This year, the Australian financial regulator AUSTRAC, has heaped a swathe of new regulatory requirements on Australians and their businesses. It’s also given itself some shiny new powers in enforcing these new rules, which are an affront to our ability to conduct private transactions and store wealth.
AUSTRAC says that this new regulatory framework is bringing Australia in-line with FATF regulations and protecting us from terrorism. I say they’re bringing Australians a fat ‘L’. Let’s unpack why.
One of the biggest of the new changes is the expansion of information-gathering powers. This allows the AUSTRAC CEO to compel any person to answer questions or produce documents regarding their (or their customers’) financial affairs. This is manifested in their concerning new power – its ability to conduct compulsory examinations. AUSTRAC can require a person to “attend [to] answer questions on oath or affirmation, and produce documents if it believes on reasonable grounds the person has information or documents relevant to AML/CTF [anti-money laundering / counter-terrorism financing] compliance or a prescribed [legal-speak for specified/documented] criminal offence”. Failing to comply with the examination is an offence, and giving false or misleading information during an examination is an offence punishable by up to 10 years jail.
This new weapon in the regulatory arsenal is especially scary when you consider that it can be used against businesses to compel information about users, but also used against individuals themselves. Imagine making an innocent transaction with someone or some business only to be pulled into an examination about your activity with that person or business, because they are the subject of an investigation. Tools like this can and will be weaponised against individuals and businesses for a myriad of different (usually political) reasons, not just criminals.
Changes to Section 49C provides relief to confidentiality normally enforced by the Privacy Act. What this means is that where a business under investigation might normally not offer information due to it clashing with their obligations under the Privacy Act, that business is protected under 49C and can reveal information willingly. An individual or privacy-conscious business can still refuse (due to the voluntary nature of the request), but a large faceless bank without such morals will happily give up your information if there is no legal recourse not to.
Speaking of bending the rules of information confidentiality, the new Amendment Act specifically allows for AUSTRAC to share information it deems relevant to international authorities. From our perspective as a Bitcoin exchange, our predominant concern is the regulator sharing Australian transaction data with blockchain analytics companies, which are basically surveillance companies for hire. Sharing data in such a manner creates obvious security and privacy leaks when those privileged entities are eventually hacked and have their precious surveillance data exposed.
Under the new rules, businesses are compelled to continuously monitor the behaviour of Australians while using their services. Previously businesses could simply do initial KYC, and then only take further action if there is reasonable suspicion to probe further. Now, businesses must monitor all users, at all times, for suspicious behaviour not only within the confines of the business itself, as you’ll now learn:
AUSTRAC has expanded its list of offences businesses must monitor for, to include those involved in a prescribed hate group. Aside from the vague terminology, there is an obvious danger of politicians being able to brand anyone or any organisation they feel a threat as a ‘hate group’. This introduces the requirement for regulated financial entities to pry into the political and private affiliations of Australians before (and whilst) offering them services. Beyond this, businesses are expected to monitor for other offences such as tax crimes, bribery, extortion, insider trading, scams, cybercrime, environmental crime, organised crime, and sanctions breaches. This is a very wide surveillance remit for ordinary financial activity.
Then there’s the Travel Rule, which Bitcoiners tuned into the global conversation are likely well aware of. Financial remitters of all shapes, not just Bitcoin businesses, now need to implement complex and cumbersome systems to ensure that identifying information is transferred along with a transaction. Not only is this costly and burdensome, it opens up individuals to data breaches as every business in the ‘value chain’ must collect and retransmit the information as the transaction moves through the world. The risk here is obvious for very little gain, as it places more sensitive information at risk of leaks, leading to more scammer calls, stolen identities, and physical threats.
So who and what is now regulated by AUSTRAC?
Spoiler alert: it’s basically everything. If you want to participate in the Australian economy, beyond specific and localised peer-to-peer transactions.
AUSTRAC has been hard at work finding new words and broad definitions which will leave no quarter for its regulatory oversight. For example, previously it was playing whack-a-mole to capture Bitcoin & blockchain, then crypto, then tokens, NFTs and in-game currencies. Every month some new gimmick was released that could be interpreted as being outside the purview of the regulator.
