The long-running debate about when lawyers, accountants, real estate agents and other professional service providers will be regulated under anti-money laundering and counter-terrorism financing law has had another airing, with a parliamentary committee recommending that the government implement so-called “tranche 2” reforms, saying the reforms are “essential”.
The Senate Legal and Constitutional Affairs References Committee, chaired by Labor Senator Kim Carr, released its report on the adequacy of Australia’s AML/CTF regime at the end of last month, recommending that the government “accelerate its consultation with stakeholders on the timely implementation of tranche 2 reforms”.
Currently, AML/CTF rules apply to financial institutions, money remitters, digital currency exchanges, gambling service providers and gold bullion dealers.
In 2015, the Financial Action Task Force, the global AML/CTF watchdog, released a review of the Australian regime, which included the observation that one of its shortcomings was that "professional groups did not demonstrate an adequate understanding of their AML/CTF risks or have measures to mitigate them effectively".
In 2016, the then Minister for Justice Michael Keenan released The Statutory Review of the Anti-Money Laundering and Counter-Terrorism Financing Act. One of its recommendations was that the regime be extended to cover other services that pose AML/CTF risk.
It said these might include new payment types (such as digital currencies) and professional services provided by lawyers, accountants and real estate agents.
Later the same year, the Attorney-General’s Department issued a plan for “a program of work with industry” with a number of “priority projects” for AML/CTF. One of those was to work with industry on how to extend the regime to cover other services that pose AML/CTF risk, including professional services. That aspect of the program of work appears not to have progressed.
Changes have been made to the AML/CTF regime over the years, most recently at the end of 2020, but the designated professions remain outside the reach of the law.
The Senate committee report said there was widespread support for the extension of the regime to tranche 2 entities from parties outside those sectors, based on a view that Australia is an attractive destination for transnational organised crime groups and its AML/CTF regime has a big gap.
Some pointed out that Australia is one of only a small number of FATF member countries that have not expanded their AML/CTF laws to cover lawyers, accountants and others.
The Australian Banking Association said that as a result of FATF rating Australia non-compliant in this area, Australian banks seeking international credit are required to provide additional information to satisfy investors that the country’s banking system is secure.
The committee said the failure to regulate tranche 2 entities “leaves a gap in the ability of law enforcement agencies to disrupt the activities of those seeking to profit from crime.”
“The committee consider implementation of tranche 2 reforms essential. The Commonwealth government committed to FATF long ago and has repeatedly voiced its commitment to implementing tranche 2 reforms.”