Imprisonment and significant financial penalties are in store for those who offer digital currency exchange services without having the necessary registration.
Unregistered providers of digital currency exchange services in Australia face prison sentences and substantial monetary penalties, under the “Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017” that currently has its second reading at the Australian parliament.
The document, moved by Australia’s justice minister Michael Keenan, proposes changes to the current AML/CTF law by modernizing it to take into account digital currencies like Bitcoin. Under the bill, businesses that trade digital currencies for money, and vice versa, will be required to:
- enrol and register with AUSTRAC;
- establish, implement and maintain an AML/CTF program, which sets the framework for businesses to comply with their obligations, including customer due diligence requirements;
- report threshold transactions and suspicious matters to AUSTRAC, and
- keep appropriate records.
Digital currency means:
- (a) a digital representation of value that:
(i) functions as a medium of exchange, a store of economic value, or a unit of account; and
(ii) is not issued by or under the authority of a government body; and
(iii) is interchangeable with money (including through the crediting of an account) and may be used as consideration for the supply of goods or services; and
(iv) is generally available to members of the public without any restriction on its use as consideration; or
- (b) a means of exchange or digital process or crediting declared to be digital currency by the AML/CTF Rules.
The key aim of the changes is to deter criminals from using convertible digital currencies to move illicit funds and avoid detection, as well as to facilitate the collection of transactional information about exchanges in digital currency for use by law enforcement, intelligence and national security agencies.
The penalties envisaged by the bill start from imprisonment for 2 years and/or 500 penalty units for those who violate the requirement for registration with AUSTRAC for providing digital currency exchange services. The penalty may reach 7 years of imprisonment and a fine of 2,000 penalty units if the AUSTRAC CEO gave the person a direction in relation to violations of registration rules and accepted undertakings given by the person in relation to registration violations on numerous occasions.
Given that one penalty unit currently equals $210, the maximum fine is $420,000.
In moving the bill, Mr Keenan explained that most businesses in the digital currency exchange sector welcome the introduction of AML/CTF regulation and are already aware of the risks posed by the services they provide. Many digital currency exchange providers in fact already comply with a voluntary code of conduct that includes guidance on measures for protecting their services from illicit exploitation for money laundering and terrorism financing purposes.
Regulation under the AML/CTF regime is set to formalize these measures and reinforce the legitimacy of digital currency exchanges.
In July this year, the Australian government implemented changes to taxation rules concerning Bitcoin and its likes. As of July 1, 2017, digital currencies in Australia are treated just like money for GST (Goods and Services Tax) purposes. The purpose of this change is to avoid “double taxation” on digital currencies and to make it easier for businesses in this segment to operate in Australia.