Regulators and peak industry bodies discuss upcoming AML/CTF reforms and how they’ll affect the profession

The session, titled ‘Australia’s New Anti-Money Laundering/Counter-Terrorism Financing Regime: Implications for the Legal Profession,’ heard from Brendan Thomas, CEO of AUSTRAC, Juliana Warner, immediate past president of the Law Council of Australia and chair of its AML/CTF Working Group, Catherine Gleeson SC, member of the NSW Bar Association Executive, LCA director and member of its AML/CTF Working Group, and Bobbie Wan, Head of Regulatory Policy and Strategy at the Law Society of NSW.

Thomas commenced by touching on the areas practitioners need to know to help prepare. “[M]y aim is to equip you with some practical knowledge and context needed to prepare for and thrive under this new regulatory landscape,” he said.

He explained the key objectives of the AML/CTF legislation and how the regime has grown to address transformations in technology, business practices and the arrival of new risks. He acknowledged the difficulties in disrupting money laundering are not exclusive to Australia.

“Lawful domestic financial channels remain fundamentally important pathways for money launderers to place … and integrate funds domestically and internationally.

“Our stable political system, our open and free economy, our independent legal system … and our strong real estate market make Australia a great place to do business. But these features also make Australia an attractive destination to store and integrate criminal proceeds into our financial system,” he told the audience.

Thomas outlined the different ways criminals launder money and how criminal methodologies have evolved in sophistication. He pointed out that the government has identified these vulnerabilities and, through these reforms, sought to align their national framework with global and international standards.

Warner outlined the four essential components to comprehending the AML/CTF regime: the Anti-Money Laundering and Counter Terrorism Financing Amendment Act 2024 (Cth), the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (the Rules), AUSTRAC guidance (including its Reforms Guidance), and the recently released AUSTRAC Program Starter Kits. “[N]ot all of it will apply to you but you will need to do a whole lot of work to get across it and it’s really important … the guidance and the starter kits are critical for reasons that will become obvious …

“One of the upsides of being a later adopter of the AML/CTF regime is that we can avoid some of the debacles that have happened in implementation in other countries and giving assistance to the profession is vitally important there,” she said.

Warner referred to section 6 of the AML/CTF Act, which sets out what constitutes a ‘designated service’ in the context of certain industries, and who the ‘customer’ of the service is. She noted that it is “somewhat unclear”, saying some of the words used in the items are open to “an extremely wide interpretation which – if applied – would catch activities with no or negligible ML/TF risk”. Given the use of these broad terms, familiarity with the AUSTRAC guidance is crucial.

Warner explained that while some of the legal services are covered, others are not, and the first step for legal practitioners will be to consider the legal services they provide and ascertain whether those services may be ‘designated services’ in the context in which they are provided. While the Reform Guidance provides basic examples, Warner called for “more sector-specific guidance.”

Thomas outlined the various resources available to support legal practitioners, especially the Starter Kits, which he described as a ‘world first’.  “These initiatives are designed to ensure that legal professionals, regardless of the firm size or practice area, can access the tools and the knowledge needed to comply, to manage your risks and to contribute to the national effort against financial crime,” he says.

Bobbie Wan, from the Law Society of NSW, spoke about the obligations of legal practitioners under the AML/CTF regime and the privacy legislation. “What we and the Law Council have been particularly concerned about is that many small practices are likely to find themselves needing to be compliant with not just one, but two new regulatory regimes in a very short space of time if they provide a designated service as defined by the AML Act,” she said.

“Put another way, you can assume that, if you come under the AML Act, you will also have obligations under the Privacy Act.”

She noted that the Law Society had been concerned about how the Privacy Act and the amended AML legislation “could potentially pull practitioners in two different directions if the regulators did not come together to provide joint guidance to practitioners.”

Fortunately, the two regulators have worked together to assist with compliance. Wan observed that the Privacy Act does not prevent legal practitioners from complying with their AML obligations, but they will need to navigate their obligations cautiously. She said that firms will need to develop a privacy policy and collection notice, and take ‘reasonable steps’ to keep information secure. She noted that the Office of the Australian Information Commissioner should be releasing guidance on these obligations soon. (This has since been released and is available here)

The Law Council is currently developing rule changes to the Australian Solicitors’ Conduct Rules to ensure solicitors provide advance disclosure to potential clients about their AML/CTF obligations, and the possibility that may need to cease to act in a matter after lodging a suspicious matter report with AUSTRAC. According to Warner, the changes are critical.

“[The] Law Council, and all the State Bar and Law Societies are of the view that you cannot continue to act for a client once you have dobbed them into the regulator because it’s just completely inconsistent with a whole suite of our obligations and duties,” she said.

Public consultation on changing the Rules will commence soon.