New reforms under the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth) are sweeping, both in nature and intent – aiming to sweep clean financial and property markets fuelled by dirty money, laundered for criminal purposes including terrorism.
The changes – some attracting criminal penalties – are, according to Thomson Reuters expert author of Financial Crime Control and Anti-Money Laundering Dr Mathew Leighton-Daly, both “life-changing” and a long time coming.
But now that they’re finally here, heavy obligations now attach to those dealing in virtual assets.
And “virtual assets” – comprising Bitcoin and other cryptocurrencies – are now officially not money, no matter what the online spiv trader tries to tell you. Penalties for dealing in virtual assets without registering have been upgraded from civil and criminal to include additional criminal offences, reflecting the seriousness AUSTRAC now attaches to this market – a sector increasingly relevant not just to individual investors, but to corporates transacting in digital assets as part of ordinary business.
“So, where you’ve got people who deal in virtual currencies, then they may be unwittingly caught – but also the professionals assisting them or giving them advice, or providing a facility in relation to the dealing. They need to get across these changes asap,” warns Mathew.
Drivers for laser-targeting virtual assets
The logic behind regulating virtual assets rests on a well-documented set of money laundering and broader financial crime risks. Transfers of virtual currencies carry much greater anonymity than non-cash payment methods – though, as Mathew is careful to point out, the early belief that Bitcoin was untraceable was always wrong: “it’s not correct … transactions can be traced, investigated, and so on,” he says, but there remains materially greater anonymity than with a traditional bank transfer or Western Union-style payment.
A second driver is limited transparency, since transactions occur peer-to-peer outside the regulated financial system. A third is jurisdictional spread: components of digital currency systems can sit in different countries simultaneously, making virtual currencies much harder for regulators to monitor than transfers within the conventional banking system.
Those same features are also why unregulated online forums have long been attractive to criminals. Mathew notes that gaming platforms specifically have, for years, been recognised as a financial crime risk precisely because they sit outside regulated payment rails – “the gaming platforms were and still are one such forum,” he says – which is partly why he expects the reforms overall, carve-outs notwithstanding, to hand AUSTRAC considerably more intelligence than it has had access to before.
Virtual assets: not fiat currency, not money
Australia first regulated virtual assets from around 2017, but narrowly – capturing only “digital currency exchanges”, the entry and exit points where fiat currency converted into digital currency and back again. “That was something, but it was too narrow,” Mathew says. Following further recommendations by the Financial Action Task Force (FATF), the international AML/CTF policymaker, the old definitions – “digital asset” and “digital asset exchange” – have been replaced with the much broader “virtual asset”, covering, in his words, “really anything digital of value that can be traded” – a definition relevant not only to individual crypto traders but to any corporate now transacting, holding, or facilitating dealings in digital assets. Legally, Mathew frames virtual assets as a chose in action – a form of intangible personal property – rather than a currency or exchange point, which is the conceptual shift underpinning the whole reform.
That breadth proved almost too effective, vacuuming up things Parliament never intended to catch – most notably in-game currencies used on gaming platforms, such as the currencies used within PlayStation games, since carved out as an exception. Mathew admits to some surprise at the exemption, calling it “a bit curious” given the historic financial crime risk associated with gaming platforms, though he says he’ll “assume AUSTRAC know more about it than I do.” He’s also sceptical the carve-out closes any real risk, invoking the criminological theory of displacement: “It’s not going to stop the behaviour or the conduct, it will just displace it or move it.”
A recurring point of confusion, he stresses, is that virtual assets are legally not money. “A lot of people think that it’s the same as fiat currency … And it’s not,” he says – currency legislation confirms that only state-backed instruments qualify as legal tender.
Mathew suggests this myth isn’t accidental. Traders and enthusiasts have an interest in perpetuating it, he says, partly to “normalise the usage, the trading of cryptocurrencies, the way that people trade currencies”, and partly for tax reasons: “there’s potentially tax advantages to trading currency as opposed to virtual assets.”
Tax impact on how ATO treats virtual assets
For corporates and their accountants, this has direct tax consequences: the ATO treats virtual assets as capital assets or, in some cases, trading stock rather than currency, meaning transactions can attract GST and capital gains implications the former not applying to ordinary cash dealings – a distinction accountants advising businesses on digital asset transactions will need to apply carefully.
Mathew notes the law hasn’t always been consistent on this point. He points to a criminal case in which a judge found cryptocurrency to be “similar to currency” – but only for the purpose of bringing it within criminal money laundering legislation, not as a statement about its status for tax or other purposes. “The financial crime law can be inconsistent,” he says, and his own view remains firm: virtual assets are “nothing like money…they are just intangible property”.
Designated virtual asset service? Register or criminal penalties can apply
Perhaps the sharpest surprise for businesses in this space is enforcement. Unlike most of the AML regime, which is civil, failing to register with AUSTRAC while providing a designated virtual asset service is a criminal offence – one of only a handful of designated services treated this way. “So I think that’s a surprise to many too,” Mathew says, warning that corporates and individuals casually providing services in and out of crypto may not realise registration is now mandatory rather than optional.
For lawyers, accountants, corporates and anyone touching virtual assets, Mathew’s overall message is one of urgency: this is, in his words, “a sort of brave new world for the next few years” while the market gets itself across the new regulations.
Financial Crime Control and Anti-Money Laundering
Authored by Dr Mathew Leighton-Daly, Financial Crime Control and Anti-Money Laundering is a comprehensive work addressing financial crime control and compliance with the regulation of money laundering and terrorism financing. The publication includes the complete, annotated Anti-Money Laundering and Counter-Terrorism Financing Act 2006, along with supplementary legislation and resources.
Dr Mathew Leighton-Daly is the commissioned author of Thomson Reuters’ Financial Crime Control and Anti-Money Laundering online publication. A Special Counsel at HWLE Lawyers, he is also an adjunct academic at The University of Sydney Law School and an Industry Fellow at Griffith University. Dr Leighton-Daly is an internationally recognised specialist in financial crime control.
