Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2013-2014-2015
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
BANKING LAWS AMENDMENT (UNCLAIMED MONEY) BILL 2015
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon J. B. Hockey MP)
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Amendments to the Banking Act 1959 .......................... 5
Chapter 2 Amendments to the Life Insurance Act 1995 ............... 11
Chapter 3 Regulation impact statement ....................................... 15
Chapter 4 Statement of Compatibility with Human Rights ............ 55
Index ..................................................................................... 59
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
ADI Authorised-deposit taking institution
ASIC Australian Securities and Investment
Commission
CRC Convention on the Rights of the Child
Banking Act Banking Act 1959
Banking Regulations Banking Regulations 1966
FOI Act Freedom of Information Act 1982
ICCPR International Covenant on Civil and Political
Rights
Life Insurance Act Life Insurance Act 1995
1
General outline and financial impact
Overview
The Bill makes amendments to the Banking Act 1959 (Banking Act) and
Life Insurance Act 1995 (Life Insurance Act) to give effect to the
unclaimed moneys measures announced in the 2015-16 Budget.
The Bill extends the period of inactivity required before funds from
authorised-deposited taking institution (ADI) and life insurance provider
accounts and life insurance amounts can be transferred to the
Commonwealth from three years to seven years. As such, accounts held
by ADIs and life insurance providers will have to be inactive for a period
of seven years before they are deemed to be unclaimed moneys and
transferred to the Commonwealth.
The Bill exempts ADI accounts created for children and those that are
held in a foreign currency from the unclaimed moneys provisions. It will
also stop ADI accounts being transferred to the Commonwealth where the
account holder provides notification that the account should be treated as
active after the account is assessed as unclaimed moneys at the end of the
calendar year but before it is transferred to the Commonwealth.
The Bill also promotes and protects the privacy of individuals with
accounts that have unclaimed moneys by: removing the requirement for
the Australian Securities and Investment Commission (ASIC) to publish
details of unclaimed moneys in the annual Unclaimed Moneys Gazette;
introducing a secrecy provision to prevent access to information on
unclaimed moneys via the Freedom of Information Act 1982 (FOI Act);
and making consequential amendments to the FOI Act to restrict the
access to information on unclaimed moneys under freedom of information
requests.
Date of effect: The amendments will take effect from 31 December 2015.
Proposal announced: The measures were announced by the Prime
Minister and the Assistant Treasurer on 18 March 2015 and is included as
part of the 2015-16 Budget.
Financial impact: The amendments will have negative cash impact of
$285.1 million over four years from 2015-16.
Human rights implications: This Bill raises human rights issues. See
Statement of Compatibility with Human Rights.
Compliance cost impact: Savings of $36 million per annum.
3
Chapter 1
Amendments to the Banking Act 1959
Outline of chapter
1.1 Schedule 1 to the Bill will amend the Banking Act 1959
(Banking Act) to provide for new arrangements for unclaimed moneys
held by authorised deposit-taking institutions (ADIs).
Context of amendments
1.2 Currently, ADIs are required to assess all accounts to determine
if they consist of unclaimed moneys by 31 December each year and
transfer any that do to the Commonwealth by 31 March of the following
year (subsection 69(3), Banking Act).
1.3 An account held by an ADI consists of unclaimed moneys if in
the previous three years there have been no transactions in the account
other than interest or charges (subsection 69(1), Banking Act) and they
have not satisfied the notification requirements by, for example, checking
their account balance online or on the phone, or by specifically advising
their bank that they would like the account to remain active.
1.4 Evidence suggests that many of the accounts that are
declared unclaimed and transferred to the Commonwealth are effectively
active as the account holder remains aware of them. For example, around
15 per cent of unclaimed funds transferred from ADIs are reclaimed in the
same year they are transferred to the Commonwealth. Approximately
50 per cent of all funds transferred to the Commonwealth as unclaimed
moneys are reclaimed within two years.
1.5 The high proportion of effectively active accounts transferred to
the Commonwealth each year under the current provisions increases the
regulatory burden of the unclaimed moneys provisions for ADIs and
account holders. ADIs have to assess and transfer all accounts with
unclaimed moneys to the Commonwealth even though many of the
accounts are still effectively active. Once these accounts are transferred,
account holders have to complete the necessary paperwork and verify
their details in order to reclaim their accounts.
5
Banking Laws Amendment (Unclaimed Money) Bill 2015
1.6 To minimise the number of effectively active accounts that are
transferred to the Commonwealth, regulation 20A of the Banking
Regulations 1966 (Banking Regulations) enables account holders to notify
an ADI that an account should be treated as active. If the notification is
provided prior to 31 December (that is, when ADIs have to assess
accounts as unclaimed moneys) then the account does not have to be
transferred to the Commonwealth.
1.7 If, however, the account holder provides notification after an
account is assessed as unclaimed money on 31 December, but before the
ADI transfers the account to the Commonwealth then the account must
still be transferred.
1.8 This is inconsistent with the treatment of accounts where the
account holder satisfies the activity requirements (such as completing a
transaction) after an account has been deemed to be unclaimed but before
the funds are transferred to the Commonwealth as these accounts do not
have to be transferred to the Commonwealth.
1.9 The unclaimed moneys provisions currently apply to foreign
currency accounts and children's accounts. The application of the
unclaimed moneys provisions to these accounts does not align to how they
are used by the community.
1.10 Foreign currency accounts are generally used by sophisticated
consumers to settle business transactions in foreign currencies.
Transferring these accounts to the Commonwealth under the unclaimed
moneys provisions requires the account to be converted into Australian
dollars, potentially exposing the account holder to exchange rate
fluctuations. Given this risk and the fact that these accounts are used by
sophisticated consumers that are likely to know of these accounts, it is not
appropriate to transfer them to the Commonwealth under the provisions.
1.11 Children's accounts are generally established for long periods so
that money can be set aside in a high-interest account for a child to access
on, for example, their eighteenth birthday. Transferring these accounts to
the Commonwealth may result in some children losing out on higher
interest rates because accounts transferred to the Commonwealth will only
accrue the interest at the rate of the Consumer Price Index.
1.12 Details of unclaimed moneys held by the Commonwealth must
be published annually in the Australian Securities and Investment
Commission's (ASIC) Unclaimed Moneys Gazette (subsection 69(9),
Banking Act). Information on unclaimed moneys is also released under
the Freedom of Information Act 1982 (FOI Act) and is published on the
ASIC website.
6
Amendments to the Banking Act 1959
1.13 Details of unclaimed moneys is also searchable online via the
ASIC Money Smart website (subsection 69(9)(b), Banking Act).
1.14 The level of information available has created the opportunity
for groups to approach account holders offering to reunite them with their
account for a fee. Account holders can reclaim their money from the
Government at no charge. The level of information could also potentially
be used for identity theft.
Summary of new law
1.15 The new law amends the Banking Act to extend the unclaimed
moneys period from three years to seven years from 31 December 2015.
1.16 The new law provides that ADI accounts created for children
and those that are held in a foreign currency are exempt from the
unclaimed moneys provisions.
1.17 The new law stops ADI accounts being transferred to the
Commonwealth where the account holder provides notification that the
account should be treated as active after the account is assessed as
unclaimed moneys at the end of the calendar year but before it is
transferred to the Commonwealth.
1.18 The new law amends the Banking Act to remove the
requirement for ASIC to publish details of unclaimed moneys in the
annual Unclaimed Moneys Gazette and introduces a secrecy provision to
prevent access to information on unclaimed moneys via the FOI Act. The
Treasurer will retain the ability to publish information on unclaimed
moneys, such as on ASIC's MoneySmart website.
Comparison of key features of new law and current law
New law Current law
ADI accounts consist of unclaimed ADI accounts consist of unclaimed
moneys seven years after there are no moneys three years after there are no
transactions other than interest and transactions other than interest and
charges unless an exemption applies. charges unless an exemption applies.
Foreign currency accounts held by No special treatment for foreign
ADIs are exempt from the unclaimed currency accounts held by ADIs.
moneys provisions.
7
Banking Laws Amendment (Unclaimed Money) Bill 2015
New law Current law
A Children's account in an ADI is A children's account in an ADI only
exempt from the unclaimed moneys consist of unclaimed moneys if there
provisions. are no transactions for seven years (in
the Banking Regulations).
ADIs do not have to transfer accounts ADIs must transfer accounts to the
to the Commonwealth if an account Commonwealth if an account holder
holder provides notification that an provides notification that an account
account is active after the account is is active after the account is assessed
assessed as unclaimed moneys at the as unclaimed moneys at the end of a
end of a calendar year but before the calendar year but before the ADI
ADI transfers the account the transfers the account the
Commonwealth. Commonwealth.
Removes the requirement for details Details on unclaimed moneys held in
on unclaimed moneys held in ADI ADI accounts must be published in
accounts to be published in the annual the annual ASIC Unclaimed Moneys
AISC Unclaimed Moneys Gazette. Gazette.
A secrecy provision prohibits the Details on unclaimed moneys can be
disclosure of information relating to sought under FOI requests and is
unclaimed moneys unless provided published on the ASIC website.
for in the Banking Act.
Detailed explanation of new law
1.19 The Bill modifies the definition of unclaimed moneys in
subsection 69(1) of the Banking Act by increasing the time before an ADI
account is assessed as unclaimed moneys from three years to seven years.
[Schedule 1, item 1, subsection 69(1)]
1.20 The Bill excludes foreign currency accounts and children's
accounts from being treated as unclaimed moneys. The existing
exemption for farm management deposits remains unchanged. [Schedule 1,
item 2, subsection 69(1A)]
1.21 The Bill provides that ADIs do not have to report on or transfer
to the Commonwealth any accounts where the account holder notifies the
ADI that the account should be treated as active, after the account is
assessed as unclaimed moneys at the end of a calendar year, but prior to
the ADI actually transferring the account to the Commonwealth.
[Schedule 1, item 3, subsection 69(3)]
Example 1.1
Mitch has an account with ABC bank. His account is assessed as
having unclaimed moneys on 31 December 2019. On 20 January 2020,
ABC bank has not yet transferred the account to the Commonwealth
8
Amendments to the Banking Act 1959
when Mitch notifies them that he wants to treat the account as active.
ABC bank will no longer have to report on or transfer Mitch's account
to the Commonwealth.
Example 1.2
Sue has an account at XYZ credit union. Her account is assessed as
having unclaimed moneys on 31 December 2019. XYZ credit union
transfers all of the accounts it has assessed as unclaimed moneys to the
Commonwealth on 20 March 2020. Sue provides XYZ credit union
with notification that her account is active on 25 March 2020. Sue's
notification is too late as the account has already been transferred to
the Commonwealth. Sue will have to reclaim her account.
1.22 The Bill removes the requirement for ASIC to publish details of
ADI accounts with unclaimed moneys in the annual Unclaimed Moneys
Gazette. The Bill continues to enable information on ADI accounts with
unclaimed moneys to be published in any manner determined by the
Treasurer. [Schedule 1, item 4, subsection 69(9)]
1.23 The Bill establishes the definition for a Children's account for
the purposes of subsection 69(1A). The definition is identical to the one in
the Banking Regulations. [Schedule 1, item 5, subsection 69(12)]
1.24 The Bill creates a secrecy provision that prevents the disclosure
of information relating to ADI accounts with unclaimed moneys unless
authorised by subsection 69(3) of the Banking Act. The secrecy provision
applies in relation to the FOI Act which will ensure that access to
information on ADI accounts with unclaimed moneys via the FOI Act is
only available to the people to whom the information relates (or their
agent). [Schedule 1, item 6, section 69A]
1.25 The Bill renumbers section 69AA as section 69B. No
substantive changes are being made to the provision. [Schedule 1, item 7,
section 69AA]
Consequential amendments
1.26 Section 38 of the FOI Act provides that a document is exempt
from freedom of information applications if it is prohibited under a
provision of another Act and the provision is specified in Schedule 3 of
the FOI Act.
