proceedings under the Proceeds of Crime Act 2002 that relate to this Act; or
• In criminal proceedings other than:
  1. proceedings for an offence against this Act; or subsection 202(4); and
  2. proceedings for an offence against the Criminal Code that relates to this Act.

Therefore the information provided can be used against the person in civil or criminal proceedings brought under the Act. This gives rise to the circumstances where a person must provide the evidence which will be used against them in a civil or criminal prosecution under the Act. Further, the information may be used by other statutory authorities against the person.

The Defence Provision under Section 206

If a person, or an officer, employee or agent of a person, provides information under a notice under subsection 202(2), the person, officer, employee or agent is taken, for the purposes of

Division 400 and Chapter 5 of the Criminal Code, not to have been in possession of that information at any time.

Disclosure of the Existence of the 202 Notice under Section 207

It is an offence for the reporting entity to disclose the existence of the 202 Notice subject to certain exceptions. If you receive a 202 Notice if is extremely important to ascertain whether or not the Notice has a Non-Disclosure provision. The Non-Disclosure clause may very well be placed towards the end of the Notice.

A person commits an offence if:

1. the person is given a notice under subsection 202(2); and
2. the notice specifies that information about the notice must not be disclosed; and
3. the person discloses the existence or nature of the notice.

The penalty for disclosure is imprisonment for 2 years or 120 penalty units, or both.

Disclosure is allowed to a legal practitioner (however described) for the purpose of obtaining legal advice. Disclosure is also allowed if the reporting entity is a member of a designated business group; and the disclosure is made to another member of the designated business group. If prosecuted for disclosure the defendant bears the evidential burden to prove that the disclosure was to a legal practitioner or within a designated business group.

A 167 Notice OR 202 Notice?

A 167 Notice is a request for general information relating to the operation of the AML Act or Rules. A 202 Notice is specifically targeted, in my opinion, at ascertaining whether or not an entity is a reporting entity providing designated services whilst not being registered or enrolled. The self incrimination defence is similar under a 167 Notice and a 202 Notice (it used to be wider under a Sect 167 Notice).

It is my opinion that a 167 Notice is the correct method for AUSTRAC to obtain general information from a reporting entity. AUSTRAC, or other agencies, should only use a 202 Notice in narrowly defined circumstances and within the power of the Section. One would not want to see a situation when a 202 Notice is used where a 167 Notice is the correct method.