A recent report reveals that the Australian legal profession is actively taking steps to minimise the risk of involvement in money laundering. Where vulnerabilities exist, they are being addressed through the enhancement of existing controls that govern the profession.
“The Government is currently considering how best to achieve the existing anti-money laundering and terrorism financing (AML/CTF) regime objectives concerning the legal profession,” stated Mr. Luke Murphy, President of the Law Council of Australia.
The Law Council has long maintained that due to the stringent regulations governing the Australian legal profession, the potential for lawyers to facilitate AML/CTF activities is minimal. To validate this belief, the Law Council engaged Russ + Associates to conduct an independent review of the profession’s vulnerability to unintentionally participating in money laundering and terrorism financing.
Russ + Associates is a specialised tax and AML law practice renowned for its expertise in AML/CTF advisory services.
To the best of our knowledge, this examination of vulnerabilities conducted by Russ + Associates is a pioneering effort globally. It underscores the Australian legal profession’s commitment to comprehending and mitigating AML/CTF risks, offering a robust evidence base for informed decision-making and reforms.
The report indicates that, in addition to adhering to regulations and professional requirements, lawyers have taken extra precautions to mitigate risks. These measures include limiting cash receipts, particularly from overseas sources, refraining from holding assets for clients, and ensuring full compliance with reporting obligations.
However, the report also acknowledges the existence of vulnerabilities, such as lawyers not routinely inquiring about a client’s source of wealth and challenges in confirming the origin of funds, with variations in risk across different jurisdictions.
“Identifying these vulnerabilities allows us to be even more vigilant in addressing them through training and education, collaboration with the banking sector to enhance transparency, standardisation of practices, regulations, and requirements, and increased utilisation of technologies like electronic conveyancing,” emphasised Mr. Murphy.
The report underscores the legal profession’s positive attitudes and behaviours regarding integrity, risk awareness, and aversion, as well as the fulfilment of statutory and professional obligations. It suggests that these vulnerabilities can be effectively managed through the enhancement of existing controls.
However, certain considerations cannot be ignored when contemplating an extension of the AML/CTF regime. The most pressing concern is the financial and regulatory burden that an overly burdensome regime would impose on small law firms. Similar experiences overseas, such as in New Zealand, have seen several legal practices closing their doors following the imposition of disproportionate AML/CTF reforms.
The majority of the Australian legal profession, a staggering 92 percent, operates within practices consisting of fewer than four principals. These small businesses are spread across the nation, serving suburban and regional areas. The compliance costs, both in terms of time and money, could potentially jeopardise the sustainability of these firms.
This scenario could have significant repercussions for our community, where access to legal services may become scarcer or more costly. Rural and regional communities, in particular, could bear the brunt of this, given that they may already face a shortage of legal professionals.
In essence, legal services might become less affordable and further out of reach for Australians, placing greater strain on the underfunded legal assistance sector and potentially hindering access to justice, particularly in an economically challenging climate.
Furthermore, the extension of the AML/CTF regime could pose a threat to client legal privilege, a fundamental aspect of the administration of justice in Australia.
The Law Council remains committed to combatting financial criminality and recognises the importance of a regulatory framework to mitigate the risks associated with money laundering and terrorism financing.
The Russ + Associates report provides compelling evidence that these risks do not necessitate the imposition of an extreme, disproportionate, and potentially detrimental AML/CTF regime. Instead, the report offers a clear roadmap for addressing the identified areas of vulnerability.
Verify 365 is uniquely positioned to assist Australian law firms in their fight against money laundering. Our comprehensive suite of tools and services, including identity verification, PEPs and sanctions screening, global electronic address verification, open banking source of funds checks, and enhanced due diligence questionnaires, provides a robust defence against illicit financial activities.
With a focus on AML compliance, Verify 365 streamlines client onboarding processes, ensuring that the identity of clients is rigorously verified, and their financial backgrounds are thoroughly assessed.
Verify 365 empowers law firms to bolster their AML defences efficiently and cost-effectively, minimising their vulnerability to money laundering risks. Our commitment to providing cutting-edge solutions aligns perfectly with the Australian legal profession’s dedication to maintaining the highest standards of integrity and compliance.