1.27 The Bill amends schedule 3 of the FOI Act to prescribe that the
secrecy provision that is being introduced in subsection 69A(2) of the
Banking Act is a provision to which section 38 of the FOI Act applies.
[Schedule 1, item 10, schedule 3 of the FOI Act]
9
Banking Laws Amendment (Unclaimed Money) Bill 2015
1.28 This will mean that information related to unclaimed ADI
accounts (such as the name and recorded address of the account holder)
will not be available under the FOI Act to anyone other than the person to
whom the information relates (or their agent).
Application and transitional provisions
1.29 The amendments in this Chapter to the Banking Act will
commence on 31 December 2015.
1.30 There are no transitional provisions.
10
Chapter 2
Amendments to the Life Insurance
Act 1995
Outline of chapter
2.1 Schedule 1 to the Bill will amend the Life Insurance Act 1959
(Life Insurance Act) to provide for new arrangements for unclaimed
moneys held by life insurance providers.
Context of amendments
2.2 Currently, life insurance providers are required to assess all
accounts to determine if they consist of unclaimed moneys by
31 December each year and transfer any that do to the Commonwealth by
31 March of the following year (subsections 216(1), 216(3) and 216(6)
Life Insurance Act).
2.3 An account held by a life insurance provider consists of
unclaimed moneys if there have been no transactions in the account other
than interest or charges in the previous three years (subsection 216(16),
Life Insurance Act).
2.4 Many of the accounts that are transferred to the Commonwealth
are still effectively active as the account holder remains aware of them.
Around 9 per cent of life insurance accounts are reclaimed in the same
year as they are transferred to the Commonwealth and 50 per cent of all
funds transferred are reclaimed within two years.
2.5 The high proportion of effectively active accounts that are
transferred to and reclaimed from the Commonwealth creates a regulatory
burden for life insurance providers and account holders. Life insurance
providers have to assess and transfer all accounts with unclaimed moneys
to the Commonwealth even though the accounts may still be effectively
active. Once these accounts are transferred, account holders have to
complete the necessary paperwork and verify their details in order to
reclaim their accounts.
11
Banking Laws Amendment (Unclaimed Money) Bill 2015
2.6 Information on unclaimed moneys is released under the
Freedom of Information Act 1982 (FOI Act) and is published on the ASIC
website. Details of unclaimed moneys is also searchable online via the
ASIC Money Smart website
2.7 The level of information available has created the opportunity
for groups to approach account holders offering to reunite them with their
account for a fee. Account holders can reclaim their money from the
Government at no charge. The level of information could also potentially
be used for identity theft.
Summary of new law
2.8 The new law amends the Life Insurance Act to extend the
unclaimed moneys period from three years to seven years from
31 December 2015.
2.9 The new law amends the Life Insurance Act to introduce a
secrecy provisions to prevent access to information on unclaimed moneys
via the FOI Act. Details on unclaimed moneys in life insurance accounts
will still be able to be published in any way as determined by the
Treasurer.
Comparison of key features of new law and current law
New law Current law
Life insurance accounts consist of Life insurance accounts consist of
unclaimed moneys seven years after unclaimed moneys three years after
there are no transactions other than there are no transactions other than
interest and charges unless an interest and charges unless an
exemption applies. exemption applies.
A secrecy provision prohibits the Details on unclaimed moneys can be
disclosure of information on sought under FOI requests and is
unclaimed moneys unless provided published on the ASIC website.
for in the Insurance Act.
Detailed explanation of new law
2.10 The Bill modifies the definition of unclaimed moneys in
subsection 216(1) of the Life Insurance Act by increasing the time before
a life insurance account is assessed as unclaimed moneys from three years
to seven years. [Schedule 1, item 8, subparagraph 69(15 )(c)(i)]
12
Amendments to the Life Insurance Act 1995
2.11 The Bill creates a secrecy provision that prevents the disclosure
of information relating to life insurance accounts with unclaimed moneys
unless authorised by subsection 216 of the Life Insurance Act. The
secrecy provision applies in relation to the FOI Act which will ensure that
access to information on life insurance accounts with unclaimed moneys
via the FOI Act is only available the people to whom the information
relates (or their agent). [Schedule 1, item 9, section 216A]
Consequential amendments
2.12 Section 38 of the FOI Act provides that a document is exempt
from freedom of information applications if it is prohibited under a
provision of another Act and the provision is specified in Schedule 3 of
the FOI Act.
2.13 The Bill amends schedule 3 of the FOI Act to prescribe that the
secrecy provision that is being introduced in subsection 216A(2) of the
Life Insurance Act is a provision to which section 38 of the FOI Act
applies. [Schedule 1, item 10, Schedule 3 of the FOI Act]
2.14 This will mean that information related to unclaimed life
insurance accounts (such as the name and recorded address of the account
holder) will not be available under the FOI Act to anyone other than the
person to whom the information relates (or their agent).
Application and transitional provisions
2.15 The amendments in this Chapter to the Life Insurance Act will
commence on 31 December 2015.
13
Chapter 3
Regulation impact statement
Issue identification
3.1 Under the unclaimed money provisions in the Banking Act 1959
(Banking Act) and the Life Insurance Act 1995 (Life Insurance Act) all
Authorised Deposit-taking Institutions (ADIs) and life insurance providers
are required to transfer 'inactive' accounts (that have not had a transaction
other than interest or fees in the last three years) to the Australian
Securities and Investments Commission (ASIC). The provisions are aimed
at protecting the value of an account from being eroded by bank fees and
charges over time while ensuring that account holders can be effectively
and efficiently reunited with their lost accounts. There are 162 ADIs and
28 life insurance providers registered in Australia. They must all comply
with the provisions.
3.2 Some accounts, such as farm management deposits, are exempt
from the scheme; while others, such as escrow accounts, receive special
treatment in the Banking Regulations 1966.
3.3 In 2012, the Government announced that it would reduce the
period of time required for bank accounts to be recognised as 'unclaimed'
from seven to three years. This reduction in the required time period has
resulted in more accounts being classified as 'unclaimed' despite account
holders considering them to be active. In many cases, for example, the
account holder continues to declare and pay tax on any interest accrued on
their savings but may not access the funds held in the account for an
extended period of time as they wish for them to remain 'at-call' if they
need them. These accounts are deemed to be 'effectively active'. This is
the primary problem with the unclaimed moneys provisions and it has
increased the burden of the provisions on businesses that must transfer the
accounts (and process claims to have them returned), and on individuals
that must complete paperwork and wait at least four weeks for their funds
to be returned. The transfer of effectively active accounts to ASIC can
also sometimes place account holders in conditions of financial stress.
There is no data available on whether certain types of account holders are
more likely to be affected by the provisions than any other; however,
correspondence from affected individuals to the government suggests that
they are distributed reasonably evenly throughout the population.
15
Banking Laws Amendment (Unclaimed Money) Bill 2015
3.4 In addition to the large regulatory costs that the transfer of
effectively active accounts imposes, there are community concerns
(highlighted by National Seniors Australia's submission on the
government's May 2014 discussion paper) that the amount of personal
information published online by ASIC on their 'MoneySmart' website
could facilitate identity fraud and leave account holders vulnerable to
businesses offering to reunite them with their funds for a fee. ASIC does
not charge a fee for this service.
3.5 Under the unclaimed moneys provisions in the Banking Act and
Life Insurance Act account holder's personal details1 have always been
made publicly available (either online or in the Unclaimed Moneys
Gazette). However, these issues have become more pronounced since
2013 as a result of new technologies that can better harvest these details,
as well as the increase in the number of individuals affected by the
provisions since the reduction in the required period of inactivity.
3.6 These issues, as well as other more minor issues, are discussed
in more detail below.
The required period of inactivity
3.7 The evidence suggests that the current provisions may not
correctly balance the objectives of protecting the value of individual's
funds from being eroded by fees and charges, while effectively and
efficiently reuniting account holders with their money.
3.8 Account holders and industry stakeholders have advised the
Government that a number of accounts after three years of inactivity are
effectively active. The Government has received a substantial amount of
correspondence relating to unclaimed moneys specifically making this
claim. ADIs have also received a large volume of complaints following
the government's changes to the provisions that came into effect in 2013.
According to the Australian Bankers' Association (ABA), complaints
about the provisions increased by 300 per cent following the introduction
of the three year required period of inactivity. This indicates that a large
number of account holders very quickly noticed that their accounts had
been deemed 'unclaimed'- suggesting that they were active. This would
reflect the situation where an account holder has maintained an 'at-call'
savings account that they have periodically checked on, but have not
undertaken a transaction on. In some cases, this had a quite large and
1 Where available ADIs and life insurance providers provide ASIC with the account holder's name,
address that the account was established at, the account provider, and the branch where the account
was established.
16
Regulation impact statement
negative impact on account holders' wellbeing. For example, the
government has received correspondence from a number of individuals
that suffered as a result of losing access to funds they had set aside for
times of financial hardship that were no longer available when required. It
is primarily for these reasons that the Final Report of the Financial System
Inquiry recommended that the required period of inactivity under the
unclaimed moneys provisions should be extended.
3.9 Transferring accounts to ASIC that are effectively active
imposes unnecessary costs on businesses and individuals. ADIs and life
insurance providers must assess which accounts are unclaimed by
31 December each year, and transfer them to ASIC by 31 March the
following year. While the majority of accounts are assessed using
automatic processes, we have been advised by industry that the list of
accounts must also be manually checked to ensure that exempted
accounts, or accounts with special treatment, are appropriately excluded.
Prior to them being assessed the majority of banks and life insurers also
attempt to alert their customers to their unclaimed accounts, however
there is no law mandating this. In addition, as unclaimed accounts are
reclaimed there is an additional work created for industry throughout the
rest of the year. Although account holders must complete the relevant
paperwork, industry participants are responsible for reclaiming accounts
on their behalf.
3.10 The ABA has estimated (in its submission to the Treasury
discussion paper 'Options for Improving the Unclaimed Bank Account
and Life Insurance Money Provisions') that a return to a required period
of inactivity of seven years (the period that applied in 2011-12) would
reduce the number of accounts transferred by approximately half. While it
is not possible to precisely calculate how many effectively active accounts
have been transferred under the provisions since 2013, it can be estimated.
In 2013-14, $146 million in unclaimed accounts was transferred to ASIC
(this was solely from accounts that had been inactive for three years). This
is more than double the $70 million transferred to ASIC in 2011-12 that
was collected solely from accounts that had been inactive for seven years.2
Consequently, even assuming a slight increase in the value of each
account transferred under a three year required period of inactivity, close
to twice as many account-holders have been affected by these provisions
as were previously. In 2013-14, 39,964 accounts were transferred to ASIC
cumulatively from ADIs and life insurance providers (31,923 from ADIs
and 8,041 from insurers). This implies that these changes have affected an
additional 19,982 account holders each year, however this should be
2 The figures for 2012--13 should not be used as in this year funds were collected from all accounts that
had been inactive for between three and seven years.
17
Banking Laws Amendment (Unclaimed Money) Bill 2015
caveated by noting that some of these additional affected accounts may
have been genuinely unclaimed.
3.11 While some of these issues with the required period of inactivity
may lessen over time (due to the changes in notification requirements
introduced in 2013 and broader consumer awareness of the provisions), it
is still likely that many more account holders will be affected under the
current three year required period of inactivity than was previously the
case.