Now, they’ve flipped the table and re-written the regulations to specify simply… ‘value’. If you want to use a business to facilitate a ‘transfer of value’ between yourself and someone else, that transaction is subject to their oversight.
Up until this year, AUSTRAC’s regulatory umbrella only extended to very obvious financial businesses, such as banks, financial institutions, digital currency exchanges and similar. Now, based on these new broadbrush definitions, a tonne of new businesses are now bending over backwards to comply or face the wrath of the regulator. Such as:
- real estate professionals
- dealers in precious metals, stones and products
- lawyers
- conveyancers
- accountants
- trust and company service providers
- additional virtual asset service providers beyond the previous scope
- intermediary transfer-message service providers
There’s no doubt that there are plenty of genuine criminals out there that engage in illicit behaviour while operating businesses under the above categories, either because they are criminals themselves or in the employ of them (for example to launder cash for drug gangs). These new regulations will not stop them from acting illicitly; at best, it will slow them down. But criminals are criminals, and will happily ignore or skirt regulation, while honest businesses are further bogged down in the financially burdensome, regulatory trudge.
Thankfully, there are still two methods that readers can use to conduct ‘transfers of value’ without the prying eyes of our government.
Good old self-custodial, peer-to-peer money.
First off, the obvious one, is cash. The old adage of Cash is King still rings true, but the other adage – use or lose it – is also true here. Recent changes to our cash laws (don’t trust the ‘mandating cash acceptance’ misnomer) mean that businesses outside of big supermarket chains and fuel companies can legally refuse to accept cash at their businesses. Australians need to get noisy about this one, and start boycotting any business that refuses to accept cash.
Keep in mind that AUSTRAC requires strict monitoring of significant cash transactions (ie large withdrawals or deposits) between individuals and businesses, so it’s not the sole answer to escape the surveillance web. The answer is having cash in the community and keeping it circulating, peer-to-peer style.
Secondly, peer-to-peer electronic cash; i.e. Bitcoin. While exchanges and other Bitcoin related businesses are under the purview of AUSTRAC, ASIC and other government goons, once that Bitcoin is in your self-custodial wallet, you are able to do as you please (within reason). Start treating it as the more convenient form of cash that it is, and start using it in your community!
What Must Be Done?
The true answer to the problem of money laundering and terrorism financing (and other crime) is quite simple:
- Arrest the criminals when proceeds of crime are generated, and punish them accordingly so as to remove them from society and to deter others from engaging in similar behavior.
- Foster a society where people don’t feel a need to engage in or fund terrorism (or indeed engage in any form of crime).
We should not accept the excuse of ‘it’s complicated’ or ‘it’s too hard’ to effectively police crime when it occurs any longer. Look to El Salvador to see how a (admittedly strict) return to zero-tolerance punishments has turned their nation around.
Increase the budgets of police departments until the problem is solved. Give police a wider berth to capture and process their suspects, and try them in courts that are not staffed by activist judges who give lenient sentences to genuine criminals.
We should not be allowing this problem to be an excuse for our government to implement a surveillance state that makes Orwell blush, but this is exactly what is happening.
Instead of digging into the root cause of problems in society, we are failing to combat the symptoms of the underlying rot, and instead of beefing up the classic tools of combatting crime, we’re instead forcing everyone into a surveillance panopticon.
Instead of indulging our political addiction to funnelling taxpayer dollars into an endless black hole of spending, weakening our economy and dollar in the process, we should be engaging in constructive economic policy so that Australians are not pushed to the fringes and forced to engage in criminal activity to generate and maintain wealth.
Our prevailing political position is based on fear of punishing genuine wrongdoing out of not wanting to offend. Instead of being brutal to the small minority of the population engaging in such behaviour, the state is forcing everyone to submit to dragnet regulatory surveillance instead.
It seems clear that the end goal isn’t to reduce crime. It’s all about maintaining control during our managed decline.
n.b. the positions articulated in this piece are the personal opinion of the author alone, and not explicitly that of HardBlock, specifically, or any other associated entity.