The Australian government is broadening its Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) framework to include “Tranche 2 entities”, including accounting firms.
Money Laundering Risks for Accountants
The accounting profession is a prominent target for money launderers due to its access to customer finances and ability to facilitate transactions. By incorporating accountants into the AML/CTF system, Australia seeks to:
- Prevent, detect and disrupt money laundering and terrorism financing
- Align with the global standards established by the Financial Action Task Force (FATF)
- Protect the Australian economy from criminal exploitation
These steps are designed to give accountants the tools they need to spot suspicious activity and prevent criminals from misusing their services.
Services Covered Under the Tranche 2 Reforms
The new system covers high-risk services offered by accountants, including:
- Customer funds are held in the firm’s trust account, excluding accountant fees
- Managing customer bank accounts and making payments on their behalf
- Managing and banking consumer cash withdrawals
- Creating or managing legal entities for customers
These operations exert enormous power over customers’ finances, making them open to exploitation. Accountants who offer these recognised services must take on AML/CTF duties for their customers.
Services Not Covered Under the Reforms
The new rules do not apply to the following accounting services:
- Advisory work on directors’ responsibilities and employment laws
- Business entities benefit from centralised legal and finance divisions
- In-house services entail the accountant and the customer being the same company
- Individual accountants manage their own finances
The underlying principle is that the individual who buys a specific service cannot also provide it.
Tranche 2 AML Compliance for Accountants
Accountants must take proactive actions to meet the new criteria.
- Enrol with AUSTRAC: Accountants who perform designated services must register with AUSTRAC.
- Develop an AML/CTF program: Create a risk-based program that considers consumer types, services offered and geographic reach.
- Conduct Customer Due Diligence (CDD): Confirm customer identities, assess business relationships and understand transaction objectives.
- Conduct Ongoing CDD: Constantly monitor customer conduct to ensure that transactions are consistent with your knowledge of their organisation and risk profile.
- Report Suspicious Activity: As required by law, any suspicious transactions or activity should be reported to AUSTRAC.
- Keep detailed records of CDD checks, transaction reports, and other relevant AML/CTF documents.
Summary
The accounting profession is an appealing target for money launderers because of its access to customer finances and capacity to arrange transactions. Accountants may help prevent financial crime and defend the integrity of the financial system by adhering to these processes and building a solid AML/CTF program, all while maintaining their professional reputation.
FAQs
What is the Tranche 2 Reforms?
The Tranche 2 Reforms are a package of proposed legislative changes aimed at widening the scope of Australia’s Anti-Money Laundering and Counter-Terrorism Financing laws to include more enterprises and occupations.
Which industries will be impacted by the Tranche 2 Reforms?
The Tranche 2 Reforms will affect real estate agents, precious metals dealers, lawyers, trust and company service providers and accountants.
When will the Tranche 2 Reforms take effect?
The actual timeline for implementing the Tranche 2 Reforms is determined by the legislative procedure. Stakeholders should monitor announcements from appropriate government authorities, such as the Australian Transaction Reports and Analysis Centre (AUSTRAC), for dates and transitional periods following the Act’s passage.
Why are the Tranche 2 Reforms necessary?
The Tranche 2 Reforms must align with global standards established by the Financial Action Task Force (FATF), which recommends that countries regulate DNFBPs within their AML/CTF frameworks and strengthen Australia’s ability to detect, prevent, and combat money laundering and terrorism financing activities.
What steps should regulated entities take to comply with the Tranche 2 Reforms?
Regulated entities must conduct thorough risk assessments, develop and implement strong AML/CTF programs, ensure that employees receive adequate training on AML/CTF obligations and the entity’s compliance program and establish systems for reporting suspicious activity and maintaining records in accordance with regulatory requirements.
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