Exempt accounts and accounts receiving special treatment
3.12 The Government made a number of regulations in the Banking
Regulations 1966 to exempt certain types of accounts and to provide
special treatment to others (see Table 1). Despite the significant number of
existing exemptions and special rules, some stakeholders (such as the
ABA, the Customer Owned Banking Association (COBA), HSBC, and
Adelaide and Bendigo Bank) have identified other accounts that should be
exempted from the provisions, such as Foreign Currency Accounts
(FCAs) and children's accounts.
3.13 FCAs are bank accounts held in a denomination other than
Australian Dollars (AUD). When they are declared unclaimed they are
converted to AUD by the relevant ADI before being transferred to ASIC.
When they are claimed they are returned to the account holder in AUD.
3.14 As a result, account holders are exposed to the risk that the
exchange rate will change over the relevant period and ADIs must meet
the cost of exchanging the currency of these accounts.
3.15 Children's accounts are accounts held by, or on behalf of, an
individual under the age of 18. The current period of inactivity does not
align with how consumers often use this type of account -- for example,
to set money aside for a child to access on their eighteenth birthday. A
common complaint has been that accounts set aside for children in a high
interest account have been transferred to the Government, reducing the
amount of interest earned. This problem will not become apparent until
2016 as children's accounts must be inactive for seven years before they
can be deemed unclaimed.
18
Regulation impact statement
Table 1: Current treatment of specified accounts in the Banking Regulations 1966
Account type and definition Current treatment
Linked accounts: A linked account is an Linked accounts cannot be transferred to
account that is opened or maintained as a ASIC until no transactions other than
condition of holding another account at the interest or fees have been undertaken on any
same ADI, and are linked in accordance with of the linked accounts for at least three
the conditions of either or both accounts. years.
Sub accounts: A sub account is an account A sub account cannot be transferred to ASIC
that is operated or maintained as part of until no transactions other than interest or
another account (the parent account). Note: a fees have been undertaken on any sub
single parent account can have multiple account, or the parent account, for at least
sub accounts. three years.
Frozen accounts: A frozen account is A 'frozen account' (for the purposes of the
generally an account where deposits and regulations) cannot be transferred to ASIC
withdrawals have not been allowed by law until no transactions other than interest or
or by an order of a court. fees have been undertaken on the account for
at least three years since the law or court
Under the regulations, a 'frozen account' is
order limiting access to the account has
defined as an account that was frozen, but is
ceased to apply.
no longer frozen (that is, the order or law no
longer prohibits deposits or withdrawals
from the account).
Security or set-off accounts: A security or Security, set-off, and escrow accounts
set off account is an account held as a currently have different treatments depending
security, or set-off or account combination on whether the account holder notified their
purposes, for a loan or other obligation. ADI of the purpose of the account and the
period covered by the conditions of the loan,
Escrow accounts: An escrow account is an
obligation, or contract, or simply its purpose.
account held as escrow for a contract.
If the account holder informs the ADI of the
In addition for all three account types to
account's purpose and the relevant period, the
satisfy the requirements of the regulations:
account cannot be transferred to ASIC until
• the account holder's ability to transact the longer of seven years of inactivity, or
on the account must be limited by the three years of inactivity after the relevant
ADI or the terms of the account's loan, obligation, or contract has been
establishment; and discharged.
• they must notify their ADI of either If the account holder only informs the ADI of
the purpose of the account and the the account's purpose, but not the period, the
period covered by the conditions of account is transferred to ASIC after seven
the loan, obligation, or contract; or years of inactivity.
simply the purpose of the account.
19
Banking Laws Amendment (Unclaimed Money) Bill 2015
Account type and definition Current treatment
Controlled accounts: A controlled account Controlled accounts currently have different
is an account opened and held as a treatments depending on whether the account
requirement of a law of the Commonwealth, holder notified their ADI of the purpose of
a state or a territory, or a contract where the the account and the relevant period, or simply
ability of the account holder to make deposits its purpose.
or withdrawals from the account is restricted
If the account holder informs the ADI of the
by law or by contract.
account's purpose and the relevant period, the
In addition, to satisfy the requirements of the account cannot be transferred to ASIC until
regulations, the account holder must notify the longer of seven years of inactivity, or
their ADI of either the purpose of the account three years of inactivity after the relevant
and the period of the requirement, or simply legal requirement has ceased to apply.
the purpose of the account.
If the account holder only informs the ADI of
An example would be a lawyers' trust the account's purpose, but not the period, the
account. account is transferred to ASIC after seven
years of inactivity.
Privacy
3.16 Under the Banking Act, the details of account holders with
unclaimed accounts have always been required to be published in the
Unclaimed Moneys Gazette. This includes the full name of the account
holder, the account holder's address at the time that the account was
established, and the value of the account. Since 2002, these personal
details have also been publicly searchable on-line via ASIC's
'MoneySmart' website. ASIC also responds proactively to Freedom of
Information (FOI) requests by publishing an excel file containing all of
this information on their website. This spreadsheet is updated regularly.
3.17 The problem with the current arrangements is that the level of
information publicly available creates opportunities for groups to
approach account holders and offer to reunite them with their account for
a fee. There is no charge for account holders to reclaim their funds from
ASIC. The Office of the Australian Information Commissioner (OAIC)
and National Seniors Australia also noted in their submissions to
Treasury's discussion paper that the level of information published could
potentially be used to commit identity theft. While we currently have no
evidence of this occurring, the risk has arguably increased as a result of
the large increase in the number of account holders' details available on
the MoneySmart website3 and new technologies that make this data easier
to harvest. These concerns were also raised by National Seniors Australia
in their submission on Treasury's discussion paper on the unclaimed
moneys provisions.
3 This is due to the changes to the required period of inactivity in 2012--13.
20
Regulation impact statement
Administrative arrangements
3.18 There is currently an administrative inconsistency that increases
the chance of funds in effectively active accounts being deemed
unclaimed and transferred to ASIC. Since May 2013 (as a result of
legislative changes) ADIs and life insurance providers have not had to
transfer reactivated accounts, that is accounts that have had a transaction
undertaken on them after the assessment date (31 December each year)
but prior to the transfer date (up to 31 March each year). This does not
occur for accounts where the account holder notifies their ADI that they
would like their account to remain active (such as by checking a balance)
between these two dates (these are 'identified accounts').
Why is Government action required?
3.19 Government action is required as the provisions are set by
legislation and regulations and could potentially achieve their objectives
with a lower regulatory burden on the community.
3.20 This is particularly the case given the overarching policy
objective of the unclaimed moneys provisions, which is to ensure that
account holders' unclaimed funds are not eroded by fees, charges, or
inflation. Consequently, while a large number of the issues associated
with the current provisions could be remedied through the abolition of the
unclaimed moneys provisions this would not guarantee account holders
any protection in the event that, for example, an account is not transferred
from a deceased estate for a number of years and is worth substantially
less than was intended within that individual's will.
3.21 As a result, Government action is required to ensure that the law
contains some protection for consumers in the event that they have lost
funds through no fault of their own but also works to ensure that it is only
those individuals that are captured by the provisions in order to minimise
their burden on the broader community.
Policy options under consideration
3.22 The Government is considered a number of 'packages' of reform
options to the unclaimed moneys provisions.
21
Banking Laws Amendment (Unclaimed Money) Bill 2015
Option 1: Maintain the status quo
3.23 The Government has the option of not amending the current
provisions. This would not address the problems identified, however it
would not require ADIs and insurance companies to make any changes to
their systems, and customers would not have to learn about a new system.
Option 2: Extend the required period of inactivity to seven years, exempt
FCAs and children's accounts, reduce the amount of private information
publicly available, and ensure that 'identified' accounts do not have to be
transferred to ASIC.
The required period of inactivity
3.24 Option 2 would extend the required period of inactivity before
an account is transferred to ASIC to seven years. Section 20 of the
Banking Regulations Act 1966 would have to be updated to ensure that the
treatment of linked accounts, sub accounts, frozen accounts, set-off or
escrow accounts, and controlled accounts reflected this.
3.25 There is evidence that extending the required period of inactivity
to seven years would approximately halve the number of accounts
currently transferred to ASIC each year. This estimate is based on actual
transfers to ASIC both before and after the 2012 amendments. Table 2
includes the proposed treatment of these accounts under the Banking Act.
Table 2: Proposed treatment of specified accounts
Account type and Proposed treatment
definition
Linked accounts: Linked accounts cannot be transferred to ASIC until no
transactions other than interest or fees have been undertaken
on any of the linked accounts for at least seven years.
Sub accounts: A sub account cannot be transferred to ASIC until no
transactions other than interest or fees have been undertaken
on any sub account, or the parent account, for at least seven
years.
Frozen accounts: A 'frozen account' (for the purposes of the regulations)
cannot be transferred to ASIC until no transactions other than
interest or fees have been undertaken on the account for at
least seven years since the law or court order limiting access
to the account has ceased to apply.
22
Regulation impact statement
Account type and Proposed treatment
definition
Security, set-off, or Security, set-off, and escrow accounts currently have
escrow accounts: different treatments depending on whether the account holder
notified their ADI of the purpose of the account and the
period covered by the conditions of the loan, obligation, or
contract, or simply its purpose.
If the account holder informs the ADI of the account's
purpose and the relevant period the account cannot be
transferred to ASIC until seven years of inactivity after the
relevant loan, obligation, or contract has been discharged.
If the account holder only informs the ADI of the account's
purpose, but not the period, the account is transferred to
ASIC after seven years of inactivity.
Controlled accounts: Controlled accounts currently have different treatments
depending on whether the account holder notified their ADI
of the purpose of the account and the relevant period, or
simply its purpose.
If the account holder informs the ADI of the account's
purpose and the relevant period, the account cannot be
transferred to ASIC until seven years of inactivity after the
relevant legal requirement has ceased to apply.
If the account holder only informs the ADI of the account's
purpose, but not the period, the account is transferred to
ASIC after seven years of inactivity.
Exempted accounts
3.26 Under this option the Government would amend the Banking Act
1959 to exempt FCAs and children's accounts from the unclaimed
moneys provisions.
Privacy concerns
3.27 In order to address the concerns of the Office of the Australian
Information Commissioner and National Seniors Australia regarding the
amount of personal information made publicly available and to reduce the
threat of identity fraud, under this option the Government would amend
the Banking Act to remove the requirement to publish data in the
Unclaimed Moneys Gazette entirely.
3.28 In order to limit the ability of businesses to access individual's
private information the Government would also introduce secrecy
provisions into the Banking Act and the Life Insurance Act.
23
Banking Laws Amendment (Unclaimed Money) Bill 2015
3.29 The secrecy provisions would be drafted such that disclosure can
occur, but only to the individual (or selected other individuals or entities
-- for example the relatives of the deceased) about which the information
concerns.
3.30 Section 38 of the Freedom of Information Act 1982 (FOI Act)
provides that a document is exempt under the Act if it is covered by a
secrecy provision in other legislation, and:
• The provision is listed in Schedule 3 of the FOI Act, or
• The provision (or some other provision) explicitly applies
section 38 of the FOI Act to the documents concerned.
3.31 The MoneySmart website, despite these changes, would
continue to operate as it does currently.
Administrative arrangements
3.32 The Government would amend the Banking Act to ensure that
'identified' accounts are not transferred to ASIC under the unclaimed
moneys provisions. This would align the treatment of 'identified' accounts
with 'reactivated' accounts.
Option 3: Maintain a required period of inactivity of three years, exempt
FCAs and children's accounts, reduce the amount of private information
publicly available, and ensure that 'identified' accounts do not have to be
transferred to ASIC.
