The amendments include:

• Amendments to Chapters 8 and 9 require reporting entities to expressly state in their AML/CTF Part A programs what obligations they have under the AML/CTF Act, and specify the appropriate systems and controls which they have implemented in regard to those obligations. Reporting entities have discretion in how they detail the description of the systems and controls which they have put in place, however, they must be an ‘appropriate’ response to the money-laundering/terrorism-financing risk which the reporting entity has identified. There was previously no requirement in Chapters 8 or 9 that reporting entities should list the reporting obligations which specifically apply to them under the AML/CTF Act.
• Amendment of Chapter 28: Chapter 28 now provides an exemption from conducting the applicable customer identification procedure for transferring customers following a voluntary transfers of business under the Financial Sector (Business Transfer and Group Restructure) Act 1999.
• New Chapter 67 provides an exemption from the applicable customer identification procedure in regard to ‘warrants’. A warrant is a financial instrument issued by banks and other institutions and traded on the Australian Stock Exchange. AUSTRAC has accepted industry representations that, at the time of the warrant reset, there is currently a duplication of customer identification by reporting entities. This is because the warrant holder would already have been identified under the AML/CTF Act when the warrant was purchased. Accordingly, Chapter 67 specifies that relevant reporting entities are exempt from customer identification, subject to certain conditions, thereby removing the duplication.
• As a result of the amendments to Chapter 51, transactions which are currently not reportable between PayPal Australia and PayPal US and PayPal Singapore will now be reported to AUSTRAC under Chapter 16. The reporting anomaly has arisen because PayPal Australia does not supply reports to AUSTRAC about IFTIs under Chapter 17 of the AML/CTF Rules, but instead reports under Chapter 16 as it is an ADI. Therefore PayPal Australia transactions with PayPal Europe are reported under Chapter 16 as PayPal Europe is a ‘financial institution’ because it is a bank licensed in Luxembourg.

The Anti‑Money Laundering and Counter‑Terrorism Financing Rules Instrument 2007 (No. 1) (compiled up to 11 January 2012 but excluding the above amendments) can be downloaded here.

Agribusiness schemes must disclose whether they meet the benchmarks and if not, why not. ‘Why not’ means explaining how they will deal with the business factor or the issue underlying the benchmark.

Agribusiness schemes pose particular risks for investors because they enter into contracts with the responsible entity or other parties to perform all the cultivation and management activities associated with the investor’s agribusiness enterprise.

RG 232 also outlines the standards ASIC expects responsible entities to meet when advertising agribusiness schemes to retail investors and guidance as to clear, concise and effective disclosure of the benchmark and disclosure principle information.

Responsible entities of agribusiness schemes should disclose the benchmark and disclosure principle information in any product disclosure statement dated on or after 1 August 2012.

The amendments are intended to harmonise nationally the imposition of personal criminal liability of company officers when their company breaches a statutory requirement.

The Bill makes amendments to the Corporations Act 2001, Insurance Contracts Act 1984, Foreign Acquisitions and Takeovers Act 1975 and the Pooled Development Finds Act 1992.

The Corporations Act changes include redrafting Section 188 dealing with company secretary liability and making breaches of certain sections subject to a civil penalty, rather than constituting an offence.

A second draft bill, encompassing all proposed amendments to Commonwealth legislation will be exposed in February/March 2012.

The amendments are based on the following COAG Principles:
1. Where a corporation contravenes a statutory requirement, the corporation should be held liable in the first instance.
2. Directors should not be liable for corporate fault as a matter of course or by blanket imposition of liability across an entire Act.
3. A ‘designated officer’ approach to liability is not suitable for general application.
4. The imposition of personal criminal liability on a director for the misconduct of a corporation should be confined to situations where:
• there are compelling public policy reasons for doing so (e.g. in terms of the potential for significant public harm that might be caused by the particular corporate offending);
• liability of the corporation is not likely on its own to sufficiently promote compliance; and
• it is reasonable in all the circumstances for the director to be liable having regard to factors including:
– the obligation on the corporation, and in turn the director, is clear;
– the director has the capacity to influence the conduct of the corporation in relation to the offending; and
– there are steps that a reasonable director might take to ensure a corporation’s compliance with the legislative obligation.
5. Where principle 4 is satisfied and directors’ liability is appropriate, directors could be liable where they:
– have encouraged or assisted in the commission of the offence; or
– have been negligent or reckless in relation to the corporation’s offending.
6. In addition, in some instances, it may be appropriate to put directors to proof that they have taken reasonable steps to prevent the corporation’s offending if they are not to be personally liable.

