Powered by
MOMENTUM
MEDIA
The anti-money laundering and counter-terrorism rollout should be delayed by a year to allow small firms to better prepare, the Law Council of Australia told a parliamentary inquiry.
With serious concerns about the ongoing lack of certainty regarding important aspects of the Anti-Money Laundering and Counter-Terrorism (AML/CTF) regime, the Law Council of Australia (LCA) has urged the government to push back its rollout by 12 months.
Should that not be possible, LCA said AUSTRAC should at least implement a transitional compliance period of at least 24 months that is focused on education and assistance rather than enforcement.
“Until clarity is provided on who the regime actually applies to, commencement should be delayed,” LCA president Tania Wolff said.
“Three weeks is simply not enough time for small businesses to prepare for obligations they cannot yet identify.”
Small businesses make up more than 90 per cent of the Australian legal profession, and many cannot determine whether they provide “a designated service” and face the prescribed obligations from 1 July.
“Despite the best efforts of the profession and significant work by the regulator, a lack of clarity in the legislation means it is still not clear what legal services are caught up in the regime,” Wolff said.
Wolff said the situation is further complicated by amendments to the regime currently before Parliament, which are the subject of the parliamentary joint committee on intelligence and security.
Rather than resolving uncertainty, LCA said these could deepen it.
“The Law Council remains committed to working with the government on these reforms. Money laundering and terrorism financing cause real harm, and the legal profession takes that seriously.
“But regulated entities cannot comply with obligations they cannot identify,” Wolff said.
Given the AML/CTF rules are a “momentous compliance uplift”, iManage’s global legal vertical lead, Madeleine Porter, said there was no doubt they are a source of pressure and anxiety for Tranche 2 reporting entities.
Not only does it transform how they onboard and screen new matters and clients, but will also change how they interact with clients.
“Uncomfortable conversations will arise because of the rules being enacted, as will the need to broach topics or documentation you have never previously raised with your exiting or new clients,” Porter said.
“All of this is being fuelled by the question of whether they are providing a designated service.”
Speaking in response to LCA calls, Porter said the concern and deserves to be taken seriously, but a 12 month delay “could be a riskier path”.
Porter explained Australia is “already a laggard” on the global stage in terms of AML/CTF compliance, particularly as it is the last major member of the Financial Action Task Force (FATF) yet to extend AML/CTF obligations to professional gatekeepers like law firms, accountants, conveyancers and real estate professionals.
“A 12 month deferral could potentially expose us to broader economic and commercial disadvantages globally,” Porter said.
“FATF assesses not just whether a country has the right laws on paper, but whether it is implementing them effectively and on a credible timeline.
“A last-minute delay, after years of consultation and a legislated commencement date, signals the opposite.”
Porter stressed the regime does not regulate a law firm or an accountancy practice itself, but rather the services it offers while carrying on the business.
While on paper it looks “clear cut”, Porter said it was “anything but”.
“Because matters evolve and instructions start out vague, making it difficult to ascertain whether they are indeed a designated service.
“A retainer that begins outside the net can drift firmly inside it; for example drafting of a non-disclosure agreement could morph into a complex commercial acquisition that starts out not being a designated service but quickly becomes one.”
iManage provided the designated services below:
iManage said firms can look to its own webinar hub, as well as resources on available on AUSTRAC and the Law Society of NSW’s websites.
