Paper 2 — information for professional service providers are proposed to be brought under the AML/CTF regime.

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This is an article of a series of articles explaining proposed measures to amend AML/CTF regime by the Attorney General’s Dept.

This paper dives into the proposed reforms to Australia’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regime. It highlights the inclusion of “tranche two” entities, such as lawyers, accountants, and other professions, within the regime to combat money laundering and terrorism financing. The reforms also aim to ensure Australia meets Financial Action Task Force (FATF) standards and protects the integrity of the financial system.

Obligations as a PSP

The term “Professional Service Provider” (PSP) encompasses legal practitioners, accountants, consultants, trust and company service providers, financial advisors, and business brokers.

Legal Professional Privilege and AML/CTF Obligations

The paper acknowledges the importance of legal professional privilege and proposes a solution to balance this right with AML/CTF obligations. The department proposes repealing section 242 of the Act and introducing specific protections for privileged information. This aims to ensure reporting entities can fulfill their AML/CTF duties while safeguarding legal professional privilege.

The legal sector raised concerns about the current 1-to-3 day timeframe for lodging Suspicious Matter Reports (SMRs) under section 41 of the Act being insufficient to assess legal privilege. The department proposes extending the reporting timeframe from three to five days for suspected money laundering and non-terrorism financing offenses. This extension allows time for a proper assessment of whether relevant information is privileged.

What Activities are Captured?

It’s important to note that not all activities undertaken by PSPs will be designated services under the reforms. For example, auditing financial statements or representing a client in court are not included.

Similarly, purely advisory work without an underlying client transaction, such as general legal advice on directors’ duties or employment law, would also be excluded. Additionally, centralized legal or finance functions within business groups wouldn’t be subject to the AML/CTF regime.

Proposed Designated Services

The following is a breakdown of the specific activities that would be considered designated services:

1. Assisting clients with buying, selling, or transferring real estate (acting on behalf of the client).
2. Assisting clients with buying, selling, or transferring legal entities (acting on behalf of the client).
3. Receiving, holding, managing, or disbursing various assets (money, accounts, securities, digital assets, property) on behalf of clients, excluding pre-payments, property management, and prescribed disbursements.
4. Facilitating contributions for the creation, operation, or management of legal entities on behalf of clients.
5. Forming, creating, operating, or managing legal entities (excluding testamentary trusts) on behalf of clients.
6. Acting as, or arranging for someone else to act as, a director, secretary, power of attorney, partner, trustee, or similar position for a legal entity on behalf of a client (excluding executors or administrators of deceased estates).
7. Acting as, or arranging for someone else to act as, a nominee shareholder on behalf of a client.
8. Providing a registered office address, principal place of business address, or other administrative addresses for various legal entities on behalf of clients.

Business Responsibilities

Professional service business will be required to:

1. Enroll with AUSTRAC.
2. Develop and maintain a comprehensive AML/CTF program specific to company’s needs.
3. Conduct thorough initial customer due diligence.
4. Implement procedures for ongoing customer due diligence.
5. Report certain transactions and any suspicious activity identified.
6. Establish and maintain accurate records.