AML/CTF Consultation: Tranche 2 Expansion and Modernising the Regime

The Commonwealth Attorney-General’s Department has initiated the implementation of proposed reforms of Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime to bring Australia's anti-money laundering laws in line with standards recommended by the Financial Action Task Force. These reforms have far-reaching implications for real estate and accounting professionals, as well as lawyers, who will be required to take a more active role in deterring money laundering and terrorist financing.

The reforms are likely to require accountants, real estate agents and other professionals to implement risk management programs and to conduct due diligence on clients. This will include verifying the identity of clients, assessing the risk of money laundering or terrorist financing, and monitoring transactions for suspicious activity. Failure to comply with these requirements may result in significant civil penalties.

The reforms also aim to:

• Modernise and clarify the regime in line with international standards and best practice.
• Reduce complexity and regulatory burden on industry.
• Ensure the regime remains fit for purpose, and.
• Harden Australian businesses and sectors against exploitation by serious organised criminals.

The Attorney-General's Department Consultation

On April 20 2023, the Commonwealth Attorney-General's Department released the first of two consultation papers on modernising Australia's AML/CTF regime.

Part 1 of the consultation paper addresses the need to simplify and modernise the operation of the regime to streamline AML/CTF obligations, which was recommended by the 2016 Statutory Review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. The review found that the regime was too complex, making it difficult for regulated entities to comply with their obligations. This will be of interest to both existing and proposed reporting entities.

Part 2 seeks feedback on extending the AML/CTF regime to high-risk professions, including lawyers, accountants, trust and company service providers, real estate agents, and dealers in precious metals and stones. Australia is currently one of only five jurisdictions in the FATF Global Network that do not regulate these entities.

The initial consultation and submissions on the proposals discussed in the Consultation paper closed on 16 June 2023. A second consultation is expected to be announced soon and will provide further opportunity to contribute to the debate on the scope and nature of the new obligations.

We can assist you to:

• Make submissions to government, including proposing pragmatic solutions.
• Participate in direct consultation with government or industry roundtables.
• Understand impacts in jurisdictions that have already implemented Tranche 2 reforms.
• Prepare your business for the upcoming challenges.
• Prepare policies, procedures and guidance for compliance.

You can subscribe for more updates on Tranche 2 from our risk advisory team here.

Useful links

FATF Guidance

• Risk-based Approach Guidance for the Real Estate Sector (2022)
• Risk-Based Approach for the Accounting Profession (2019)
• Risk-Based Approach Guidance for Legal Professionals (2019)
• Risk-Based Approach for Trust and Company Service Providers (2019)
• Risk-Based Approach for Dealers in Precious Metals and Stones (2008)
• https://www.fatf-gafi.org/en/publications/Mutualevaluations/Australia-fur-2024.html

Background Information

• Senate Inquiry Report: The adequacy and efficacy of Australia’s anti-money laundering and counterterrorism financing (AML/CTF) regime (2022)
• Attorney General’s Department: Report on the Statutory Review of the AML/CTF Act and associated Rules and Regulations (2016)
• Australia’s FATF Mutual Evaluation (2015)
• Australian Institute of Criminology - Estimating the costs of serious and organised crime in Australia (2020–21)
• Law Council of Australia: Vulnerabilities Analysis