The required period of inactivity
3.33 Option 3 would maintain the required period of inactivity before
an account is transferred to ASIC of three years.
Exempted accounts
3.34 Under this option the Government would amend the Banking
Act to exempt FCAs and children's accounts from the unclaimed moneys
provisions.
Privacy concerns
3.35 As in Option 2, under Option 3 the Government would remove
the requirement to publish data in the Unclaimed Moneys Gazette and
introduce secrecy provisions to protect account holders' personal
information.
24
Regulation impact statement
Administrative arrangements
3.36 Under Option 3 the Government would ensure that 'identified'
accounts do not have to be transferred to ASIC. This would align their
treatment with 'reactivated' accounts.
Option 4: Abolish the unclaimed moneys provisions
3.37 Under Option 4 the Government would abolish the unclaimed
moneys provisions as they relate to bank accounts and life insurance
amounts. This would leave account holders wholly responsible for
maintaining awareness of their banking and life insurance products.
Regulatory cost benefit analysis
3.38 Throughout each costing we have attempted to provide
conservative estimates of the regulatory costs and savings associated with
any changes to the unclaimed moneys provisions.
3.39 In line with the OBPR's regulatory costing framework we have
not included or considered opportunity costs. The assumptions used to
derive these cost estimates are outlined in the Appendix.
Option 1: Maintain the status quo
3.40 As this would maintain the status quo, and therefore require no
regulatory or legislative changes, there are no new regulatory costs or
savings associated with this option. The problems identified above in
'Issues identification' would broadly persist, however this option would
have the benefit of account holders and industry not requiring education
on further changes to the provisions.
3.41 It is also likely that if the status quo was to be maintained that
some of the problems identified in Section 1 may decrease over time. This
is, firstly, as account holders may become more aware of the provisions or
industry may become more effective at reaching out to them before their
accounts are deemed unclaimed. This would result in fewer accounts
being transferred, however this is impossible to quantify and merely
speculative.
3.42 Secondly, fewer effectively active accounts may be transferred
to ASIC in the future as a result of the changes to notification standards
introduced in 2013. These changes ensured that account holders now only
have to (for example) check their balance online, over the phone, or
simply ask their account provider to maintain their account for it not to be
25
Banking Laws Amendment (Unclaimed Money) Bill 2015
deemed unclaimed. Over time this should result in fewer effectively active
accounts being transferred to ASIC each year though will likely not
eliminate the problem as cases will still remain where account holders
have been unfamiliar with the provisions and unfamiliar with the steps
that they can take to avoid being affected. It is not possible to quantify
how many fewer accounts may be transferred to ASIC in future years as a
result of these changes.
3.43 However, while problems related to the period of inactivity may
decrease over time even while maintaining the status quo, issues related to
the account types captured by the provisions, the availability of account
holders' personal details, and the inconsistency in the treatment of
'identified' and 'reactivated' accounts would remain.
Option 2: Extend the required period of inactivity to seven years, exempt
FCAs and children's accounts, reduce the amount of private information
publicly available, and ensure that 'identified' accounts do not have to be
transferred to ASIC.
3.44 A shift to a required period of inactivity of seven years could
more adequately balance the trade-off between preserving the value of the
account and efficiently reducing the burden that the provisions place on
the community and industry.
The required period of inactivity
3.45 Any change to the required period of inactivity will affect the
industry participants responsible for complying with the unclaimed
moneys provisions in two ways: there will be an upfront cost associated
with adapting IT systems and manual processes (or some combination
thereof) to comply with the new rules; and there will be ongoing savings
generated due to institutions having to transfer fewer accounts to ASIC
and having to process fewer claims by individual's seeking to reclaim
their lost accounts. This reduction in the volume of accounts transferred
will also benefit consumers by limiting the number of accounts transferred
to ASIC that are not genuinely unclaimed. This will be particularly
beneficial for account holders that may have been placed in a situation of
financial hardship had their funds been transferred after three years
despite it being effectively active.
3.46 These ongoing benefits to consumers will be offset at the
margins due to the cost to consumers whose accounts are genuinely
unclaimed after three years but continue to attract monthly fees for four
more years until they are transferred to ASIC.
26
Regulation impact statement
3.47 Finally, extending the required period of inactivity would have a
substantial cost to the Government's budget as no funds would be
transferred to ASIC for at least four years. This is because currently the
longest period that an account could possibly be inactive is three years.
Given the Government's current fiscal position, this will be an important
consideration in determining the preferred option.
Regulatory impact on industry
3.48 We have assumed that the cost for large ADIs in establishing
new processes and/or updating new infrastructure will be, on average,
$200,000. This acknowledges the variations in entity size that exist among
this cohort, and accepts that for some ADIs the costs may approach the
upper $500,000 threshold for implementation identified by the ABA (and
for some very large institutions potentially the $1 million upper bound).
The ABA has advised the Government that this approach is appropriate.
We have assumed that the cost to smaller ADIs and life insurers will be
approximately half the average cost to larger ADIs. This is recognising
that while these entities transfer less accounts per institution on average
than ADIs, the number per institution is still quite significant.
Table 3: Estimated cost to industry in updating IT infrastructure and processes
Approximate Amount per Number of Total cost
regulatory cost (in entity ($) entities (in year 1) ($)
year 1)
Implementation costs -- 200,000 92 18,400,000
large ADIs
Implementation costs -- 100,000 70 7,000,000
small ADIs
Implementation costs -- 100,000 28 2,800,000
insurance funds
Total 190 28,200,000
3.49 Extending the required period of inactivity will generate
ongoing savings for industry in two ways. Firstly, entities would transfer
fewer accounts to ASIC each year. While entities will continue to have to
provide an unclaimed moneys report to ASIC by 31 March each year,
transferring fewer accounts will result in entities having to complete less
manual checking of their reports. Secondly, transferring fewer accounts
will result in businesses having to reclaim commensurately fewer
accounts from ASIC each year. Many businesses submit paperwork to
reclaim accounts from ASIC weekly or fortnightly throughout the year
and while this may not change they are likely to have to process fewer
claims each time.
27
Banking Laws Amendment (Unclaimed Money) Bill 2015
3.50 Consequently, we have estimated that the saving for large ADIs
in transferring fewer accounts each year will be approximately $340,000
per ADI -- towards the upper end of the band provided by the ABA. This
acknowledges the variations in entity size that exist among this cohort,
and accepts that for some ADIs the savings may approach the upper
threshold of $350,000, while for others it will be towards the middle of
the band.
3.51 We have assumed that there will be no savings for small ADIs
due to the number of ADIs that transfer zero accounts each year. The
savings for life insurers are assumed to be half as large of those for large
ADIs, accepting that they transfer approximately half as many accounts
per institution on average. This is based on ASIC's data on the number of
accounts affected each year. See Table 6 for these estimates.
3.52 As a result of this change, ADIs may also benefit from
collecting account keeping fees from accounts that are effectively
'unclaimed' for up to seven years, whereas currently they would be
transferred to ASIC after three. This would therefore represent up to two
years of income on each such account for the relevant ADI -- this
represents a real cost to consumers. However, as this would also represent
up to four years of fees on each such account for the affected consumer it
is argued that the net regulatory burden of this change is zero. Accounts
would not be transferred for an additional four years; however, it would
generate a saving for Government from not having to pay interest on the
funds for an additional two years.
3.53 Finally, if the required period of inactivity is extended, industry
will also benefit from a likely decrease in complaints associated with the
unclaimed moneys provisions. This is based on the approximately
three-fold increase in complaints to industry in 2013 after the reduction of
the required period of inactivity in 2012. However, as we do not believe
that the number of people employed by affected businesses to deal with
customer complaints would be reduced as a result of this change, we have
not estimated a cost.
28
Regulation impact statement
Table 4: Approximate ongoing regulatory savings for industry associated with
extending the required period of inactivity to seven years.
Amount per Number of Total savings
entity entities
Transferring fewer $340,000 92 $31,280,000
accounts -- large ADIs
Transferring fewer $0 70 $0.00
accounts -- small ADIs
Transferring fewer $170,000 28 $4,760,000
accounts -- insurance
funds
Total 190 $36,040,000
Regulatory impact on account holders
3.54 We have assumed that after a period of seven years, funds from
50 per cent fewer accounts will be transferred each year relative to the
existing three year period of inactivity. This represents 19,982 accounts
relative to 2013-14. This is based on the fact that approximately half as
much revenue was collected under a three year required period of
inactivity as was collected under a seven year period of inactivity.
3.55 The most significant benefit of this change could be that fewer
individuals will be placed in a position of financial distress as a result of
having funds withdrawn from effectively active accounts and transferred
to the Government. However, we have not quantified this benefit as it sits
outside OBPR's regulatory costing framework.
3.56 In addition to this, a large number of individuals will no longer
have to identify their missing account, complete the relevant paperwork,
and wait between four and six weeks4 for their funds to be returned. In
order to reclaim their funds, account holders must complete, depending on
their ADI or life insurance provider, a two page form and verify their
claim to the account. This form is on average two pages, and requires
account holders to provide their name, current address, former address (if
the account was created at a former address), and telephone number. They
must also nominate how they would like their funds to be returned to them
and verify their address (or addresses) and identity. We have estimated
4 While it takes ASIC on average 28 days to return funds to an individual there is also a delay between
account holders completing the paperwork to reclaim their account and ASIC receiving this from the
relevant ADI/life insurance provider.
29
Banking Laws Amendment (Unclaimed Money) Bill 2015
that satisfying these requirements will take half an hour on average. In
addition to the cost of completing paperwork, however, there are
additional costs for consumers in determining why their account has been
closed, learning about the provisions, obtaining an Original Transaction
Number from ASIC, and in contacting their ADIs or life insurance
providers. We have estimated that this will take an additional two hours
-- noting that in many cases it could be far higher. As a result, extending
the required period of inactivity to seven years is estimated to save
account holders a regulatory cost of $85.50 each, or $1,708,461 per year
in relation to 19,982 account holders. See Table 5.
Table 5: Approximate ongoing regulatory savings for account holders associated
with extending the required period of inactivity to seven years.
Amount per Number of Total regulatory
account holder affected account saving for account
($) holders holders ($)
Reclaiming fewer 85.50 19,982 1,708,461
accounts --
account holders
3.57 While we have quantified the benefits of no longer having to
complete the relevant paperwork, we have not quantified the benefit of no
longer having to wait to have money returned. This is because this benefit
is likely in most cases to be due to their bank account paying interest at a
higher rate than CPI, which is an economic rather than a regulatory
saving. Despite not quantifying this saving, ensuring that account holders
have ready access to their active funds is a primary objective of any
change to the unclaimed moneys provisions.
3.58 These benefits will be offset at the margins due to the cost to
consumers whose accounts are genuinely unclaimed after three years but
continue to attract monthly fees for four more years until they are
transferred to ASIC. However, as noted above the net regulatory cost for
this item is zero, as it is netted out by additional income to account
providers.
3.59 Finally, under a seven year period of inactivity it is less likely
that industry will have up-to-date contact details for each account holder
to provide to ASIC than after three. This could make it slightly more
difficult in some cases for individual's to locate their funds on the
MoneySmart website, however we believe that this cost will be marginal
and is impossible to quantify.
30
Regulation impact statement
Exempted accounts
Regulatory impact on industry
3.60 Regulations to exempt FCAs and children's accounts from the
unclaimed moneys provisions will generate small regulatory savings for
ADIs each year (life insurance providers do not provide either of these
financial products). However, savings would be offset initially due to the
costs of either updating IT infrastructure or manual processes.
