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Australia | Publication | October 2023
This article was co-authored by Elizabeth Melkonian.
On 20 April 2023 the Commonwealth Attorney-General's Department released the first of two consultation papers to reform Australia's anti-money laundering and counter-terrorism financing (AML/CTF) regime (Consultation Paper). The proposed reforms include an extension of the regime to capture certain high-risk professionals, including lawyers, accountants, trust and company service providers, real estate agents and dealers in precious metals and stones (Tranche-Two Entities). This is a highly anticipated change that has been years in the making and will align Australia’s regime with the rest of the international community.
The Consultation Paper is divided into two parts. Part 1 proposes reforms to simplify and modernise the operation of the AML/CTF regime. This was recommended by the 2016 Report on the Statutory Review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, which found that the regime was too complex and made it difficult for reporting entities to comply with their obligations. To address this, the Consultation Paper proposes to, among other things:
Part 2 of the Consultation Paper proposes to extend the regime to Tranche-Two Entities. As the Act regulates particular services rather than types of entities, the Consultation Paper proposes a list of services that could be inserted into the Act. These include the preparation or carrying out of transactions for clients which relate to the following:
It also proposes to amend the Act to cover the preparation or carrying out of transactions for clients by trust and company service providers which relate to the following:
The Consultation Paper proposes that as a general rule, services provided for non-commercial purposes will not be covered. It also proposes to exclude representing a client in litigation, unless during the course of such representation, the litigator also engages in one or more of the services listed above.
Some of the proposed designated services have the capacity to apply to services provided by insolvency practitioners. In particular, questions arise over whether the following could be captured under the services outlined in the Consultation Paper:
The Consultation Paper does not clearly articulate whether it is government’s intention to capture insolvency practitioners when they provide services such as these. Nor is it clear from the Consultation Paper what the potential money laundering or terrorism financing risk might be with respect to services provided in the context of administration or liquidation. Engagement with the Attorney-General’s Department is recommended to:
While initial submissions and feedback on the Consultation Paper closed on 16 June 2023, this is only the first stage of public consultation for reform. A second consultation paper, informed by industry submissions on the first Consultation Paper, is expected to be released around September 2023. The Attorney-General's Department will also conduct roundtable discussions with key stakeholders and engage with industry on sectoral-specific issues as required.
It is important that the reforms be informed by insolvency practitioners’ understanding and insight into the application of the proposed regime, including their international experience in jurisdictions that have already implemented regulation of Tranche-Two Entities. These insights, which may be provided by way of submissions on the second consultation paper and/or by coordinating and participating in direct consultation with government or industry roundtables, will be necessary to shape Australia’s AML/CTF regime.
It is also important for insolvency practitioners to be aware of the new obligations that may be imposed on them by these changes, and to prepare policies, procedures and guidance in advance of their implementation.
This is an abridged version of an article that is due to be published in the next edition of the Australian Restructuring Insolvency & Turnaround Association Journal, with permission of the Australian Restructuring Insolvency & Turnaround Association.
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