Under Part 18 — Miscellaneous, the exposure draft of the Anti-Money Laundering and Counter Terrorism Financing Bill states it “does not affect the law relating to legal professional privilege”.

The first part of the AML legislation only affects those lawyers that offer services in competition with financial services providers, but the second part will cover the rest of the profession and is likely to require lawyers to report suspicious transactions.

Law Council president John North said he remained seriously concerned about the anti-money laundering legislation. Even if the second part of the Bill includes the same provision on legal professional privilege, he said what it will require lawyers to do will still have the effect of undermining client confidentiality.

“The promised second tranche of the Bill will require legal practitioners to report on suspicious financial transactions by their clients. It is this area that offends legal practitioner/client confidentiality, and to say that legal professional privilege will be retained ignores this important matter,” he said.

He said the reporting of clients under similar laws already introduced in the UK had been a “nightmare” and the Council “will fight any moves that affect legal practitioner/client confidentiality”.

In Canada he said constitutional challenges to provisions affecting legal professional in that country’s anti-money laundering laws had been successful and the Law Council would consider taking similar measures here.

A spokesperson for the Attorney-General’s Department said the provision that professional privilege was not affected by the Bill was included after meetings with the Law Council.

Minter Ellison partner James Beaton said his firm’s analysis of the effect of this provision was that lawyers could still use common law legal professional privilege as a reason to refuse to report communications with clients to the regulator of the new law, the Australian Transactions Reports and Analysis Centre (AUSTRAC).

However, according to a High Court ruling Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543, if the communications with a lawyer are for illegal purposes, they would not attract privilege.

The firm said there is no explicit “abrogation” of legal professional privilege in the Bill, and “arguably, there is no necessary implication for the abrogation of legal professional privilege in the Bill either”.

“For example, the retention of legal professional privilege would not appear to significantly impair AUSTRAC’s functions under the Bill. If this is correct, a person is entitled to refuse to answer questions or produce documents to AUSTRAC, or another agency.”

See ‘Flushing the dirt from the wash’ p16