Australia needs to expand AML/CTF laws to lawyers, accountants, trust and company service providers and high-value goods dealers

On 20th April 2023, the Attorney General’s Department (AGD) issued its long-awaited consultation paper seeking comments on simplifying and modernising the AML/CTF Act; expanding the laws to new gatekeeper professions and other sectors, and other matters.

Australia has a terrible track record of failure to prevent money laundering and tax evasion. 

In 2015, the FATF mutual evaluation report on Australia heavily criticised the Australian Government for its failure to expand AML/CTF laws to gatekeeper professions. Then on 26 April 2016 the Australian Government published its own Statutory Review of the AML/CTF Act and committed to implementing 84 recommendations (most of which remain unactioned), including expanding AML/CTF laws to gatekeeper professions. In March 2022, following a year-long Parliamentary Inquiry into the adequacy and efficacy of Australia’s AML/CTF laws, the findings report included an entire chapter dedicated to expanding AML/CTF laws to gatekeeper professions, which was widely supported (apart from industry groups who continue to argue that Australia is somehow different to the 195 countries that have already implemented these reforms).

Against this domestic context, internationally, there are many countries that have been grey-listed by the FATF for being far less recalcitrant than the Australian Government is, despite numerous reports, reviews and inquiries all recommending the same reforms. It seems incredulous and a waste of taxpayer funds for there to be another year of consultation, when what needs to happen to bring Australia into line with international standards is crystal clear to most, but the phrase “none blinder than those who do not want to see” could not be more apt. And there is a lot to see…

It is long overdue for the Australian Government to expand AML/CTF laws to lawyers and conveyancers, accountants and bookkeepers, real estate professionals, trust and company service providers and high-value goods dealers which is notably absent from being included in the AGD’s consultation paper which was surprising as there is irrefutable evidence that organised criminals launder criminal proceeds through luxury car dealers, boat dealers, art and antiquities dealers and luxury goods dealers and should not be excluded from the planned reforms. (Read our article about how Australia’s proposed Tranche 2 laws fail to regulate the high-valued goods sector here)

Despite such a long history of inaction by the Attorney General’s Department in a context of wide-spread money laundering through Australian businesses, reported by the Australian Institute of Criminology to cost the Australian economy AUD$60.1 billion a year, it is clearly time to stop the pretence of action and act. 

In our submission to the Attorney-General’s Department, Anthony Quinn, CEO & Founder, strongly recommended the services of lawyers and conveyancers, accountants and bookkeepers, trust and company service providers and high-value goods dealers that must be regulated under the AML/CTF Act to include:

Lawyers and conveyancers

These are the services offered by lawyers and conveyancers that must be included as designated services under AML/CTF Act are:

• Acting as a formation agent of legal persons or legal arrangements
• Acting as, or arranging for a person to act as, a nominee director or nominee shareholder or trustee in relation to legal persons or legal arrangements.
• Providing a registered office or a business address, a correspondence address, or an administrative address for a company, or a partnership, or for any other legal person or arrangement.
• Managing client funds (other than sums paid as fees for professional services), accounts, securities, or other assets.
• Engaging in a transaction on behalf of any person in relation to the buying, transferring, or selling of a business or legal person (for example, a company) and any other legal arrangement.
• Engaging in a transaction on behalf of a customer in relation to creating, operating, and managing a legal person (for example, a company) and any other legal arrangement.
• Engaging in or giving instructions on behalf of a customer to another person for any conveyancing to affect the grant, sale, or purchase or any other disposal or acquisition of real estate or an interest in land.
• The transfer of a beneficial interest in land or other real property.
  

Accountants and bookkeepers

These are the services offered by accountants and bookkeepers that must be included as designated services under AML/CTF Act are:

• Acting as a formation agent of legal persons or legal arrangements
• Acting as, or arranging for a person to act as, a nominee director or nominee shareholder or trustee in relation to legal persons or legal arrangements.
• Providing a registered office or a business address, a correspondence address, or an administrative address for a company, or a partnership, or for any other legal person or arrangement
• Managing client funds (other than sums paid as fees for professional services), accounts, securities, or other assets.
• Engaging in a transaction on behalf of any person in relation to the buying, transferring, or selling of a business or legal person (for example, a company) and any other legal arrangement
• Engaging in a transaction on behalf of a customer in relation to creating, operating, and managing a legal person (for example, a company) and any other legal arrangement 

Trust and company service providers

• Company Formation Services – Acting as a formation agent of legal persons or arrangements.
• Company Management Services – Engaging in or giving instructions in relation to transactions for customers related to creating, operating, and managing companies.
• Legal Entity Address Services – Providing a registered office or a business address, a correspondence address, or an administrative address for a company, a partnership, or any other legal person or arrangement.
• Nominee Services – Acting as, or arranging for a person to act as, a nominee director or nominee shareholder or trustee in relation to legal persons or arrangements.
• Transaction Services – Engaging in or giving instructions in relation to transactions on behalf of any person in relation to the buying or selling of real estate or businesses.