3.61 We have assumed that only large ADIs will offer FCAs to their
consumers. This is due to the relative complexity of the product and to
ensure that our estimates of the regulatory savings generated by this
option remain conservative. Excluding FCAs from the provisions will
generate savings for two reasons: firstly, as ADIs would no longer need to
transfer unclaimed FCAs to ASIC under the unclaimed moneys
provisions, and secondly, as they would therefore no longer need to
convert FCAs into Australian dollars prior to their transfer to ASIC.
3.62 We have estimated that the regulatory saving generated by this
change would equal five per cent of the lower bound of the savings
estimates provided by the ABA (that is, approximately
$5,000 per institution per annum). This is designed to capture both the
saving associated with transferring fewer accounts ($4,000 per year), and
the saving associated with no longer having to convert accounts into AUD
prior to their transfer ($1,000 per year). It is designed to be a conservative
estimate of any saving as there is no data available on the number of
FCAs held in Australia.
3.63 Completely excluding children's accounts would generate
additional small regulatory savings for all ADIs each year. However, these
savings would not become apparent until at least 2016. This is because
children's accounts are currently subject to a required period of inactivity
of seven years under the unclaimed moneys provisions before they can be
transferred to ASIC.
3.64 In order to quantify this saving we have assumed that the
average savings per annum for large ADIs related to excluding children's
accounts will equal approximately 10 per cent of the lower bound estimate
provided to Government by the ABA. This equates to approximately
$10,000 per institution per year. ADIs are also likely to see a reduction in
the volume of complaints that they receive as a result of these changes,
creating small additional savings. It is designed to be a conservative
estimate of any saving as there is no data available on the number of
children's accounts held in Australia.
31
Banking Laws Amendment (Unclaimed Money) Bill 2015
3.65 Completely excluding FCAs and children's accounts does have
an associated implementation cost for industry. It is estimated that this
will be small relative to the cost of changing the required period of
inactivity. This is because the costs of updating IT infrastructure or
business processes are assumed to be largely fixed. We are assuming a
fixed capital cost of $10,000 for large ADIs and $5,000 for small ADIs
(maintaining the ratio used to estimate the costs of changing the required
period of inactivity). It is acknowledged that for some institutions it may
well be higher, and lower for others (for example those that do not provide
FCAs even within the 'large ADI' subset). Implementation of any new
requirements will still impose a cost on small ADIs, despite assuming that
they will transfer no accounts to ASIC each year, as their annual reports
must still comply with legislative requirements.
Regulatory impact on account holders
3.66 There is no data available on the types of accounts transferred to
ASIC. Therefore it is impossible to accurately estimate the regulatory
savings for individuals associated with exempting children's accounts and
FCAs from the unclaimed moneys provisions.
3.67 The exemption of FCAs, however, will benefit individuals in
two ways. Firstly, they will no longer have to complete the relevant
paperwork to reclaim their accounts. Secondly, they will no longer be
exposed to exchange risk on their funds -- that is, the risk that the value
of their funds will be eroded by appreciation in the value of the AUD
relative to the currency that the account was kept in.5 Finally, it is also
anticipated that as FCAs are primarily held in order to finalise transactions
with foreign counterparties there will be additional benefits to account
holders who would have been unable to finalise a transaction if their FCA
had been transferred to ASIC. This is an economic cost, rather than a
direct cost of regulation.
3.68 We do not believe that excluding FCAs will impose additional
costs on consumers. This is because the holders of FCAs tend to be
sophisticated consumers and the accounts tend to be established for
particular purposes. It is therefore arguable that they fall outside the policy
intent of the unclaimed moneys provisions as it is unlikely for these
accounts to be genuinely unclaimed.
5 This will not generate regulatory savings for account holders overall as movements in the AUD are
anticipated to be as likely to benefit account holders as to not.
32
Regulation impact statement
3.69 The exemption of children's accounts from the provisions will
also potentially benefit individuals in two significant ways. As with FCA
holders, they will no longer have to complete the relevant paperwork to
reclaim their accounts. They will also no longer be exposed to the risk that
the account will earn interest at a lower rate while unclaimed than if it had
remained with the ADI. This is a common source of complaints for ADIs
from holders of children's accounts.6 More broadly, it will also ensure that
when a child's funds are to be drawn on (for example, for a significant
birthday) account holders will know with certainty that the funds will be
available.
3.70 In order to quantify these benefits we have assumed that
2.5 per cent of individual's currently affected by the provisions are
affected because of holding either a FCA or a children's account. This
would represent approximately 1000 individuals generating savings of
$85,459 per year.
Privacy concerns
Regulatory impact on industry
3.71 Removing the requirement to publish the Unclaimed Moneys
Gazette and introducing secrecy provisions to the Banking Act and Life
Insurance Act to restrict access to the details of account holders will not
impose additional regulatory burden on ADIs or life insurance providers.
This is because the amount of information that they provide to ASIC will
not change.
3.72 These changes, however, will have costs for those businesses
that offer to reunite account holders with their accounts for a fee. While
the information on the existing stock of unclaimed accounts will remain
publicly available (even if they are removed from ASIC's website it is
likely that copies will remain in circulation)in the future it will no longer
be straight forward to compile a database of account holders' personal
details. As a result, it is likely that the income of these firms will decline
as they will not be able to easily obtain these details and contact these
individuals. We have assumed that these entities would have already
contacted those account holders currently identified in the Unclaimed
Moneys Gazette.
6 This will not generate regulatory savings for account holders overall as we have assumed that it is just
as likely that an account will earn a higher interest rate while unclaimed than a lower one. This is
based on the fact that many savings accounts offered by the four major banks are approximately
2.5 per cent. This is in line with forecast inflation.
33
Banking Laws Amendment (Unclaimed Money) Bill 2015
3.73 It is not possible to calculate the quantum of this loss of revenue
with any accuracy as these businesses tend to be privately held and only
operate for a short period of time. There is no data available on their
number or their revenue. It is anticipated that the size of this cost would
be small relative to the administrative savings associated with extending
the required period of inactivity.
Regulatory impact on account holders
3.74 Account holders would benefit from this change as it would
minimise the risk of identity theft and make it much more difficult for
firms to make unsolicited contact with them. Under these changes, firms
looking to obtain the personal details of individuals with unclaimed
accounts would be forced to search the MoneySmart website for one name
at a time. The MoneySmart website would then provide details only for
individual's matching that name (and will not display any results for a
search that generates 500 or more results).7 It would therefore be very
labour intensive for the firms involved to obtain the full list of individual's
with unclaimed accounts and depending on the percentage of account
holders that accept their find-for-fee business offerings, this business
model may no longer be viable. Account holders will therefore no longer
pay for access to a service that is free, however for some individuals these
changes could mean that they are no longer reunited with their funds at all
(as they would not have been aware of the lost funds without contact
being made).
3.75 We have not attempted to quantify these effects. This is because
it is not a direct outcome of changing the unclaimed moneys provisions,
but a second order effect. As a result, it sits outside the quantification
requirements of the Regulatory Burden Measurement Framework.
3.76 Despite these benefits, the introduction of secrecy provisions
could make it harder for individual's to obtain details of their unclaimed
funds through a Freedom of Information request. That is because
following the introduction of secrecy provisions such requests would need
to be accompanied by sufficient documentation to confirm their identity
and claim to any unclaimed funds. We have not quantified this cost,
however, as while theoretically this could present a problem the
government has never received a Freedom of Information request from an
account holder with unclaimed money and there is no reason to infer that
this would change.
7 This minimises the chance that a database mining tool could be used to compile a list of account
holders.
34
Regulation impact statement
Administrative arrangements
Regulatory impact on industry
3.77 Removing the requirement for industry participants to transfer
'identified' accounts to ASIC will generate small, ongoing, regulatory
savings. These savings will be offset initially due to ADIs needing to
invest in systems changes to ensure that these accounts are not included in
the annual unclaimed moneys report.
3.78 We have assumed that the cost of updating IT systems and
processes will primarily be fixed. As a result, we have estimated the
following costs to business -- maintaining the ratios of costs between
large ADIs, small ADIs and insurance companies that we have used
throughout. These are $5,000 for large ADIs and $2,500 for small ADIs
and life insurance providers. They are smaller than the costs estimated to
exempt FCAs and children's accounts as this change will align the
treatment of identified accounts with reactivated accounts -- a change that
has already been implemented and we have assumed will therefore be
reasonably simple to extend to 'identified' accounts.
3.79 Savings will be generated for industry due to having to transfer
less accounts to ASIC. For large ADIs we have estimated a regulatory
saving equal to approximately 0.5 per cent of the lower saving bound
provided by the ABA (that is, approximately $500). This is because we
estimate that very few accounts will no longer have their funds transferred
to ASIC as a result of this change. We have also estimated such a low
number to ensure that the estimates put forward remain conservative.
Regulatory impact on account holders
3.80 Account holders will benefit from the exclusion of identified
accounts from the unclaimed moneys provisions. This is because
satisfying the notification requirements explicitly indicates that the
account is active, and should therefore not be deemed to be unclaimed.
3.81 While this change will generate a regulatory saving for account
holders, it is not anticipated to affect many account holders per year --
particularly as it would only apply to account holders that have already
left their account inactive for seven years. We have assumed that this will
result in the provisions affecting approximately 200 people less than they
do currently (that is, 0.5 per cent less).
3.82 More broadly, this change will help to ensure that account
holders maintain access to funds in their active accounts which will
minimise the risk of individual's being placed in a position of financial
hardship as a result of the unclaimed moneys provisions.
35
Banking Laws Amendment (Unclaimed Money) Bill 2015
Summary of costs and savings
3.83 Table 6 contains a summary of the estimated costs and savings
for industry of adopting Option 2. Table 7 contains a summary of the
estimated savings for account holders in adopting Option 2.
Table 6: Approximate regulatory costs and savings for industry participants
under Option 2
Item Affected No. Cost Saving
businesses (in year 1) ($) (ongoing) ($)
Extending the Life Insurance 28 100,000 170,000
required period Providers
of inactivity
Small ADIs 70 100,000 0
Large ADIs 92 200,000 340,000
Exempting Small ADIs 70 5,000 0
accounts
Large ADIs 92 10,000 15,000
Privacy Small ADIs 70 0 0
Large ADIs 92 0 0
Exempting Life Insurance 28 2,500 250
identified Providers
accounts
Small ADIs 70 2,500 0
Large ADIs 92 5,000 500
Table 7: Approximate regulatory costs and savings for account holders under
Option 2
Item Individuals Saving per Saving (total) ($)
Affected individual
(ongoing) ($)
Extending the required 19,982 85.50 1,708,461
period of inactivity
Exempting FCAs and 1000 85.50 85,500
Children's Accounts
Exempting Identified 200 85.50 17,100
Accounts
3.84 Table 8 presents the overall effect of these changes as calculated
using the Office of Best Practice Regulation's (OBPR's) regulatory
burden measurement framework.
36
Regulation impact statement
Table 8: Total regulatory impact of Option 2
Average annual regulatory costs (from business as usual)
Change in Business Community Individuals Total change in
costs organisations costs
($ million)
Total, by -$34.44 $0.00 -$1.40 million -$35.87 million
sector million
Cost offset Business Community Individuals Total, by source
($ million) organisations
Agency $ N/A $ N/A $ N/A $ N/A
Are all new costs offset?
Yes, costs are offset No, costs are not offset Deregulatory--no offsets required
Total (Change in costs -- Cost offset) ($ million) = -$35.87 million
Option 3: Maintain a required period of inactivity of three years, exempt
FCAs and children's accounts, reduce the amount of private information
publicly available, and ensure that 'identified' accounts do not have to be
transferred to ASIC.
