SME financial services companies to be hit with new money laundering fee

Small- and medium-sized companies including small superannuation funds, managed funds, cash-in-transit firms and money transfer firms will be hit with a surprise $500 fee under a new measure snuck through in the Federal Budget.

AUSTRAC, which describes itself as “Australia’s anti-money laundering and counter-terrorism financing regulator and specialist financial intelligence unit” will recover a flat $500 fee from all 17,000 businesses registered under the Government’s Anti-Money Laundering and Counter-Terrorism Financing Act 2006.

In addition to the flat fee, which will come in from the 2011-12 financial year, AUSTRAC will also charge a fee (proposed to be $1.06) for every international fund transfer instruction report (these cover the movement of money from Australia overseas) and every threshold transaction report (these cover instances where more than $10,000 is transferred physically or electronically).

AUSTRAC says the fees are cost recovery measures that will fund the cost of AUSTRAC’s “regulatory activities”, but industry groups including the Australian Bankers Association and the Australian Financial Markets Association are unimpressed.

They say banks and financial institutions have spent millions of dollars complying with anti-money laundering provisions, only to be slugged with a new fee.

But smaller financial services companies are likely to be hit harder than ever according to Joy Geary, director of consultancy firm AML Master, which helps small firms comply with anti-money laundering laws.

She says her clients, which include small managed funds and superannuation funds, security services businesses that transport cash and small money transfer businesses that services immigrant communities, are furious with the unexpected Budget slug.

“The people who are really going to be affected are the small and medium businesses, who are paying the flat fee that the big banks are paying,” she says.

“For some of my tiny clients, $500 is a lot of money. It has been very difficult to get them to come on board to the anti-money laundering regime to begin with, so slugging them $500 isn’t going to help with the commitment. “

She also argues the cost recovery process goes against the Government’s own cost recovery guidelines and says many businesses subject to AUSTRAC’s regulatory regime already feel they are being forced to comply with a law that doesn’t directly improve the probity of the sector.

She also says that charging companies for the right to provide information that helps the Federal Government track down money laundering activities is a “bit like charging companies to file their GST information with the ATO”.

Geary plans to write an issue paper on the fee slug and then marshal the support of her clients and other industry bodies in a campaign against the new fees.