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LCA on warpath over AML

LCA on warpath over AML

THE LAW COUNCIL of Australia (LCA) has insisted it will do everything in its power to resist any potential erosion of legal professional privilege from the Federal Government’s overhaul of…

THE LAW COUNCIL of Australia (LCA) has insisted it will do everything in its power to resist any potential erosion of legal professional privilege from the Federal Government’s overhaul of anti-money laundering laws.

Under the proposed new legal framework, legal professionals would be required to inform government authorities of suspicious transactions entered into by their clients, effectively voiding client confidentiality. While other sectors such as banking, financial services and the accounting profession will also have to comply, the issue of professional privilege is exclusive to the legal profession.

“What we cannot achieve is any consensus at this stage that the legal profession, due to the importance of client confidentiality, should be outside the ambit of the proposed legislation,” John North, LCA president, told Lawyers Weekly. “Further, it has the potential to seriously erode the confidence of clients in their lawyers and will add considerable cost to legal practices.”

So serious is the issue, North said, that the LCA will go as far as it can to defend professional privilege. “In a small town where a lawyer was obliged to secretly report a client’s suspicious transaction, if it all turned out to be legitimate, then that client’s faith in the lawyer would probably be shattered,” he said.

“For the whole of society to work, it is absolutely vital that our clients have confidence in us because they tell us things that enable justice to prevail. That is something so crucial, so vital, that we want the government to recognise that and [the Financial Action Task Force] to recognise that. The Law Council feels so strongly about this that we would be prepared to test it on a constitutional law basis.”

The issue is not without precedent. In the UK, which is further down the track in its AML reforms, the subject of professional privilege is at the forefront of debate on how effective the new laws have been.

According to a former member of HM Treasury’s Money Laundering Advisory Committee, questions are being raised over whether the government has gone too far on the issue of lawyers informing on their clients in AML matters.

In the recent case of Bowman v Fels, the UK Court of Appeal ruled it was not the intention of UK legislature to impose on lawyers the requirement to report on their clients in the process of litigation.

But there are examples where the legal profession has successfully lobbied to protect professional privilege regarding AML.

“I would imagine that the legal profession has fairly strong views that any information that is covered by legal professional privilege should not need to be disclosed and one would like to see that protected,” said Ros Grady, partner at Mallesons Stephen Jaques, who has recently returned from a fact-finding trip to North America and the UK on AML issues. “In Canada, there have been exemptions provided for the legal profession as a result of action taken by the Law Society. They went to the Supreme Court of Canada and got a negotiated settlement with the government which relates to their reporting requirements. They essentially self regulate.”

Meanwhile, the Minister for Justice and Customs, Senator Chris Ellison, has been holding consultations with representatives of the financial services industry on the reforms, with more meetings taking place this month.

Ellison met with representatives of banks, financial services firms and the superannuation and insurance industries late last month to discuss AML-related issues, and further consultation involving the Investment and Financial Services Association (IFSA), Treasury and Austrac, among others, is underway.

All parties are tight-lipped on the outcomes of the discussions, but there was agreement that customers already identified under the Financial Transactions Reporting Act need not be re-identified and that Australia should mould its AML system in line with “comparable jurisdictions”.

IFSA CEO Richard Gilbert said that the dialogue was welcome, but added that costs of compliance with the new laws which have been estimated, in the case of the superannuation industry, to be $900 million will be passed on to consumers.

While many have welcomed the consultation, several groups are concerned that they were left out.

Stuart Fagg is the Editor of Risk Management magazine, Lawyers Weeklys sister publication.

Mallesons warns: start planning for AML compliance

A MALLESONS STEPHEN JAQUES anti-money laundering expert has warned that those likely to be impacted by the forthcoming AML legislation should begin planning now.

Mallesons Stephen Jaques partner Ros Grady said that while we only have draft legislation at this point, we know enough to understand what is going to be expected when the legislation does come through.

“It is important that organisations begin planning now on two fronts: firstly, project planning for their AML compliance and, secondly, making submissions to government once the draft legislation is released.”

Speaking at a seminar jointly hosted by Mallesons and the Australian Corporate Lawyers Association (ACLA), Grady discussed some likely impacts of the new AML legislation on Australian businesses, including related compliance and project planning issues.

With Mallesons partner Andrea Beatty, Grady drew upon insights gained on an international fact-finding trip to New York, Washington, Toronto and London, where they met with a range of regulators, industry bodies and business organisations about AML laws and practices.

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