The required period of inactivity
3.85 Under Option 3, the required period of inactivity would be
maintained. Consequently, there are no new regulatory costs or savings to
be considered. The problems with the current period of inactivity
identified in Section 1 would broadly persist, however there would be the
benefit that account holders and industry would not need to be educated
about further changes to the provisions.
3.86 It is also likely that if the required three year period of inactivity
was to be maintained that the identified problems may decrease over time.
This is, firstly, as account holders may become more aware of the
provisions or industry may become more effective at reaching out to them
before their accounts are deemed unclaimed. This would result in fewer
accounts being transferred, however this is impossible to quantify and
merely speculative.
3.87 Secondly, fewer effectively active accounts may be transferred
to ASIC in the future as a result of the changes to notification standards
introduced in 2013. These changes ensured that account holders now only
37
Banking Laws Amendment (Unclaimed Money) Bill 2015
have to (for example) check their balance online, over the phone, or
simply ask their account provider to maintain their account for it not to be
deemed unclaimed. Over time this should result in fewer effectively active
accounts being transferred to ASIC each year, though will likely not
eliminate the problem as cases will still remain where account holders
have been unfamiliar with the provisions and unfamiliar with the steps
that they can take to avoid being effected. It is not possible to quantify
how many fewer accounts may be transferred to ASIC in the future as a
result of these changes.
3.88 Finally, maintaining a required period of inactivity of three years
would drastically reduce the costs to government of improving the
unclaimed moneys provisions. As a consequence of the budget's current
position, the fiscal impact of any change will be a key consideration in
determining the preferred option.
Exempted accounts
3.89 The regulatory costs and benefits of exempting FCAs and
children's accounts from the unclaimed moneys provisions in Option 3
will be identical to those reported in Option 2.
Privacy concerns
3.90 The regulatory costs and benefits of ceasing to publish the
Unclaimed Moneys Gazette and introducing secrecy provisions to protect
individual's data from FOI requests from unrelated parties will be
identical to those reported in Option 2.
Administrative arrangements
3.91 The regulatory costs and benefits of not requiring 'identified'
accounts to be transferred to ASIC under the unclaimed moneys
provisions in Option 3 will be identical to those reported in Option 2.
Summary of costs and savings
3.92 Table 9 contains a summary of the estimated costs and savings
for industry of adopting Option 3. Table 10 contains a summary of the
estimated savings for account holders in adopting Option 3.
38
Regulation impact statement
Table 9: Approximate regulatory costs and savings for industry participants
Item Affected No. Cost Saving
businesses (in year 1) ($) (ongoing) ($)
Exempting Small ADIs 70 5,000 0
accounts
Large ADIs 92 10,000 15,000
Privacy Small ADIs 70 0 0
Large ADIs 92 0 0
Exempting Life Insurance 28 2,500 250
identified Providers
accounts
Small ADIs 70 2,500 0
Large ADIs 92 5,000 500
Table 10: Approximate regulatory costs and savings for account holders
Item Individuals Saving per Saving (total) ($)
affected individual
(ongoing) ($)
Exempting FCAs and 1000 85.50 85,500
children's accounts
Privacy 0 0 0
Exempting identified 200 85.50 17,100
accounts
3.93 Table 11 presents the overall effect of these changes as
calculated using the OBPR's regulatory burden measurement framework.
Table 11: Total regulatory impact of Option 3
Average annual regulatory costs (from business as usual)
Change in Business Community Individuals Total change in
costs organisations costs
($ million)
Total, by -$1.24 million $0.00 -$0.08 million -$1.32 million
sector
Cost offset Business Community Individuals Total, by source
($ million) organisations
39
Banking Laws Amendment (Unclaimed Money) Bill 2015
Average annual regulatory costs (from business as usual)
Agency $N/A $N/A $N/A $N/A
Are all new costs offset?
Deregulatory--no offsets required
Total (Change in costs -- Cost offset) ($ million) = -$1.32 million
Option 4: Abolish the unclaimed moneys provisions
3.94 Abolishing the unclaimed moneys provisions would resolve a
number of the problems identified in Section 1 by ensuring that no
account holder would lose access to their funds due to inactivity on an
account. However, abolishing the provisions would also not achieve the
objectives for the provisions (outlined in Section 2) which is to ensure that
account holders' unclaimed funds are not eroded by fees, charges, or
inflation. In the absence of unclaimed moneys provisions there could be a
direct transfer of wealth from account holders to their financial institution
(in the case of fees and charges) through no fault of their own, particularly
in relation to accounts tied to deceased estates where it may take a number
of years to resolve ownership. Abolishing the provisions would also have
a substantial cost to the Government's budget, as funds would not be
transferred to ASIC anymore. Given the government's current fiscal
position, this will be an important consideration in determining the
preferred option.
3.95 Despite these downsides, reducing the regulatory burden of
Government policies by $1 billion each year is a key objective of the
current government and lower regulatory costs will allow businesses to
spend more funds growing their business and individuals to spend more
time on work or leisure activities. There would be large regulatory savings
associated with abolishing the provisions.
3.96 For example, industry will not be required to make any further
investments in their systems in order to enact this change and will no
longer have to track account activity and transfer funds to ASIC each
year. Account holders would also no longer have to undertake the process
of reclaiming their money from the government and there would no longer
be any risk of account holders being placed in a position of financial
distress as a consequence of the provisions. Lower regulatory costs will
allow businesses to spend more funds growing their business and for
individuals to spend more time on work or leisure activities.
40
Regulation impact statement
3.97 As no accounts would be transferred under this option, and
given the earlier assumption that a seven year period of inactivity would
halve the number of accounts transferred each year (based on historical
collections data), we have assumed that under abolishing the provisions
would double the regulatory savings for industry outlined in Option 2. The
savings for industry are laid out in Table 12.
Table 12: Approximate ongoing regulatory savings for industry associated with
abolishing the provisions.
Amount per Number of Total savings
entity entities
Transferring fewer $680,000 92 $62,560,000
accounts -- large
ADIs
Transferring fewer $0 70 $0.00
accounts -- small
ADIs
Transferring fewer $340,000 28 $9,520,000
accounts --
insurance funds
Total 190 $72,080,000
3.98 As in Option 2 and 3 the savings for account holders will be
equal to $85.50 per account holder no longer affected by the provisions.
Assuming that the number of accounts transferred in 2013-14 remains
approximately constant, this translates to a regulatory saving of
$3,416,922 per year. Table 13 outlines the approximate ongoing
regulatory savings for account holders.
Table 13: Approximate ongoing regulatory savings for account holders associated
with abolishing the provisions.
Amount per Number of Total regulatory
account holder affected saving for
($) account account holders
holders ($)
Reclaiming fewer 85.50 39,964 3,416,922
accounts -- account
holders
3.99 Table 14 presents the overall effect of these changes as
calculated using the OBPR's regulatory burden measurement framework.
41
Banking Laws Amendment (Unclaimed Money) Bill 2015
Table 14: Total regulatory impact of Option 4
Average annual regulatory costs (from business as usual)
Change in costs Business Community Individuals Total change
($ million) organisations in costs
Total, by sector -$72.1 million $0.00 -$3.4 million -$75.5 million
Cost offset Business Community Individuals Total, by
($ million) organisations source
Agency $N/A $N/A $N/A $N/A
Are all new costs offset?
Deregulatory--no offsets required
Total (Change in costs -- Cost offset) ($ million) = -$75.5 million
Consultation
3.100 Treasury released a consultation paper on potential
improvements to the unclaimed moneys provisions on 26 May 2014 on
the Treasury website. Consultation closed on 11 July 2014. As of
22 July 2014 Treasury had received 18 submissions on the options
detailed in the discussion paper. The objective of this consultation round
was to inform the options detailed in this Regulatory Impact Statement. A
summary of non-confidential stakeholder submissions can be found in
Table 14.
3.101 The submissions received do not present a consensus view on
the required period of inactivity. However, the majority of the
submissions considered that a required period of inactivity of three years
was inadequate. There was also broad support for the exemption of FCAs
and children's accounts from the provisions and a firm view that the
provisions do not adequately protect account holders' personal details.
3.102 Treasury is undertaking public consultation on all draft
legislation, draft regulations, and explanatory materials generated as part
of the process of reforming the unclaimed moneys provisions. This will
take place during May2015, with draft materials uploaded to the Treasury
website and four weeks provided for public submissions. Opening
submissions up to the public online ensures that consumers and businesses
both have the opportunity to comment on legislation that may affect them.
This round of consultation will be useful in identifying potential issues
with the draft legislation. Stakeholders' concerns will be reflected in the
finalised legislation.
42
Regulation impact statement
Table 15: Summary of stakeholder submissions
Author Content
Submissions received from organisations
Australian ARITA note that under the Corporations Act dividends or moneys in a
Restructuring corporate insolvency are to be paid to ASIC by the trustee if they
Insolvency and remain unclaimed for six months. A creditor may then apply to ASIC
Turnaround for payment if the creditor claims to be entitled to the money.
Association
Under the Bankruptcy Act any unclaimed moneys are to be transferred
(ARITA)
to the Commonwealth. A person claiming those moneys must apply to
the Federal Circuit Court or the Federal Court for an order declaring
that person is entitled to those moneys. ARITA recommend that the
Bankruptcy Act be amended so that those entitled to the funds only
need to apply to ASIC to access them.
Australian Bankers The ABA supports a return to a seven year required period of
Association (ABA) inactivity. They believe that this better aligns with the way that
customers use their accounts (for example, at call savings accounts).
The ABA note that a return to seven years would likely halve the
number of accounts transferred. This would reduce the administration,
marketing, and complaints handling costs for ADIs.
The ABA notes that on average the cost of implementing a new
required period of inactivity would be $50,000 to $250,000 per bank.
Once changes are made however, the industry estimates that savings
would be in the range of $95,000 to $350,000 per bank.
The ABA believes that banks require a transitional period of
approximately one year to implement the required systems changes.
The ABA recommend that the following accounts be excluded from
the provisions:
• Credit accounts
• Investment accounts (for example cash management accounts)
• Children's accounts
• Bank cheques
• Linked accounts, sub accounts, and other bundled accounts
• All non-resident accounts
• Controlled accounts and accounts with restrictions on
transactions
• Government designated special purpose deposit accounts
• Foreign currency accounts
• Term deposits.
The ABA does not support ADIs being responsible for managing
unclaimed moneys. They support ASIC's continued management of
the unclaimed moneys scheme.
43
Banking Laws Amendment (Unclaimed Money) Bill 2015
Author Content
Submissions received from organisations
The ABA does not support the use of TFNs to reunite individuals with
their accounts. This is as ADIs do not currently collect TFNs and
would add additional complexity and regulatory burden.
The ABA believes that consideration should be given to special
arrangements to fast-track the return of monies from ASIC for those
customers who identify as experiencing financial difficulties.
The ABA recommends reducing the amount of information made
public on the ASIC website to the first initial, family name, and
suburb of each customer.
The submission notes that Government should adequately
communicate any policy changes to the community to aid consumers'
understanding of the unclaimed moneys provisions.
Bendigo and Bendigo bank supports a required period of inactivity of five years.
Adelaide Bank A change to five years would have a minimal cost, and could be
implemented by January 2015.
Bendigo recommend that the following products be exempted from
the provisions:
• Credit accounts
• Escrow accounts
• Controlled accounts
• Accounts held as security
• Farm management deposits
• Term deposits
• Foreign Currency Accounts
• Bendigo bank supports the use of TFNs in reuniting individuals
with their unclaimed accounts.
• Bendigo recommend that the MoneySmart unclaimed money
database be supplemented by the unclaimed money data held by
each State and Territory in order to create a single database. This
should then be managed by a single Government entity, such as
the ATO. This may enable the ATO to assist individuals in
locating their funds when they lodge a tax return.
