Australian Government begins consultation on AML reforms
According to law firm Gilbert & Tobin, deficiencies in the federal Anti-money Laundering and Counter-terrorism Financing Act 2006 have been known since at least 2015, when the Financial Action Task Force (FATF) gave Australia a poor mutual evaluation assessment. This was followed in 2016 by a statutory review recommending reforms to the regime. In April 2022, Australia's Senate Legal and Constitutional Affairs Committee published a further report asking the federal government to immediately extend AML legislation to cover designated non-financial businesses and professions (DNFBPs). It noted that Australia was one of only three countries that have committed to FATF compliance but do not regulate DNFBPs.
The new government, elected in 2022, has now announced it intends to progress all the reforms recommended by the senate committee. The consultation is being managed by the Attorney-General's office under Mark Dreyfus, who says the 'significant regulatory gaps and vulnerabilities' in Australia's AML regime have made it ‘an increasingly attractive destination for laundering illicit funds’ through the use of professional services.
Lawyers, accountants, trust and company service providers, real estate agents and dealers in precious metals and jewels are the principal risks, said Dreyfus. 'Since 2015, Australia has failed to comply with 16 out of 40 FATF Standards, including extending the AML/CTF regime to tranche-two [DNFBP] entities', he commented. Australia is now one of only five jurisdictions out of more than 200 that do not regulate tranche-two entities, he said. 'As a result, Australia now risks being “grey-listed” by the FATF, which could result in significant harm to our economy.'
Australia is due for another FATF mutual evaluation in 2024 or 2025, said Gilbert & Tobin. It says the reforms will require lawyers to conduct customer due-diligence and transaction monitoring in certain high-risk scenarios such as holding client money on trust. It adds that some legal industry groups have already raised concerns around how this will impact ethical duties and professional standards.
The consultation paper released on 20 April 2023 is the first of two on the proposed reforms. Submissions will close on 16 June 2023.
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