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overview
This note considers the 'hundred points' identity verification
scheme in Australia under the Financial Transaction
Reports Act 1988 and the Anti-Money Laundering
and Counter-Terrorism Financing Act 2006.
It covers -
It
supplements discussion elsewhere on this site regarding
privacy principles, the
Australian privacy
regime, identity theft,
security and forgery.
introduction
Identity verification in Australia has come to leverage
the '100 Points' requirement under the 1988 Financial
Transaction Reports Act (FTR),
federal legislation initially enacted as the Cash
Transactions Report Act 1988. That requirement is
now used for a wide range of purposes, including obtaining
a mobile phone and gaining a driver's licence.
The legislation established the Australian Transaction
Reports & Analysis Centre (AUSTRAC),
a federal government agency that serves as the national
anti-money laundering
regulator and specialist financial intelligence unit.
It also established mandatory reporting by a wide range
of financial services providers (including banks, bullion
dealers and solicitors) and the gambling industry. That
reporting involves customer identification, with identity
being verified through provision of documentation that
in aggregate is equivalent to one hundred points. A 'primary'
document (such as a passport)
that features a photograph, is tamper-resistant and was
obtained through a process that includes some checking
is for example worth 70 points.
FTR data is used in action against welfare fraud, tax
evasion, money laundering
and other offences. It is provided to a range of federal
and state/territory law enforcement and revenue agencies.
background
The federal 1987 Cash Transaction Reports Bill
reflected government and community anxieties about "widespread
abuse of the facilities provided by financial institutions"
and about "the underground cash economy, tax evasion,
money laundering and welfare fraud". Those anxieties
were evident in calls at that time for a mandatory Australia
Card.
Proponents of the Bill claimed that it was easy for individuals
to create accounts with banks and other financial institutions
using false identities, thereby evading tax and disguising
the origins of money gained through illicit activity such
as drug trafficking, prostitution or extortion. Acceptance
by financial institutions of false identities also enabled
people to improperly gain government benefits, in particular
unemployment, disability pension and medical benefit scheme
payments.
In calling for legislation those proponents noted that
there was no federal government registration of bank accounts,
that surveillance of money flows (particularly within
Australia) was weak, that institutions tended to rely
on the good faith of those opening/using accounts and
that there was no specific legal prohibition of opening
an account in a false name (although misuse of an account
might be an offence under a range of federal and state/territory
legislation). They also noted that there was some uncertainty
about the incidence and seriousness of particular offences.
The expectation was that new legislation would assist
law enforcement and inhibit a range of offences by -
- requiring
institutions to report particular types of transactions
- requiring
institutions to more effectively verify the identity
of individuals opening accounts.
That
expectation recognised Australia's move to a 'cashless
economy', particularly one in which few bank customers
were personal acquaintances of bank staff. It assumed
that existing recordkeeping arrangements would provide
a substantial match between the individual opening an
account and the individual using that account.
The 1987 Bill, which came into force in 1988, was not
developed in isolation. It reflected international discussion
about the shape of restrictions on money laundering.
It also reflected debate in Australia about privacy protection
- evident in the 1988 Privacy Act - and about
personal identification mechanisms such as the Australia
Card that would enable government agencies to uniquely
tie an individual to an entitlement or transaction.
the 1988 Act
The reporting regime has been extended and streamlined
since 1988. Landmarks include -
- mandatory
reporting of suspect transactions (January 1990)
- reporting
on cash transactions and cash transfers into/out of
Australia (July 1990)
- implementation
of account opening procedures (1991)
At the time of royal assent the Cash Transaction Reports
Act 1988 established the Cash Transaction Reports
Agency, a new federal government agency, and identified
an offence of "operating a false name account".
It required 'cash dealers' - essentially banks and credit
unions - to verify the identity of signatories to accounts
that had a cash balance exceeding $1,000 or an aggregate
of credits exceeding $2,000 over a thirty day period.
Verification centred on an "identity reference":
a signed statement from a referee. The statement certified
that the signatory to the account was known by the name
used for the account and that the referee had sighted
particular identity documents.
That verification process was criticised as cumbersome
and in 1990 the Act was amended (through Statutory Rules
340 and 341 of 1990) to allow an alternative method of
identity verification, with further streamlining in 1991
and 1992 (under Statutory Rules 166 and 90 respectively).
The alternative method - the 100 Point scheme - involves
the financial institution or other entity verifying an
individual's identity -
- by
examination of several 'proof of identity' documents
(eg a passport and a driver's licence) that are either
provided by the individual
- through
reference to an independent database.
Each
item is assigned a number of points, with establishment
of an account being conditional on the points adding up
to at least 100.
Assignment of points reflects the 'authority' of the individual
document. A document such as a passport that
- has
been issued by a government agency through a process
that involves some testing of claims (eg checking a
register of births)
- features
a photograph or biometric
identifier
- is
tamper-resistant
has
a greater number of points than a document without those
attributes (eg a letter from a landlord or a bill from
a telephone company). The weighting of points is identified
in the final page of
this note.
