Reforms to Australia’s anti-money laundering and counter terrorism financing regime are coming. Here’s what you should know about how those reforms are progressing.
Money laundering is a serious crime. It attempts to obscure the criminal origins of funds by making those proceeds appear to have come from legitimate sources. Australia’s anti-money laundering and counter terrorism financing (AML/CTF) regime attempts to prevent money laundering, and in doing so, stop the flow of funds to serious crimes such as child abuse, illicit drug trade and terrorism.
In March 2022, the Senate’s Legal and Constitutional Affairs References Committee published its report on ‘The adequacy and efficacy of Australia’s AML/CTF regime’ (the Report). The Report describes the phased series of reforms to Australia’s AML/CTF as ‘tranches’.
Tranche 1 refers to the AML/CTF Act, while ‘tranche 2’ refers to AML/CTF regulatory obligations that would apply to designated non-financial business and professions, otherwise known as ‘gatekeeper professions,’ which includes the legal profession.
The Report indicated that delays to tranche 2 reforms exposed Australians and the Australian economy to harm and posed a risk to Australia’s credibility.
In April this year, the Attorney General’s Department (the Department) released its consultation paper, Modernising Australia’s anti-money laundering and counter terrorism financing regime. The consultation paper says the Department proposes to reform Australia’s AML/CTF regime to include lawyers, accounts conveyancers as well as trust and company service providers when they prepare or carry out certain transactions for clients. For example, the buying and selling of real estate, management of client securities, creating or operating legal arrangements (such as trusts) and the buying and selling of business entities.
The Law Society of New South Wales (Law Society) has worked closely with the Law Council of Australia (LCA) to draft a joint response to the Department’s consultation paper, advocating:
- striking a careful balance between mitigating anti-money laundering and or counter-terrorism financing AML/CTF risks and ensuring legal practices, particularly smaller practices, are not unduly burdened with compliance obligations
- that the reforms should be designed with the particular characteristics of the legal profession in mind, with a focus on the risks specific to our profession. Specifically, that tranche 2 should be designed from the premise of recognising existing risk mitigation practices that lawyers already undertake (for example, trust accounting procedures, practising certificate renewals and “know your client” obligations when conducting a conveyancing matter)
- that LPP and confidentiality should be preserved and suggested ways in which the regime can operate without compromising these fundamental aspects of our legal system
- the benefits of incorporating into the reforms a mechanism for deemed compliance – where segments of the profession (eg. sole practitioners) could rely on sector wide initiatives by constituent bodies (or regulators) which achieve the same outcomes as the AML/CTF obligations.
Meanwhile, the LCA has commissioned a vulnerability analysis of the NSW legal profession to be undertaken. It is anticipated that this analysis will identify areas of money laundering and terrorism financing residual risks within our profession and assist us to advocate for an AML/CTF regime that imposes minimal costs and regulatory burden on legal practices, particularly smaller practices.
The Law Society is acutely cognisant of the importance of readying the profession for the impending tranche 2 reforms affecting the legal profession. While ensuring these reforms are well-informed of the unique role of lawyers and the existing onerous obligations our profession has to our clients and as officers of the court, we are also striving to prepare lawyers for these imminent reforms.
To this end, the Law Society has been assisting the LCA re-draft its AML/CTF guidance to the legal profession. This nationally consistent guidance for the profession is expected to be published later this year.
Practitioners wishing to fortify their practice are encouraged to participate in continuing professional development courses offered by the Law Society on AML/CTF or contact the Law Society’s Professional Support Unit (PSU) if they have any specific questions.
PSU provides free and confidential support and guidance to legal practitioners regarding their obligations under NSW legal professional legislation, specifically in the areas of costs, ethics and regulatory compliance. Practitioners wanting to write to or speak to a PSU solicitor can do so using the contact information below:
Costs (02) 9926 0116 [email protected]
Ethics (02) 9926 0114 [email protected]
Regulatory Compliance (02) 9926 0115 [email protected]
