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World pressure ramps up, Australia finally moves on money laundering by lawyers, accountants and the property lobby

by Nathan Lynch | Apr 12, 2023 | Economy & Markets, Latest Posts

After 16 years governments dithering, Attorney-General Mark Dreyfus is moving to introduce Tranche 2 of Australia’s money-laundering laws, finally tackling the powerful lawyer, accounting and property lobbyists. Nathan Lynch reports.

The Albanese government is expected to publish its response to the recommendations from the Senate’s inquiry into the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF regime), by the end of this month. The response will detail the Labor government’s broad position on Tranche 2 laws, plans for a beneficial ownership register, and its timetable for consultation with AML/CTF gatekeeper professions and other stakeholders.

The government will open a consultation period on the proposals before introducing a Bill into federal parliament. The Attorney General’s Department (AGD), 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.

Sources in Canberra said the AGD had been working on draft legislation to capture lawyers, accountants and real estate agents under the anti-money laundering and counter-terrorism financing (AML/CTF) regime. The law reforms would update the list of designated services that are set out in Item 54 of Table 1 in Section 6 of the Act.

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Slight reprieve

The FATF’s next round of mutual evaluation visits will begin in 2024. The first countries to be assessed will include Belgium, Malaysia, Singapore, Italy, Austria, Canada and Turkey.

Australia was expected to be among the first countries to receive a fifth-round on-site mutual evaluation when the new assessment round begins in 2024. At the latest FATF plenary, Australia was given a reprieve, however, when it was excluded from the list of countries that will be assessed next year.

Neil Jeans, a partner at Grant Thornton, said the FATF mutual evaluation calendar had given Australia a window of opportunity to fix the gaping loopholes in the regime around DNFBPs.

“It’s curious that the FATF has chosen to exclude Australia, as well as Spain and Norway, from the first tranche of the fifth round mutual evaluations, particularly as all three countries were included in the first round last time,” Jeans said.

“In the case of both Norway and Spain, this may be because they had detailed follow-up reviews in 2019 and have demonstrated progress in addressing the fourth round findings. However, the same can’t be said for Australia, which has not addressed the significant gaps in the regime that were identified in 2015.”

Jeans said these legislative shortcomings had led Nicole Rose, the chief executive of AUSTRAC, to warn late last year that Australia risked being added to the FATF greylist.

A spokesperson from the Attorney-General’s Department (AGD) said the government was committed to “continually reviewing Australia’s AML/CTF regime to ensure that it remains effective and complies with international standards as set by the FATF.”

The AGD spokesperson said Australia had not been advised on the timing of the FATF’s next mutual evaluation visit.

Regional objectives

The government’s focus on meeting its 17-year-old commitment to AML/CTF reform has also been influenced by the agreements made late last year as part of the Indo-Pacific Economic Framework for Prosperity. The framework included a commitment to “implement and accelerate progress on anti-corruption measures and tax initiatives within our domestic legal frameworks, consistent with international agreements and standards.” This included a specific reference to the FATF standards on real estate and other DNFBP sectors.

Australia has also been working with the UK to improve its efforts to combat illicit finance, amid a deteriorating regional geopolitical environment. Late last year, the UK Home Office and the AGD signed a confidential declaration on working together more closely to combat money laundering, terrorism financing and sanctions breaches. The agreement included a commitment from Australia to comply with the FATF’s recommendations, including the regulation of gatekeeper professions.

The UK government is understood to have been concerned about the delays in Australia’s Tranche 2 regime, given that similar laws have applied in the UK for almost two decades.

Matter of mutual concern

The FATF’s most recent mutual evaluation report on Australia was published in 2015. The report concluded that Australia had a “mature regime for combating money laundering and terrorist financing, but that certain key areas remain unaddressed.”

Following the mutual evaluation, Australia was placed on an “enhanced follow-up process” and was required to report back regularly about the progress it was making in addressing the technical compliance deficiencies, including its DNFBP controls.

A spokesperson for the FATF was unable to comment on the fifth round mutual evaluation timetable beyond 2024.

Jeans said that Australia was now in a “perilous position” with the FATF as the fifth-round mutual evaluation is looming and there has been no progress on DNFBPs since the 2015 visit. Jeans said the only FATF countries that do not have laws for DNFBPs are Haiti, Madagascar, Australia, China and the United States. Both China and the United States have committed to passing laws for DNFBPs.

“As a result of the lack of movement on Tranche 2, it’s possible that Australian representatives at the February 2023 FATF plenary convinced the FATF to give Australia more time to get its house in order,” Jeans said.

“Regardless, progress on introducing Tranche 2 will need to be made in the coming months to ensure Australia doesn’t run out of time before the FATF evaluation.”

A FATF spokesperson told Thomson Reuters Regulatory Intelligence that the fifth-round evaluation timetable was still a work in progress.

“The list does not include Australia and, at this stage, the plenary has not finalised the sequence of the assessments beyond the first year,” the spokesperson said.

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This article first appeared on Thomson Reuters Regulatory Intelligence.

Nathan Lynch is a writer and international speaker who has spent two decades investigating the hidden world of dark money that fuels organised crime, corruption and violent extremism around the globe. He is certified by the US Department of Justice's elite CCIPS Cybercrime Laboratory and is a program expert with the Financial Services Volunteer Corps, which provides support to developing countries to help them combat the scourges of money laundering and other serious financial crimes. Nathan has trained police, government officials and bankers across Asia and the Middle East on the techniques the world's criminals use to conceal and clean their dirty money.

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