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Will new laws turn small business into spies

The Anti-Money Laundering/Counter-Terrorism Financing Act (AML/CTF), which came into effect on 12 December 2007 will soon have implications for small businesses.

As the first part of the AML/CTF Act has come into full effect, banks and other financial institutions are to comply with the new laws.

The second provision of the legislation is expected to come into effect by mid-2008 and which will impose an obligation on small businesses, professionals and retailers to report suspicious transactions to the Australian Transaction Reports and Analsysis Centre (AUSTRAC).

Those affected include:

* Jewellers;
* Real estate agents;
* Lawyers;
* Accountants;
* Financial advisors;
* Property dealers;
* Brokers; and
* Car dealers.

The AML/CTF legislation has created widespread controversy, including calls from advocates and interest groups, to scrap the legislation. The Australian Privacy Foundation, for instance, believes the legislation places an obligation on small businesses to monitor their customers in a similar way to “spying”.

Privacy advocates have called for a halt to turning small businesses into spies.

In a letter dated 13 December 2007, sent to the Federal Minister for Finance and Deregulation, consumer representative for CHOICE Jan Whitaker and the Australian Privacy Foundation representative Nigel Waters, called for a halt to the second part of the legislation. “This is really the Financial Privacy Invasion Act in its current form,” the letter stated.

They are concerned that the legislation risks small businesses to reporting activity based on such “amateur” profiling as ethnicity. Another concern was that suspicious transactions reporting would lead to an abundance of citizen reporting, with no recourse to the Privacy Act to destroy incorrect data held by AUSTRAC.

“It’s there forever with no ability for a citizen to ‘prove their innocence’,” the letter stated. “This data is available for additional profiling not only by the traditional law enforcement agencies charged with protecting the financial interests of the country, but also Child Support Agency, Centrelink, ASIC and many more.”

In this context, Ms Whitaker and Mr Waters warned the Act would lead to “crime on speculation” instead of “probable cause”.

In calls to delay the legislation, Ms Whitaker and Mr Waters called for the new Rudd Government to:

* Review the “onerous” nature of the existing legislation, which they claim exceeds the requirements of the FATF 40 recommendations.
* Delay indefinitely the presentation of the second tranche, which they believe “extends” the onerous compliance obligations to thousands of small businesses, should the legislation pass.
* “Reduce the regulation of our financial institutions, cut the current red tape, and certainly stop from adding any more that would impose on small businesses as a result of the second tranche,” the letter stated.