• Bendigo recommends that a certain portion of the unclaimed
moneys revenue should be managed by an independent
investment board that can target investments that provide a
commercial return in Australian communities.
44
Regulation impact statement
Author Content
Submissions received from organisations
Customer Owned • COBA support the continuation of a required period of
Banking inactivity of three years, arguing that many of the subsequent
Association changes to notification requirements will mean that the majority
(COBA) of accounts transferred to ASIC in the future will be genuinely
unclaimed.
• COBA argue that as a result a change in the required period
would not have a noticeable impact on the number of accounts
transferred to ASIC, however it would make it harder to ADIs to
locate individuals with unclaimed accounts.
• In addition, COBA note that ADIs have already changed their
systems to comply with the current provisions, and that any
change will have an initial cost.
• If changes were to be made to the required period, COBA note
the need for a transitional period of at least a year.
• COBA support the linking of unclaimed accounts to growth in
the CPI to ensure their real value is maintained. The
Government, however, should ensure that the tax treatment of
unclaimed accounts
Financial Rights • The submission supports extending the required period of
Legal Centre inactivity to five years as they believe that this strikes the right
(FRLC) balance between protecting the value of consumers accounts and
ensuring that the funds are actually unclaimed.
• The FRLC submits that consumers must be notified in writing
prior to any unclaimed moneys being sent to ASIC.
• The FRLC does not believe that further accounts should be
exempted from the unclaimed moneys provisions.
• The FRLC argues that only a minimum of personal details
should be available publicly (that is, just their name) with further
known details kept privately by ASIC.
Financial Services • The FSC note that unclaimed life insurance policies in Australia
Council (FSC) can be divided into two types of business -- ordinary business
and superannuation business. The FSC note that each should
receive different treatment.
• The FSC recommends that the Government consult with the life
insurance industry to implement appropriate amendments to the
unclaimed moneys provisions to ensure that it reflects the variety
of products that it regulates.
• The FCS notes that superannuation business typically relates to
deferred annuity products. Unclaimed superannuation money
from superannuation funds and Retirement Savings Account
providers is paid to the ATO. The FSC recommend that funds
from life insurers 'superannuation business' should be
transferred to the ATO.
45
Banking Laws Amendment (Unclaimed Money) Bill 2015
Author Content
Submissions received from organisations
• The FSC recommends that the process for reuniting consumers
with their funds should be amended to allow either: ASIC to
make the payment directly to the fund holder once they become
aware of the account or the insurer should retain the funds and
simply report the 'lost policyholder' to ASIC for publication on
the register.
HSBC • HSBC support a required period of inactivity of five years
before accounts can be transferred to ASIC as it would reduce
the regulatory burden associated with the provisions.
• HSBC support the exclusion of Foreign Currency Accounts from
the Unclaimed Moneys Provisions
National Seniors • NSA supports a return to a required period of inactivity of
Australia (NSA) seven years as the observed increase in collections has not been
matched by the increase in claims.
• NSA suggests amending subsection 69(4) and 69(9) to amend the
level of personal detail published about an individual with
unclaimed money. This is as older Australian's are more prone to
victimisation and fraud. They support removing the ADI branch,
and the last known address fields from the requirement to be
published.
• The submissions suggest that the Government should establish a
phone line through MoneySmart to support enquiries on
unclaimed money or life insurance for older Australians who are
not online.
• NSA propose that the Government should implement a log-in
system similar to that available for locating lost superannuation
through the ATO to recover unclaimed accounts and life
insurance amounts.
Office of the • The OAIC recommend reducing the amount of personal
Australian information publicly available on the ASIC MoneySmart
Information website.
Commissioner
• The OAIC did not support the use of tax file numbers as a tool to
(OAIC)
reunite individuals with unclaimed accounts with their funds,
noting that this would require amendments to legislation and the
tax file number guidelines.
Submissions received from individuals
Steve Browning • Mr Browning states that the Provisions should include a
requirement that the financial institution write to the last known
address of the account holder before an unclaimed bank account
can be transferred to ASIC.
• Mr Browning believes that the Government should guarantee the
money for affected entities and pay interest at the rate of CPI.
46
Regulation impact statement
Author Content
Submissions received from organisations
• He suggests that it should be a legal requirement for all Estates
that a documented search of the unclaimed moneys register be
conducted before probate can be legally granted.
Leo Hammond • Mr Hammond suggests that the Government should abolish the
unclaimed moneys provisions.
Tim Holton • Mr Holton supports a return to a required period of inactivity of
seven years.
• Mr Holton suggests that the Government should establish a
checklist for ADIs to follow when attempting to make contact
with the owner, or relatives of the owners, of the unclaimed
moneys.
Donald Macansh • Mr Macansh suggests that the Government should establish a
checklist for ADIs to follow when attempting to make contact
with the owner, or relatives of the owners, of the unclaimed
moneys.
Peter Sutherland • Mr Sutherland argues that the provisions should include a
requirement that the financial institution write to the last known
address of the account holder before an unclaimed bank account
can be transferred to ASIC.
Preferred option
3.103 Option 2 (that is, extend the required period of inactivity to
seven years; exempt FCAs and children's accounts; introduce secrecy
provisions and cease the publication of the Gazette; and prevent
'identified' accounts from being transferred to ASIC) is the preferred
option. This is because:
• this Option will best address the main identified problem by
preventing up to 20,000 effectively active accounts (in real
terms) from being transferred to ASIC each year (reducing
the risk that Australians will be placed in a position of
financial hardship as a result of the provisions);
• by exempting FCAs and Children's accounts from the
provisions, Option 2 will align their treatment with the way
that these products are used by the community;
• the introduction of Secrecy Provisions and the cessation of
ASIC's Gazette will mitigate the risk of identity theft (a
concern of the Australian Information Commissioner) and
47
Banking Laws Amendment (Unclaimed Money) Bill 2015
work to prevent businesses from taking advantage of
Australian's with unclaimed accounts;
• this option's components were supported by the majority of
submissions received during the Government's consultation
in 2014; and
• it generates the largest ongoing compliance cost savings for
the community (approximately $36 million per annum).
3.104 In addition, while Option 2 does have the largest budget impact
of the options considered (as a result of the Government not collecting any
accounts for at least four years), this cost is temporary and does not
significantly alter the longer term trajectory of the budget's balance.
3.105 Finally, while Option 2 will require account holders to learn
about the new provisions and understand the steps that they can take to
prevent their accounts from being transferred, the Government and service
providers have a number of years to communicate this to the community
(for example, through the Money Smart website).
Non-preferred options
3.106 Option 1, to maintain the status quo, was not considered a viable
alternative to Option 2. Option 1 failed to address the underlying problem
of effectively active accounts being transferred to ASIC. While the
number of effectively active accounts may have diminished naturally over
time without change, as a result of account holders becoming more aware
of the provisions and the steps that they could take to avoid their accounts
being transferred, it is believed that this would have been insufficient to
offset the increase in accounts transferred since 2012.
3.107 Additionally, while Option 1 did have the advantage of not
requiring industry to make changes to their systems and not requiring
account holders to learn about a new set of provisions, there were also no
offsetting reductions in compliance costs for individuals or industry.
3.108 Option 3 was also not considered to be a viable alternative to
Option 2 for similar reasons. While it would have addressed the problem
of effectively active accounts being transferred to ASIC to an extent, the
evidence on account collections from 2012 onwards clearly indicates that
the required period of inactivity is the largest driver of account
collections. Option 3, therefore, if implemented, would have still required
industry to change their systems (though to a lesser extent that in
Option 2) and account holders to understand the changes made, but would
not have addressed the main problem or generated large regulatory
savings.
48
Regulation impact statement
3.109 Option 4 would have resolved both problems with the existing
provisions. However, it would have failed to meet the primary objective
of the provisions which is to protect the value of an account from being
eroded by bank fees and charges over time. Abolishing the provisions
would therefore likely result in a direct transfer of wealth from account
holders to their financial institution.
3.110 Option 4 was considered unacceptable in the context of the
government's efforts to improve the budget's position as it would
represent a structural reduction in non-tax revenue.
3.111 The Government did not elect to extend the required period of
inactivity to five years despite this being the preferred approach of HSBC,
Bendigo and Adelaide Bank, HSBC, and the Financial Rights Legal
Centre. This was because it was believed that changing the period of
inactivity to five years would result in higher adjustment costs for
consumers and industry as their systems would not align with either what
is currently in place, or what was in place prior to 2013.
3.112 In addition to helping to minimise adjustment costs for industry
and consumers, a seven year period of inactivity also better addresses the
problem of effectively active accounts being unnecessarily transferred to
ASIC. For example, assuming a linear relationship between the required
period of inactivity and the number of accounts transferred to ASIC, a
period of inactivity of five years would result in approximately 25 per cent
more accounts being transferred each year. While this would be an
improvement on the status quo, it would still represent a significant
regulatory burden on consumers and industry that would have had to
continue to reclaim effectively active accounts from ASIC. In contrast, the
chance of accounts remaining active after seven years of inactivity is
extremely low. This is reflected in the large regulatory savings associated
with the Government's preferred option.
Implementation and evaluation plan
Implementation plan
3.113 Option 2 will require legislative changes to the Banking Act and
the Life Insurance Act, and changes to the Banking Regulations 1966 and
Life Insurance Regulation 1995.
3.114 The Government contacted stakeholders directly while the
legislation was being initially drafted to ensure that there were no
significant gaps in the draft legislation.
49
Banking Laws Amendment (Unclaimed Money) Bill 2015
3.115 The Government subsequently released the draft Bill for four
weeks public consultation on the Treasury website and key stakeholders
(including those that made submissions on the Government's unclaimed
moneys discussion paper in 2014) were specifically invited to make
submissions.
3.116 Ensuring that the final Bill is introduced in mid-2015 will ensure
that industry has certainty about the forthcoming changes, allowing them
to make the required updates to their systems ahead of the new provisions
commencing on 31 December 2015. If the Bill's introduction was to be
delayed or substantially changed by Parliament, it would likely result in
higher implementation costs for industry as changes to IT systems and
internal processes would have to be completed on a more condensed
timeline.
3.117 No additional resources are required by the Government to
implement Option 2.
Evaluation plan
Transfer of accounts to ASIC
3.118 The Government's first opportunity to determine the
effectiveness of its changes to the unclaimed moneys provisions, in
relation to the transfer of effectively active accounts, will be in April
2019. The earliest date that accounts inactive for seven years will be
transferred to the Government is 31 March 2019. A measure of success
would be a significant (30 to 50 per cent) real decline in the number of
accounts transferred to ASIC. This should be judged against the
100 per cent increase in the number of accounts transferred to the
Government each year since the 2012 changes.
3.119 If there was not a significant reduction in account transfers, the
Government could undertake a post implementation review and consult
with banks and life insurers to identify any problems with the legislation
that may have resulted in its failure.
3.120 Industry has not voiced any concerns with the Government's
proposed approach that may indicate risks in meeting this objective in
2019.
Enhanced privacy protections
3.121 Determining whether the Government's changes to privacy
protections have been successful will be more difficult. There is an
absence of reputable data on the number of unclaimed accounts that have
been returned to account holders through a third party for a fee. As the
50
Regulation impact statement
Government was alerted to this problem by stakeholders (including the
ABA and NSA); and members of the public through direct
correspondence with the Government, the Government will monitor future
correspondence with these organisations to determine whether this
problem has been resolved. The Government will also maintain regular
contact with ASIC to try and monitor the existence (and use of) money
finding companies that reunite account holders with their funds for a fee.
