Modernising Australia’s anti-money laundering and counter-terrorism financing regime

Who does it impact?

• Real estate agents
• Accountants
• Lawyers
• Trust and company service providers
• Dealers in precious metals and stones

Organisations captured under the reforms will need to assess the legal and regulatory impact on their current operations and should engage in the consultation with Government. Proactive engagement with the consultation will be critical for organisations in shaping the implementation of Tranche 2 and the timing of when compliance obligations will commence.

Additionally, the consultation considers a number of points to simplify and modernise the operation of the existing regime. This is dealt with in Part 1 of the consultation.

How should entities respond?

This consultation follows the March 2022 Senate Legal and Constitutional Affairs Committee report on the findings of its Inquiry into the adequacy and efficacy of Australia’s anti-money laundering and counter-terrorism financing regime (Senate Inquiry). As the primary focus of the Senate Inquiry was the Tranche 2 reforms to Australia’s AML/CTF regime, this consultation sets the stage for the Government’s response to the Senate Inquiry by specifically asking submitters to engage on:

1. How the AML/CTF regime should be modernised to assist regulated entities to address their money laundering and terrorism financing risks;

2. The type of designated services that should be regulated under the Act;
3. The regulatory burden on the proposed new regulated entities;
4. What guidance could be provided to assist newly regulated entities in managing AML/CTF obligations;
5. How AUSTRAC will approach implementation of the Act and Rules on the newly regulated entities.

Why is this occurring now?

These proposed reforms are particularly important as Australia remains one of the few countries in the Financial Action Task Force (FATF) Global Network (out of nearly 200 members) that has not regulated, or committed to regulating these sectors within its AML/CTF regime. The Attorney-General’s Department website in announcing the consultation states: “Out of more than 200 jurisdictions, Australia is now one of only 5 jurisdictions in the FATF Global Network, alongside China, Haiti, Madagascar and the United States, that do not regulate tranche-two entities.”

This consultation appears to be in anticipation of the forthcoming 2026 review of Australia’s AML/CTF regime by the FATF, known as a ‘Mutual Evaluation’. A Mutual Evaluation will, amongst other things, assess whether Australia has legislated Tranche 2, and if such regulation is effective to combat money laundering and terrorism financing and other serious crimes.

What next steps should impacted entities take?

Real estate agents, lawyers and accountants and other sectors subject to the reforms need to consider:

1. Whether to make a submission to the consultation;
2. How to coordinate and participate in direct consultation with Government or industry led roundtables;
3. Mapping the services they provide that are likely to be covered by the reforms;
4. Completing a detailed risk assessment to understand the money laundering risks of their current operations;
5. Preparing policies and procedures to enable compliance;
6. Training and awareness sessions, particularly for senior managers and the board;
7. Developing governance and accountabilities for risk management; and
8. How to resource and apply technology to the potential changes.

When will legislation apply

With no draft legislation currently provided, it is has been reported in the consultation that there will be a further round of consultation prior to the introduction of any reforms to Parliament. This provides an opportunity to engage with Government on the legislation, including a staged implementation of the reforms and a longer ‘assisted compliance’ period, which would enable sufficient time for newly reporting entities to meet their compliance obligations.

As the consultation progresses our expert Risk Advisory Team will provide updates on our dedicated Tranche 2 consultation page here. Our Team are able to assist should you need any assistance in responding to or understanding the implications of the consultation.