Australia’s anti-money laundering and combating the financing of terrorism (AML/CFT) measures have come under fire in a recent report from the country’s Senate committee. The report specifically criticises the delay in expanding the scope of AML measures to cover designated non-financial businesses and professions (DNFBPs), such as lawyers, real estate agents, and casinos. Gaps in DNFBP AML regulation have been blamed for billions of dollars being laundered through Australia’s housing market and “serious and systemic non-compliance” by casino operators. The report recommends timely implementation of reforms and the provision of adequate resources for regulator AUSTRAC to manage the tranche 2 regime.
In this article, we delve into the key issues raised in the report and their potential impact on businesses operating in Australia.
Delay in expanding the DNFBP AML regulations
The report highlights the failure to expand anti-money laundering (AML) measures in Australia to cover designated non-financial businesses and professions (DNFBPs), such as lawyers, real estate agents, casinos, auditors, and dealers in precious metals and stones.
This delay is exposing Australians and the Australian economy to harm, as billions of dollars have been laundered through the housing market, and casino operators have been engaging in “serious and systemic non-compliance.”
Tranche 2 reforms remain on the back burner
While Australia has committed to introducing AML reforms for DNFBPs, the tranche 2 reforms have been delayed for over a decade due to various factors, including the 2008 financial crisis, shifts in political priorities, and opposition from lawyers.
None of the key bodies sharing insights with the committee have been consulted in relation to tranche 2 reforms since 2017, which is hindering progress.
Need for action and adequate resources
The report argues that the Australian government must take action to accelerate consultation on the timely implementation of tranche 2 reforms, and provide regulator AUSTRAC with adequate resources to effectively implement and manage the regime.
The quality of reporting is critical to the success of tranche 2 reforms in detecting money laundering through DNFBPs.
Beneficial ownership register
The report highlights the importance of introducing a beneficial ownership register in Australia, which would be a key enabler of tranche 2 reforms and help mitigate the burden on small businesses by enhancing and simplifying “know your customer” searches.
The report recommends collecting this information centrally in the annual statement that Australian companies are required to complete.
Technological innovation and streamlining of AML/CFT framework
The report recommends considering how technological innovation can streamline regulatory processes and lower costs, as well as streamlining the existing “unnecessarily complex” AML/CFT framework, which makes it hard for firms to understand their obligations.
The report also calls for Section 242 of the AML/CFT Act 2006 to be amended to ensure the proper operation of legal professional privilege.
Milestones in 2022: FATF review and federal election
The Financial Action Task Force (FATF) is likely to review progress against Australia’s 2015 Mutual Evaluation Report (MER) this year, which may reveal gaps in legislation and areas for improvement.
A federal election in May 2022 is also expected to slow down legislative progress on AML/CFT reforms.