Will the government finally act on money-laundering laws promised 17 years ago, or once again be thwarted by lobbyists for lawyers, accountants and property developers? With Madagascar, China and Haiti, Australia is a global laggard. Callum Foote reports.
Mark Dreyfus’s attorney general’s department is hard at work consulting with accountants, lawyers and real estate agents on how to introduce anti-money laundering regulations which have been in the wings for over a decade.
We have seen it before, year after year, government after government. “We are in discussions with stakeholders,” has been the official refrain for more than a decade. The first tranche of the AML-CTF laws (anti money laundering, counter terrorism financing) was passed in 2006.
The second tranche, covering property, lawyers and accountants, has been delayed 17 years, as property prices have doubled, in part because of foreign ‘black money’ , mostly from China flowing into Australian real estate.
Will we finally see real action? Mark Dreyfus’ Attorney-General’s department is conducting round-table discussions with industries expected to be covered by the new anti-money laundering regulations.
While the guest list for these roundtables hasn’t been released, a spokesperson from the department told MWM that it included “national peak bodies of affected sectors and bilateral engagements with industry members and government stakeholders.”
(Read Australian Property Council, Law Council of Australia and Chartered Accountants Australia and New Zealand). The industries expected to be covered under the new regulations are lawyers, accountants and the real estate industry.
Global laggards
Australia, alongside Haiti, Madagascar and China are the only holdouts for introducing the Financial Action Task Force’s recommended anti-money laundering and counter-terrorism financing regulations.
Following a consultation paper expected to be released next month, the department will go back to the industry’s peak bodies before finally delivering its advice to the government.
The A-G has declined to provide a timetable for this advice, or when Australians can expect these new regulations to take place. (Canada, where Chinese money-flows had put property prices into orbit, moved years ago.)
According to anti-money laundering expert Nathan Lynch:
“The Attorney General’s Department, which is responsible for drafting the reforms, is looking to include a 12 or 18-month transition period in its Tranche 2 Bill. This would allow Australia to have laws in place for Designated Non-Financial Business and Professions (DNFBPs) before the Financial Action Task Force (FATF)‘s fifth-round mutual evaluation visit, which is expected in 2026.”
The Law Council of Australia alongside the Real Estate Institute of Australia have been vocal critics of introducing the new regulations.
According to Clancy Moore, CEO of Transparency International Australia, “Everyone has the right to participate in the policy-making process and we know the real-estate lobby and, to a lesser extent, the law council has been opposed to stronger anti-money laundering laws, transparency and due diligence on their customers.”
Lawyers protecting their (money-laundering) patch
The Law Council of Australia has been a persistent opponent of the reforms. In a 2021 submission to the Senate, the Law Council wrote that “to the extent that the AML/CTF [anti-money-laundering and counter-terrorism financing] regime would impose more onerous obligations to those that currently apply to the Australian legal profession, those obligations would impermissibly undermine fundamental tenets of the law, such as legal professional privilege and confidentiality.”
because lawyers legally cannot do anything illegal.
Former president of the Council Dr Jacoba Brasch that because lawyers legally cannot do anything illegal, there was no cause for additional regulation.
“As lawyers, we cannot further unlawful purposes. We cannot give advice to do things unlawfully or illegally. Indeed, that’s the first part of the oath or affirmation we take. Our second duty is to our client. Our first duty is to the courts and the proper and lawful administration of justice.”
This year, while not dropping their opposition, the Law Council has accepted the new regulations are inevitable “Tranche 2, we understand, will be legislated” a submission to the Attorney-General’s department reads.
Real estate agents and the real estate crisis
The real estate lobby has been fighting tooth and nail to stop the reforms from being implemented – in spite of the fact that black money pushes property prices higher and there is a housing affordability crisis.
This year REIA President, Mr Hayden Groves said that “The Australian Government’s response to the inquiry into the efficacy of Australia’s AML/CTF regime would do nothing for Australian consumers and a comprehensive cost-benefit analysis to support the proposal must be undertaken.”
In recent years, Australia has experienced a massive surge in illicit funds flowing into its real estate sector. The AFP arrested nine people in February and obtained restraining orders over more than 20 properties in Sydney, worth $150m relating to an international money laundering operation.
According to Groves “As if buying a house is not as challenging enough in Australia in 2023, the government wants it to be even more difficult and more expensive for both home buyers and sellers”
Accountability for accountants
Of the three major industries to be covered in Tranche 2, accounting bodies appeared to accept Tranche 2 as inevitable and accepted the need for this expansion.
Instead of arguing, as the Law Council did, against implementing Tranche 2, the Institute of Public Accountants (IPA) accepted as early as 2021 that “AML-CTF legislation is critical.”
“From our perspective, we thought it would happen sooner or later” IPA policy lead Vicki Stylianou told the senate.
I would hope the Big 4.
According to Moore “There’s also strong support from law firms, banks, and I would hope the Big 4 accounting firms for greater integrity in our AML/CTF laws as greater customer due diligence and reporting of suspicious transactions stops criminal activity and the corrupting influence of dirty money in our broader economy.”
“We look forward to the government following through on the long overdue commitment on Tranche 2 reforms later this year.”
Milan Cooper, CEO at FirstAML, an anti-money laundering compliance provider, does not expect that the government will institute regulations that differ greatly from FATF recommended guidelines.
“My guess is as good as anyone’s, but I think Australia will adopt legislation in this area which will be broadly in line with its peers on the international stage like New Zealand and United Kingdom and Canada who have adopted similar legislation.”
The Attorney General’s department says that the government will “consider the department’s advice following the conclusion of consultations.”
Meanwhile, we wait for Godot.
Australia on watch-list as China billions pour into property
Callum Foote was a reporter for Michael West Media for four years.