EXPLANATORY STATEMENT

Select Legislative Instrument 2007 No. 71

 

Issued by authority of the Treasurer

Banking Act 1959

Banking (Foreign Exchange) Amendment Regulations 2007 (No. 1)

Subsection 39(1) of the Banking Act 1959 (the Act) provides that the Governor‑General may make regulations in accordance with that section, where he considers it expedient to do so, for purposes related to, amongst other things, foreign exchange or the foreign exchange resources of Australia. The Banking (Foreign Exchange) Regulations 1959 (the Principal Regulations) have been made in accordance with this authority.

The purpose of the Regulations is to amend the Principal Regulations to ensure that directions given by the Reserve Bank of Australia (RBA) under regulation 5 are enforceable, and that breaches are subject to penalties equivalent to those outlined in the general offence provision of the Principal Regulations.

Subregulations 5(1), (2) and (3) of the Principal Regulations empower the RBA to direct a person or resident not to buy, borrow, sell, lend or exchange foreign currency, or deal with foreign currency in any way, where the transaction relates to assets controlled by persons named by the RBA (a RBA direction). The RBA utilises this power when directed to do so by the Treasurer, pursuant to subsection 39(7) of the Act.

The Australian Government currently relies on RBA directions to give effect to bilateral financial sanctions against certain individuals and entities including (at present) entities associated with North Korea, supporters of the former government of Yugoslavia and certain senior Zimbabwe government officials.

It was brought to the Australian Government’s attention that the previous Principal Regulations did not explicitly state that a breach of a RBA direction was an offence under the Principal Regulations. While subregulation 42(1) dealt generally with offences where there was contravention of any provisions of the Principal Regulations, it is desirable to put beyond doubt that a breach of the Principal Regulations includes a failure to comply with a RBA direction made under subregulations 5(1), (2) and (3). The Regulations make it clear that it is an offence to breach a RBA direction.

The penalties imposed for breaching a RBA direction are the equivalent of those outlined in the general offence provision of the Principal Regulations, although in accordance with the Crimes Act 1914, they are described in penalty units. The maximum penalty is a fine of not more than 1,000 penalty units or imprisonment of not more than five years if the case is prosecuted upon indictment, that is, if the case is prosecuted in a court higher than a Court of summary jurisdiction. A fine of 10 penalty units or six months imprisonment is the maximum penalty if the case is prosecuted in a Court of summary jurisdiction.

Treasury has consulted with officials from the Department of Foreign Affairs and Trade, the Attorney‑General’s Department and the Reserve Bank of Australia regarding this Regulation. As the amendment is minor in nature, and does not change the intent of the Principal Regulations, further consultation is not considered necessary.

An exemption from a Regulatory Impact Statement has been provided by the Office of Best Practice Regulation for this amendment, as it was believed to be of low or no regulatory impact.

The Act specifies no conditions that need to be satisfied before the power to make the Regulations may be exercised.

The Regulations commenced on the day after the registration on the Federal Register of Legislative Instruments.