The revelations about Chinese asset recovery agents operating covertly in Australia will put pressure on the Department of Home Affairs to introduce law reforms ahead of the May general election. The government is sitting on "Phase 1.5" legislation that will prepare Australia for the introduction of the long-awaited Tranche 2 AML/CTF law This transitional legislation is understood to have been shelved late last year amid a gridlocked federal parliament.The federal government will be under pressure to be seen to act, however, before the arrival of the Financial Action Task Force (FATF) for an assessment visit later this year. The international standard setter will want to see evidence Australia has acted upon the weaknesses set out in its 2015 mutual evaluation report. Chief among these was the failure to regulate lawyers, accountants and real estate agents.Late last year the AFP's Criminal Assets Confiscation Taskforce seized more than A$15 million in real estate, jewellery, wine and assets that are suspected to have been bought with the proceeds of crimes perpetrated in China, including investment fraud.AML practitioners said it was unsurprising that the assets in the AFP's recent seizures all sit outside the Australian AML regime. The seizures demonstrated the importance of extending the country's AML regime to include "tranche two" entities, they said.Neil Jeans, an AML consultant with Initialism, said the role of designated non-financial businesses and professions (DNFBPs) in complex money laundering schemes had been well understood and accepted in Australia for two decades."The regulation and supervision of DNFBPs is a fundamental requirement of the FATF, which sets the international standards for AML/CTF," he said."Australia, despite warnings from the FATF and government reports highlighting the failure to bring lawyers, accountants and real estate agents into the AML/CTF regime, has been slow to act. This represents a significant hole in Australia's AML/CTF regime, which we know domestic and international criminals are exploiting."The Tranche 2 laws have been on the drawing board in Australia for more than 12 years, despite having bipartisan support. The federal government had committed to pass laws to capture DNFBPs by 2018, following the critical report from the FATF in 2015. Australia had fallen well behind in its international obligations to protect the country's economy from criminal abuse, the report said.The "phase 1.5" stepping-stone legislation has been drafted jointly by the Department of Home Affairs, the Attorney-General's Department (AGD) and with input from the Australian Transaction Reports and Analysis Centre (AUSTRAC).A Home Affairs spokesman said there was no fixed timetable for the Phase 1.5 laws, which will be tabled "subject to the parliamentary schedule".The next stage will be to work on "the process of simplifying and streamlining Australia's AML/CTF regime and to improve compliance with the international standards set by the FATF.""The government is considering options to extend AML/CTF regulation to 'tranche 2' entities, such as lawyers, accountants and real estate agents," the spokesman said.This reform would be crucial for Australia to have any hope of turning back the tide of dirty money, said Bill Majcher, an AML