The following also re-iterates how these industry sectors can be exploited by organised criminal networks to commit money laundering offences.

Lawyers and conveyancers – ML/TF risks in services they provide.

The money laundering and terrorism financing (ML/TF) risks associated with lawyers and conveyancers include (but are not limited to):

• Lawyers and conveyancers may be hired by individuals or businesses involved in money laundering to provide professional services such as legal advice on establishing entities and how to possibly circumvent AML/CTF laws.
• Lawyers and conveyancers could be asked to facilitate transactions that involve large amounts of money, often through complex financial arrangements. Such transactions could be designed to disguise the illegal source of the funds and to make them appear legitimate.
• Lawyers and conveyancers may also be at risk if they fail to conduct adequate due diligence on their clients or if they ignore suspicious transactions.
• Lawyers and conveyancers may also be at risk of being tempted by the prospect of personal gain from money laundering activities, for example, a lawyer may be offered a bribe to ignore suspicious activity or to help launder money.
• Lawyers and conveyancers are bound by strict client confidentiality rules, which can make it difficult to identify suspicious activity or report potential money laundering.
• Lawyers and conveyancers often have long-standing relationships with clients, and clients may trust their lawyers with sensitive financial information. This trust can be abused by criminals who may use lawyers to conceal their illicit activities.
• Lawyers and conveyancers may not have adequate training or knowledge to identify money laundering risks, particularly in areas such as international finance and complex corporate structures.
• Lawyers and conveyancers may be involved in cross-border transactions, which can increase the risk of money laundering due to differences in laws and regulations across jurisdictions.
• Criminals may seek out lawyers and conveyancers as gatekeepers to the financial system creating an impression of respectability and legitimacy.
• Criminals may misuse lawyers’ trust accounts for deposits or international wire transfers to avoid detection.
• Criminals may seek the assistance of lawyers to establish companies or trusts which they use to obscure who really owns or controls the funds and assets, therefore avoiding the detection and confiscation of assets, and hindering law enforcement investigations.

Accountants and bookkeepers – ML/TF risks in services they provide.

The money laundering and terrorism financing (ML/TF) risks associated with Accountants and Bookkeepers includes (but is not limited to):

• Accountants and bookkeepers may be hired by individuals or businesses involved in money laundering to provide professional services such as bookkeeping, accounting, tax planning, or financial advisory.
• Accountants and bookkeepers could be asked to facilitate transactions that involve large amounts of money, often through complex financial arrangements. Such transactions could be designed to disguise the illegal source of the funds and to make them appear legitimate.
• Accountants may also be at risk if they fail to conduct adequate due diligence on their clients or if they ignore suspicious transactions. 

Accountants may also be at risk of being tempted by the prospect of personal gain from money laundering activities, for example, an accountant may be offered a bribe to ignore suspicious activity or to help launder money.

• Criminals may seek out accountants and bookkeepers as gatekeepers to the financial system creating an impression of respectability and legitimacy.
• Criminals may misuse accountants’ trust accounts for deposits or international wire transfers to avoid detection.
• Criminals may seek the assistance of accountants to establish companies or trusts which they use to obscure who really owns or controls the funds and assets.

Trust and company service providers – ML/TF risks in services they provide

The money laundering and terrorism financing (ML/TF) risks associated with trust and company service providers includes (but is not limited to):

• Trust and company service providers may be used by individuals or businesses involved in money laundering to establish corporate entities with the objective of creating complex legal entity structures purposefully designed to obscure the ultimate beneficial ownership.
• Trust and company service providers could be asked to facilitate transactions that involve large amounts of money, often through complex financial arrangements. Such transactions could be designed to disguise the illegal source of the funds and to make them appear respectable and legitimate.
• Trust and company service providers may also be at risk if they fail to conduct adequate due diligence on their clients or if they ignore suspicious transactions.
• Trust and company service providers could be engaged in the movement of funds therefore avoiding the detection and confiscation of assets, and hindering law enforcement investigations. 

Read Arctic Intelligence‘s full submission to the Attorney-General’s Department here.

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