The AML/CTF Parliamentary Inquiry is starting to take shape

Introduction

On 15 August 2021, the Senate Standing Committee on Legal and Constitutional Affairs (Committee) published a discussion paper (Guide) to guide submissions to the AML/CTF Parliamentary Inquiry (Inquiry).

The deadline for submissions to the Inquiry is 27 August 2021. The Guide offers direction and reinforces the Inquiry’s intended focus on several areas. The key theme cutting across all of these key areas is the regulation of “gatekeeper professions”, such as lawyers, accountants, real estate services and other Designated Non-Financial Businesses and Professions (DNFBPs).

Norton Rose Fulbright has a leading financial crime practice in Australia and across the globe. The Firm has been engaging with this Inquiry and is assisting clients who would like to make a submission. We continue to track this Inquiry closely as it evolves.

Regulation of DNFBPs

Commonly referred to as the “Tranche 2” reforms, the Guide centres on the proposed regulation of DNFBPs to include lawyers, notaries, other independent legal professionals and accountants, real estate agents, trust and company service providers and dealers in precious metals and stones. Our firm supports the introduction of Tranche 2, noting that Australia is currently lagging behind other key markets in this regard.

The Australian Government previously considered this extension as early as 2007, and legislation was drafted at that time to include legal, accounting and real estate services under section 6 of the Anti-Money Laundering and Counter-Terrorism Financing Cth 2006 (Cth) (AML/CTF Act).

With a focus on DNFBPs, Australia’s progress against prior Financial Action Task Force (FATF) mutual evaluation reviews of Australia’s AML/CTF laws, and the 84 recommendations in the Commonwealth Attorney-General’s 2016 Statutory Review of the AML/CTF Act, will certainly inform the Inquiry’s deliberations.

The Inquiry will seek to understand:

• the impediments to Australia regulating DNFBPs;
• the reputational risks to Australia if DBFBPs continue to fall outside the scope of AML/CTF regulation;
• the implications for Australia as a competitive global economy and our ability to attract global investment if DNFBPs are not regulated; and
• the experience of other countries who regulate DNFBPs.

In that regard, the Guide rightly singles out New Zealand, Singapore, the UK and Canada as particular jurisdictions of interest.

Digital Transformation and Technological Developments

The emergence of digital transformation and its intersection with AML/CTF regulation could present another area of focus for any potential submission. The Committee, drawing on the FATF’s publication on the Opportunities and Challenges for New Technologies in AML/CFT is clearly seeking to delve into current and emerging technological developments into AML/CTF regulation.

New technologies, products and related services over the last decade including cryptocurrencies and other virtual assets will no doubt be another focal point for the Inquiry.

The ATO and AUSTRAC - regulating DNFBPs

The Guide refers to the ATO’s responsibilities and seeks to assess the appropriateness of the ATO having shared regulatory responsibilities alongside AUSTRAC in monitoring financial crime risks. With most of the opposition to implementing the abovementioned Tranche 2 reforms focussing on the increased costs and burden of complicated and overly-onerous compliance regimes, the Guide encourages submissions to address this shared regulatory responsibility and the comparative approaches globally in addressing tax crime and money laundering.

Using the Guide / making a submission

The Committee has made clear that the Guide is not intended to be prescriptive. Those wishing to make submissions should consider how best to engage with the issues in the Guide and the matters covered in the Terms of Reference of the Inquiry.

Participants can also offer solutions and alternatives as to how certain issues should (or can) be viewed. For example, proposing a transition deadline for new reporting entities to comply, similar to the approach New Zealand adopted when they implemented Tranche 2 reforms, may assist in easing the costs and compliance hurdles new reporting entities are likely to encounter if / when Tranche 2 is implemented in Australia.

This Inquiry will create a platform for meaningful dialogue between government and industry and has the potential to rapidly improve Australia’s ranking as a jurisdiction with a robust and effective financial crime regulatory framework.