CP 173 deals with the three types of transfer determination applications under Part 5D.6 of the Corporations Act it anticipates receiving from trustee companies performing traditional services such as an estate management function. These are:

• voluntary transfers between trustee companies belonging to the same corporate group
• voluntary transfers between unrelated trustee companies, and
• compulsory transfers from one unrelated trustee company to another

The purpose of the inquiry is to design transparent and objective criteria for the selection and ongoing assessment of superannuation funds eligible for nomination as default funds in modern awards. In considering these criteria, the terms of reference state that the Commission could have regard to the:

•appropriateness of the investment strategy of the default investment option of the fund in terms of risk and expected return
•medium to long term net-of-costs investment performance of the default investment option
•level of fees incurred by members
•scale of the fund and the level of services provided to fund members
•suitability and cost of insurance provided by the fund
•governance of the fund
•fees incurred and other impacts on members if they cease employment with an employer.

The report responds to a request from the Government for advice on the suitability of the legislative definition of derivative for today’s derivatives markets and whether it may be possible to decrease complexity in this area of the law.

CAMAC concluded that the current definition in section 761D Corporations Act suitably aligns with market and regulatory perceptions of what constitutes a derivative and that no changes to the definition, or amendments in light of approaches adopted by overseas jurisdictions to the definition of derivative, are needed. The definition is meant to be broad, to allow for its application to new derivative products without disruption to the regulatory structure of derivatives markets.

CAMAC also considers that the section 761D definition of derivative is not unduly complex.

In CAMAC’s view, Australian derivatives markets are appropriately regulated through the general licensing and disclosure requirements applicable to all financial products, including derivatives, as well as the provisions specifically tailored for derivatives.

The ACCC has now published its policy on transitional arrangements where due to the long lead times associated with many consumer products, and the nature of the packaging of those products, there will be some goods in the supply chain that, as at 1 January 2012, do not contain warranty documents that are compliant with the warranty against defects requirements of the ACL.

The ACCC says that until September 2012, when considering the appropriate enforcement response to any contravention of the warranty against defects requirements that apply to stock in the supply chain manufactured and packaged prior to 1 November 2011, the ACL Regulators (ACCC and ASIC) will have regard to:

• whether there are serious practical difficulties in updating warranty documents—e.g. the warranty is in a tamper-proof package; and
• whether the supplier has taken all reasonable steps to otherwise convey the mandatory text and information required by the ACL to consumers—e.g. by placing a compliant sticker on the outside packaging, or by erecting prominent, clear, point-of-sale signs including the mandatory text and information at all cash registers in a prominent position.

The ACCC gives an example of an appropriate sign to be displayed.

In these circumstances the ACCC says the ACL Regulators are unlikely to take enforcement action.

These measures are:

• simplifying the treatment of hire purchase transactions by making them fully taxable;
• expanding the range of expenses qualifying for a reduced input tax credit to include superannuation funds providing life insurance products, lenders’ mortgage reinsurance and transactional fraud monitoring;
• changes to the reduced input tax credit for trustee and responsible entity services; and
• clarifying the language used in relation to guarantees and indemnities.

The changes are to have effect from 1 July 2012.

The Regulations include provisions that:

• extend the current deemed licensing regime (for trustee companies seeking to be consolidated) until 31 December 2012. This is necessary to give the states and territories sufficient time to pass complementary legislation to make transfers of trustee company business fully effective;
• improve the operation of the trustee company common fund regime by more closely adopting industry practice;
• reflect the fact that a prohibition on related party dealings that are not at arm’s length has been moved into the Corporations Act 2001 (Corporations Act);
• update the list of entities that are authorised to perform off-market transfers of securities under Division 3 of Part 7.11 of the Corporations Act (formerly known as “authorised trustee corporations”);
• insert additional State and Territory legislation which ought not to be excluded by the Commonwealth trustee company provisions (in Schedule 8AD); and
• put beyond doubt that a client’s rights to access compensation and dispute resolution arrangements are preserved following a transfer of trustee company business.

The dividends test in Section 254T was amended in 2010 to replace the profits-based test with a net assets test.

The ruling is:

1. A company that pays a dividend to its shareholders, in accordance with its constitution and without breaching section 254T or Part 2J.1 of the Corporations Act, that is paid out of current trading profits recognised in its accounts and available for distribution, is not prevented by paragraph 202-45(e) of the ITAA 1997 from franking the dividend merely because the company has unrecouped prior year accounting losses or has lost part of its share capital. That dividend will be assessable income of its resident shareholders under paragraph 44(1)(a) of the ITAA 1936.5

4. A company that pays a dividend to its shareholders, in accordance with its constitution and without breaching section 254T or Part 2J.1 of the Corporations Act, that is paid out of an unrealised capital profit of a permanent character recognised in its accounts and available for distribution, is not prevented by paragraph 202-45(e) of the ITAA 1997 from franking the dividend provided the company’s net assets exceed its share capital by at least the amount of the dividend. That dividend will be assessable income of its resident shareholders under paragraph 44(1)(a) of the ITAA 1936.6

5. A distribution (even if it is labelled as a dividend) paid by a company to its shareholders, that does not comply with section 254T or Part 2J.1 of the Corporations Act, is an unauthorised reduction and return of share capital that will be taxed as a CGT event under the capital gains tax provisions in Part 3-1 of the ITAA 1997, or will be taxed as an assessable unfranked dividend, depending on the particular facts and circumstances of the payment.