Australia is introducing significant reforms to the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act—intending to close gaps that have made Australia ‘dangerously vulnerable’ to exploitation from criminals and organised syndicates. These changes will bring the country in-line with international standards by expanding legal obligations for ‘tranche two’ entities, including lawyers, accountants, and real estate agents. (Coade, 2024)
With the risk of Australia being ‘grey-listed’ by the Financial Action Task Force (FATF)—leading to increased monitoring and economic impacts—business leaders need to ensure their organisations are compliant with the new regulations to avoid penalties and financial repercussions. (The Law Society of Western Australia, 2024)
Long-Awaited Reforms Enter Parliament in September 2024
According to Attorney-General Mark Dreyfus, in 2015 the Financial Action Task Force (FATF) found that Australia had failed to comply with various critical standards. In particular, the government had not extended the anti-money laundering and counter-terrorism financing regime to ‘tranche two’ entities, including lawyers, accountants, and real estate agents—making Australia among five out of 200 jurisdictions that did not regulate these ‘gatekeeper profession’ entities. (Coade, 2024)
Almost a decade later, on 11 September 2024—after two rounds of stakeholder consultation over 2023-24—the Attorney-General introduced the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Amendment Bill 2024 to Parliament. The official AUSTRAC update states that the Bill is ‘a significant step forward in protecting our community from financially enabled crime’. (AUSTRAC, 2024)
The Growing Threat of Money Laundering
Money laundering and terrorism financing are serious risks to the integrity of Australia’s financial system, and businesses involved in legal or financial activities must be vigilant. Criminals may exploit professionals—particularly in the legal sector—to legitimise illicit transactions. When legal teams fail to adequately assess the source of client funds, they risk unwitting involvement in criminal activities. This can result in severe consequences for businesses, including criminal charges, financial penalties, and reputational damage (Law Council of Australia, 2024).
Recent trends show an increase in organised crime groups targeting professionals to help launder money. The complexity of these schemes is growing, making it more important than ever for business leaders to ensure their legal teams are compliant with anti-money laundering (AML) obligations. Non-compliance can lead to significant legal and financial repercussions, putting both the business and its leadership at risk (Law Council of Australia, 2024).
How the Reforms Will Impact Businesses
While the timeline for the AML/CTF reforms is still being confirmed, it is essential that business leaders begin preparing their legal and financial teams now. The 2023 and 2024 consultations suggest that eight new designated services will be included under the revised legislation, which expands the scope of compliance significantly.
These new services include:
- Buying and selling property
- Managing trust accounts
- Forming companies, partnerships, and trusts
- Acting as nominee shareholders
- Providing registered office addresses
These reforms aim to reduce the risks of financial crime by ensuring businesses and legal professionals are aligned with international AML/CTF standards.
AUSTRAC CEO Brendan Thomas says that the current AML/CTF regime primarily targets financial institutions. “These obligations are based on a set of international standards enforced by a group called the Financial Action Task Force, the international body that sets money laundering standards,” Thomas explained. (Yang, 2024)
Regarding the impending changes for law firms, Thomas emphasised the importance of understanding clients and the risks they might present. “It’s really about putting controls around risk and not turning a blind eye to crime that might be in front of you,” he stated. (Yang, 2024).
As Australia strengthens its commitment to fighting money laundering and terrorism financing, it is crucial that organisations operating within these industries adapt their processes to meet these new obligations (Attorney General’s Department, 2024).
How to Prepare for Compliance
To prepare for the upcoming AML/CTF reforms, business leaders must take steps to ensure their teams are familiar with current reporting obligations. Solicitors, for example, are required to report all significant cash transactions of A$10,000 or more—or the foreign currency equivalent—to AUSTRAC via Solicitor Significant Cash Transaction Reports (SCTRs). Reporting deadlines vary depending on whether the transaction is in Australian or foreign currency, and failure to comply can result in severe penalties, including fines and imprisonment (AUSTRAC, 2023).
The Law Council of Australia has also released detailed guidance to help legal professionals manage the risks associated with money laundering and terrorism financing. These guidelines include steps for identifying and assessing risks, conducting client due diligence, and recognising red flags in transactions. Business leaders should ensure their legal and financial teams are thoroughly reviewing these resources and implementing appropriate measures to mitigate exposure to financial crime (The Law Society of Western Australia, 2024).
Staying Ahead of the Changes
Preparing your legal and financial teams for the AML/CTF changes is essential to avoiding the legal and reputational risks associated with non-compliance. By staying informed and implementing the necessary procedures, your business can protect itself from the potential fallout of these significant reforms.
With dedicated customer support and expertise in navigating complex regulatory changes, CV Check can provide sophisticated digital solutions to ensure your company stays compliant. Contact us to learn more.
References:
AML/CTF Amendment Bill introduced in Parliament. (September, 2024). AUSTRAC. https://www.austrac.gov.au/amlctf-amendment-bill-introduced-parliament
Anti-money laundering and counter-terrorism financing. (2024). The Law Society of Western Australia. https://lawsocietywa.asn.au/cpd-professional-support/professional-support/anti-money-laundering-and-counter-terrorism-financing/
Coade, M. Long overdue financial crime laws needed to close regulatory gap. September 2024. The Mandarin. https://www.themandarin.com.au/254453-long-overdue-financial-crime-laws-needed-to-close-regulatory-gap/
National legal profession anti-money laundering & counter-terrorism financing: Guidance note no. 1 – Why should I care about money laundering and terrorism financing? (June, 2024). Law Council of Australia. https://lawcouncil.au/files/pdf/policy-guideline/AML/AML-CTF%20-%20Guidance%20Note%201.pdf
Reforming Australia’s anti-money laundering and counter-terrorism financing regime [Consultation paper]. (September, 2024). Attorney General’s Department. https://consultations.ag.gov.au/crime/reforming-aml-ctf-financing-regime/
Reforming Australia’s anti-money laundering and counter-terrorism financing regime. (March, 2023). AUSTRAC. https://www.austrac.gov.au/business/your-industry/solicitors/solicitors-overview
Russ & Associates. Vulnerabilities analysis: Money laundering and terrorism financing – The Australian legal profession. (September, 2023). Law Council of Australia. https://lawcouncil.au/files/web-pdf/Vulnerabilities%20analysis%20-%20money%20laundering%20and%20terrorism%20financing%20-%20the%20Australian%20legal%20profession.pdf
Solicitors overview. (2024). AUSTRAC. https://www.austrac.gov.au/business/your-industry/solicitors/solicitors-overview
Yang. W. Lawyers among professional services to be affected by proposed reforms to anti-money laundering regime. (July 2024). LSJ Online. https://lsj.com.au/articles/lawyers-among-professional-services-to-be-affected-by-proposed-reforms-to-anti-money-laundering-regime/