The scheme does not involve the financial institution
or other entity assigning the individual with unique number
that is independent of the particular account with that
institution or that is derived from a central identity
register maintained by a government agency. It is a verification
mechanism, not the Australian counterpart of the the US
Social Security Number.
The scheme does not involve manual/automated reporting
of each and every transaction. Instead it involves reporting
on transactions - principally cash transactions - over
a certain value (currently $10,000), by particular entities
(eg organisations that are deemed to engage in/support
terrorism) or that appear anomalous.
development of the FTR and AML/CTF
The Cash Transaction Reports Act became the Financial
Transaction Reports Act 1988 (with effect from 6
December 1992) under the provisions of the Cash Transaction
Reports Amendment Act 1991. The same amendment renamed
the Cash Transaction Reports Agency as the Australian
Transaction Reports & Analysis Centre. The FTR has
been amended since that time and in 2006 was extended
through the Anti-Money Laundering and Counter-Terrorism
Financing Act 2006 (AML/CTF Act).
The 1991 amendment reflected an emphasis on monitoring
financial transactions per se, rather than merely
cash flows through a handful of institutions. In its current
form the FTR thus encompasses solicitors, gambling, bullion
dealing and international funds transfers in addition
to deposits/withdrawals from banks and similar institutions.
The FTR mandates reporting to the Director of AUSTRAC
regarding four types of financial transactions -
-
Significant Cash Transactions
-
Suspect Transactions
-
International Funds Transfer Instructions
-
International Currency Transfers.
The
obligation to provide those reports centres on 'cash dealers',
with solicitors for example only being required to report
significant cash transactions to which they are a party
and members of the public being required to report international
currency transfers (eg bringing large amounts of cash
into Australia).
The reporting regime complements requirements under the
Banking (Foreign Exchange) Regulations and other legislation.
The Reserve Bank of Australia for example indicated in
2001 that it was seeking to block accounts that might
be held by terrorist organisations, associates and individuals.
That reflected claims that groups such as Hezbollah, Hamas,
the Chechen Mujahedin and Liberation Tigers of Tamil Eelam
have raised funds in Australia or routed money thorough
Australia.
Under the FTR cash dealers must report transactions that
they suspect may be relevant to an investigation of a
breach of Australian law, including those by or for entities
proscribed under the Charter of the United Nations
(Anti-terrorism Measures) Regulations 2001.
In 2004 and 2005 the federal Minister for Justice released
a series of Issues Papers about changes to ensure conformity
with the FATF40 anti-money laundering standards. They
controversially featured a proposal to replace the 100
points test for financial accounts with a new scheme requiring
customers to provide two identification documents. The
primary document would be a government-issued photo ID
such as a passport or driving licence. The secondary document
would be a card with the customer's name, such as a credit/debit
card or a government benefit card.
In October 2005 the government announced
plans to strengthen anti-money laundering and counter-terrorist
financing measures. Initial changes under the Anti-Money
Laundering & Counter-Terrorism Financing Act 2006
(AML/CTF Act) cover the financial and gambling sectors
and bullion dealers (and lawyers and accountants to the
extent that they provide services in direct competition
with the financial sector). Subsequent changes will extend
obligations to real estate agents, to jewellers and to
professionals such as accountants and lawyers when they
provide non-financial services.
outside the FTR
The 100 points requirement for identity verification has
been widely adopted for purposes other than tagging money
flows.
Those purposes include -
- driver
licencing
- obtaining
a mobile phone
- gaining
a range of benefits from the federal government and
state/territory governments
- obtaining
workplace insurance (eg the Victorian WorkCover scheme)
- registration
as a nurse
The NSW Ministry of Transport thus indicates that
to
obtain a public passenger vehicle driver authority,
operator accreditation or vehicle licence you must prove
your identity, date of birth and residential address
...
with
that proof involving 100 points.
The federal government indicates that 100 point verification
is required to obtain -
- Age
Pension
- Youth
Allowance, Parenting Payment and Carer Payment
- Austudy
Payment and Newstart Allowance
- Partner
Allowance, Bereavement Allowance, Widow
Allowance and Wife Pension
- Farm
Help and
Retirement Assistance for Farmers
- Sickness
Allowance and Disability Support Pension
-
Exceptional Circumstances Relief Payment
- an
Export Declaration (for all goods intended to be exported
from Australia with a value of $2000 or more)
- National
Visits Media Card (NVMC) identifying the holder as
"a person with a legitimate media interest in the
visits of foreign dignitaries"
100 point verification is also required for obtaining
a tertiary student ID Card.
As noted in the following page, the checking of different
types of documentation and by different agencies varies
considerably. As with any verification scheme it is open
to subversion. Some organisations have accordingly moved
to '200' or more points for particular purposes.
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