Industry in uproar over AUSTRAC cost recovery proposal

AUSTRAC processing costs to be covered by levy on banks.

Privacy advocates and the banking and gambling industries have found themselves unlikely allies in opposition to a proposal by Australia’s anti-money laundering agency AUSTRAC to levy new fees on transaction-based industries.

Federal Government-funded Australian Transaction Reports and Analysis Centre (AUSTRAC) has proposed a levy whereby the transactional organisations it regulates would pay its $29.6 million costs in 2011-12, sparing the taxpayer from funding its operations.

Banks will be hit hardest by the scheme, still in draft form, which will levy an organisation according to the frequency and volume of work each creates for the regulator.

An AUSTRAC discussion paper estimated domestic banks would foot about $10.87 million of the total levy of $29.625 million. Foreign and Investment banks will account for $4.451 million. Large remittance networks such as Western Union will pay $1.3 million.

The rest will be spread among foreign exchange providers, casino, bookmakers, credit unions and building societies.

Stockbrokers, insurance brokers, superannuation fund trustees, pubs, clubs, currency dealers and precious metal traders may have to pay a levy, which is expected to come into operation this year, once legislation goes to Federal Parliament.

Many industry associations object to the levy. The Australian Internet Bookmakers Association (AIBA), for example, accepts fair cost recovery but objects to the scheme proposed.

The group’s executive officer, Tony Clark argued that the industry already meets most of the costs of complying with the scheme. These are the additional and extensive costs reporting entities have incurred in establishing and complying with a structure mandated by legislation, he said.

Clark was critical of the implication that the scheme benefits only industry rather than community as a whole.

“As it stands, this appears an attempt to move AUSTRAC “off-budget” by requiring reporting entities to meet a government agency’s costs.” It is “de facto an unfair tax collection,” his submission argued.

Furthermore the cost recovery scheme could deter the lodgement of reports - the opposite of the “cooperative” aim of AUSTRAC promoted over the last few years, Clark said. Lodging reports and interacting with AUSTRAC will only serve to penalise cooperative institutions, he said.

AIBA argued that the financial reports submitted to AUSTRAC were not “discretionary” and in that sense, the levy was akin to paying a fee to report a crime to the police.

 Nigel Waters for the Australian Privacy Foundation also felt the scheme seemed poorly thought out [pdf].

“We accept that there are some marginal direct benefits to reporting entities, but it is very clear that the major objectives, and benefits, of the scheme are wider public policy ones, for which the taxpayer should remain responsible,” Waters said.

“Seeking to recover the costs of the scheme from reporting entities (and ultimately from their customers) adds insult to injury and is in our view entirely inappropriate. Indeed, if anything, this is an example of regulation which imposes costs on private sector businesses almost entirely for a general public benefit, and it would not be unreasonable for reporting entities to seek to recover the costs of compliance from government!”