Australia is strengthening its financial crime defences by implementing significant modifications to its Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) laws. These revisions will subject more enterprises, known as “Tranche 2 entities”, to AML/CTF regulations. The new AML/CTF rules will affect Tranche 2 entities such as lawyers, accountants, trust and company service providers, real estate agents, and precious metals and stone dealers.
AML/CTF Risks for Lawyers
Criminal actors can exploit the services provided by lawyers to:
- Conceal the proceeds of crime
- Keep assets out of reach to prevent future liabilities
- Hide beneficial ownership behind complicated layers and legal company arrangements
- Evade regulatory controls
- Add a sheen of legality to illicit behaviour
- Maintain control over criminally derived assets
- Avoid detecting and confiscating assets
- Evade taxes and use established tax shelters
- Impede law enforcement investigations
AUSTRAC Reporting Requirements for Lawyers
Businesses that provide ‘designated services’ under the current law, are regulated regardless of how they brand their business and are considered as ‘reporting entities’.
Designated services offered by Lawyers
- Preparing for or executing transactions to buy, sell or transfer property
- Preparing for or executing transactions to buy, sell or transfer legal entities
- Receiving, holding and managing funds, accounts, securities, digital assets or property
- Preparing or executing transactions for the establishment, operation or management of legal entities
- The formation, establishment, operation or management of a legal entity on behalf of an individual
- Acting as a director, secretary or power of attorney for a legal body
- Business partners, trustees of explicit trusts and other comparable positions
- Serving as a nominee shareholder
- Providing a register office address, major place of business address, correspondence address or administrative location for a corporation, partnership or any other legal entity
Tranche 2 AML Compliance for Lawyers
The AML/CTF reforms will impact lawyers by bringing them under the AML/CTF regime. This means that they will be required to:
- Enrol with AUSTRAC
- Develop and maintain an AML/CTF program
- Conduct Customer Due Diligence
- Conduct ongoing Customer Due Diligence
- Report certain transactions and suspicious activity
- Keep records
These reforms are intended to address the fact that criminals exploit the services of lawyers and other professionals to launder money and finance terrorism. The reforms aim to make it more difficult for criminals to misuse the services of lawyers and other professionals and make the Australian financial system less vulnerable to financial crime.
Summary
The Tranche 2 Reforms seek to address the fact that criminals use the services of lawyers and other professions to launder money and fund terrorism. The measures aim to make it more difficult for criminals to exploit the services of lawyers and other professionals, as well as to reduce the vulnerability of the Australian financial system to financial crime
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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