3.122 Similarly to above, if the problem of account holders being
charged large fees to be reunited with their own funds continues, the
Government could undertake a post implementation review and consult
with banks, life insurers, and consumer groups, to identify any problems
with the existing legislation. The Government has not been alerted to the
existence of any risks to achieving its privacy objectives.
Appendix -- assumptions behind the regulatory costing
3.123 The following data and assumptions have been used to assist
Treasury in costing each of the options outlined in Section 3.
3.124 The ABA provided Treasury with the following estimates of
regulatory costs and savings associated with extending the required period
of inactivity (Table 15) under the unclaimed moneys provisions in its
submission to Treasury's discussion paper on the unclaimed moneys
provisions.
Table 15: ABA's estimates of regulatory costs and savings associated with
extending the required period of inactivity
Effect of policy change Regulatory cost/(saving)
Implementation costs (that is, the $50,000 -- $250,000 per institution or
costs associated with updating IT
$500,000 -- $1,000,000 per institution
systems, changing staff processes, or
(if the regulatory changes result in
a combination of the two) [this is a
systems being entirely rebuilt)
one off cost in year 1]
Savings due to having to transfer ($95,000) -- ($350,000) per institution
less accounts to ASIC [this is an
annual saving]
3.125 In order to complete our regulatory costing we have assumed
that there are:
• 70 small ADIs;
• 92 large ADIs; and
• 28 life insurance providers.
51
Banking Laws Amendment (Unclaimed Money) Bill 2015
3.126 This is based on the register of ADIs maintained by the
Australian Prudential Regulation Authority (APRA) and APRA's life
insurance statistics (as of March 2014).8 We assumed that all building
societies and credit unions were small, while the remainder of ADIs
operating in Australia were large.
3.127 We have assumed that the implementation costs provided to us
by the ABA will be towards the upper end of each estimate for large ADIs
and towards the lower end for smaller ADIs for the following reasons. We
believe that smaller ADIs are likely to transfer fewer accounts each year
than larger ADIs and consequently should be more likely to rely on
manual rather than IT processes to ensure compliance with the provisions.
Conversely, large ADIs, meanwhile, are conversely thought to be more
likely to invest in an automated process which would come at a larger
cost.
3.128 While each of these institutions must complete an annual
unclaimed moneys report, ASIC has advised that a large percentage of
ADIs do not transfer any accounts each year (this was the case for 90 out
of 162 institutions in 2013-14). Consequently, we have not calculated
savings associated with transferring fewer accounts, or having to reclaim
fewer accounts for the 70 small ADIs. Note, the costs of upgrading
systems and processes is still calculated for these entities as while they
may not have transferred accounts in any year, there remains the chance
that that they will in the future and at this point in time will have to
comply with Government policy.
3.129 This number is not higher as we have assumed it to be unlikely
that more than half of all ADIs will continue to not transfer any accounts
to ASIC on a perpetual basis. This assumption aligns with the submission
from COBA on the May discussion paper that noted that it was unlikely
that extending the required period of inactivity would generate savings for
their members (which are generally smaller ADIs).
3.130 The ABA's submission noted that larger banks (their members)
would likely see ongoing annual regulatory savings as a consequence of
this change.
8 APRA Life Insurance Statistics March 2014.
52
Regulation impact statement
3.131 In order to complete our regulatory costing we have also
estimated the number of account holders affected by the provisions each
year. We know that:
• funds from 39,964 accounts were transferred to ASIC in
2013-14;
• funds from 156,000 accounts were transferred to ASIC in
2012-13; and
• we have estimated that funds from 20,131 accounts were
transferred to ASIC in 2011-12.
3.132 Data is not available to indicate how many accounts were
transferred in 2011-12, as prior to 2012-13 ASIC did not collect data on a
financial year basis. However, by assuming a relatively constant average
balance we have been able to estimate the number of accounts affected in
2011-12.
3.133 This was calculated by determining the value of the
$146 million collected in 2013-14 in 2011-12 dollars. Assuming an
average discount rate of 2.5 per cent (long term average inflation) this was
equal to $138.96 million. The ratio between this value, and the actual
value collected in 2011-12 collection was then applied to the number of
accounts collected in 2013-14.
3.134 As accounts can only be reclaimed one at a time, not in bulk, we
have assumed that each affected account represents one individual, despite
the fact that some individuals may have multiple accounts transferred in
one year (for example, sub or linked accounts where each account must
satisfy the inactivity requirements).
3.135 In line with the Office of Best Practice Regulation's (OBPR's)
recommendations, we have assumed an hourly wage of $34.20 an hour
and a non-wage labour cost rate equal to 75 per cent of the total wage
cost. This brings the total assumed labour cost to $59.85 per hour. We
have assumed that the value of an individual's time is equal to $34.20 an
hour. We have not introduced wage-inflation into our costings. All values
are presented as real values in 2013-14.
3.136 This is likely to be a conservative estimate of the wages earned
by employees working for ADIs and life insurers. This is because the
average weekly ordinary time earnings for those employed in the finance
and insurance industry in March 2014 was $1665.30. This equates to
$43.82 an hour for a 38 hour week which is 22 per cent higher than the
OBPR's suggested wage. This conservatism works to somewhat offset
other errors that may enter our costings due to a lack of data on the
number and types of different accounts administered by ADIs. These
53
Banking Laws Amendment (Unclaimed Money) Bill 2015
wages have been used to generate costs using the Regulatory Burden
Framework in line with the costs provided to us by the ABA.
Note: We have a medium level of confidence in the magnitude of the
costs and savings provided; however, each component of this regulatory
costing has been estimated using only a limited amount of data.
54
Chapter 4
Statement of Compatibility with Human
Rights
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Banking Laws Amendment (Unclaimed Money) Bill 2015
4.1 This Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
4.1 The Bill amends the unclaimed moneys provisions in the
Banking Act 1959 (Banking Act) and the Life Insurance Act 1995 (Life
Insurance Act). The amendments include:
• extending the unclaimed moneys period from three years to
seven years for accounts held by authorised-deposit taking
institutions (ADI) and life insurance providers;
• exempting ADI accounts created for children and those that
are held in a foreign currency from the unclaimed moneys
provisions;
• stopping the transfer of ADI accounts to the Commonwealth
where an account holder provides notification that the
account should be treated as active after the account is
assessed as unclaimed moneys at the end of the calendar year
but before it is transferred to the Commonwealth;
• removing the requirement for the Australian Securities and
Investment Commission to publish details of unclaimed
moneys in the annual Unclaimed Moneys Gazette; and
• introducing secrecy provisions to prevent access to
information on unclaimed moneys via the Freedom of
Information Act 1982 (FOI Act).
55
Banking Laws Amendment (Unclaimed Money) Bill 2015
Human rights implications
4.2 The Bill engages the following human rights:
• the right of the child to have their best interests be a primary
consideration under Article 3(1) of the Convention on the
Rights of the Child;
• the right to the protection from arbitrary or unlawful
interference with privacy under Article 17 of the
International Covenant on Civil and Political Rights
(ICCPR); and
• the right to seek information under Article 19(2) of the
ICCPR.
Best interests of the child to be a primary consideration under Article 3(1)
of the Convention on the Rights of the Child (CRC)
4.3 Item 2 in Part 1 of Schedule 1 to this Bill provides that ADI
accounts created for children will be exempt from the unclaimed moneys
provisions. As a result, children's accounts will no longer have to be
transferred to the Commonwealth when they become inactive.
4.4 The exemption in this Bill will replace the current special
treatment for children's accounts under the Banking Regulations 1966
(Banking Regulations) which currently provides that children's accounts
are only transferred to the Commonwealth if they have been inactive for
seven years (instead of the regular three year period).
4.5 Exempting children's accounts from being transferred to the
Commonwealth is consistent with Article 3(1) of the Convention on the
Rights of the Child because it makes the best interest of the child the
primary consideration.
4.6 The exemption is in the best interest of children because it
ensures that they will always have access to their accounts even in cases
where the account has been inactive for a long period of time.
4.7 The exemption is also in the best interests of children because it
seeks to ensure that they do not have to go through lengthy processes to
reclaim their accounts.
4.8 In addition, children's accounts are generally established for
long periods so that money can be set aside in high-interest accounts for a
child to access on, for example, their eighteenth birthday.
56
Statement of Compatibility with Human Rights
4.9 Exempting these accounts from the unclaimed moneys
provisions is therefore in the best interest of children because the accounts
would otherwise be transferred to the Commonwealth and this may result
in some children losing out on the higher interest rates because the
accounts transferred to the Commonwealth only accrue interest at the rate
of the Consumer Price Index.
Right to the protection from arbitrary or unlawful interference with
privacy and the right seek information under Article 17 and 19 of the
ICCPR
4.10 Items 6 and 9 in Part 1 of Schedule 1 of the Bill establish new
secrecy provisions that prevent the disclosure of information relating to
unclaimed moneys in ADI and life insurance provider accounts.
4.11 Under the secrecy provisions, information on unclaimed moneys
in ADI accounts can only be disclosed if authorised by the Banking Act
and information on unclaimed moneys in life insurance accounts can only
be disclose if authorised by the Life Insurance Act.
4.12 The secrecy provisions apply in relation to the FOI Act as well,
ensuring that access to information on unclaimed moneys via freedom of
information requests is only available to the people to whom the
information relates (or their agent).
4.13 The secrecy provisions being introduced are consistent with the
right to protection against arbitrary and unlawful interference with privacy
and the right to freedom of expression under Articles 17 and 19 of the
ICCPR.
4.14 The introduction of the secrecy provisions is intended to
promote and protect the privacy of individuals with accounts that have
unclaimed moneys.
4.15 Information on unclaimed moneys has been used by business
groups to contact account holders offering to help reclaim unclaimed
moneys for a fee. Account holders may be disadvantaged by this because
they are able to reclaim the money from the Government directly with no
charge.
4.16 Stakeholder groups have also raised concerns that the public
disclosure of information on unclaimed moneys could lead to identity
theft.
4.17 The secrecy provisions therefore support Article 17 of the
ICCPR by protecting account holders from interference with their privacy.
57
Banking Laws Amendment (Unclaimed Money) Bill 2015
4.18 Limiting access to information about ADI and life insurance
provider accounts with unclaimed moneys restricts the public's right to
seek information under Article 19(2) of the ICCPR. However, this is
permitted under Article 19(3) of the ICCPR if the restrictions are intended
to protect the rights of others.
4.19 As such, the secrecy provisions being introduced into the
Banking Act and Life Insurance Act are consistent with the ICCPR
because the restriction of the public's right to seek information is a
consequence of strengthening the right of privacy of individuals who hold
accounts with unclaimed moneys.
Conclusion
4.20 The Bill is compatible with human rights as it seeks to put the
best interests of children first by exempting children's accounts from the
unclaimed moneys provisions and protects the privacy of account holders
by stopping the public disclosure of information on unclaimed moneys.
4.21 To the extent that the Bill restricts the public's right to seek
information, this is justified because it is a reasonable, necessary and
proportionate consequence of protecting the privacy of individuals who
have accounts consisting of unclaimed moneys.
58
Index
Schedule 1: Amendments
Bill reference Paragraph number
Item 1, subsection 69(1) 1.19
Item 2, subsection 69(1A) 1.20
Item 3, subsection 69(3) 1.21
Item 4, subsection 69(9) 1.22
Item 5, subsection 69(12) 1.23
Item 6, section 69A 1.24
Item 7, section 69AA 1.25
Item 8, subparagraph 69(15 )(c)(i) 2.10
Item 9, section 216A 2.11
Item 10, Schedule 3 of the FOI Act 1.27, 2.13
59
61