The Commonwealth Attorney-General’s Department has issued a Consultation Paper which proposes extending the Anti-Money Laundering and Counter Terrorism Financing Act 2006 to certain “gatekeeper” professions and businesses that provide services that are vulnerable to misuse for money laundering and terrorism financing purposes, including lawyers, accountants, trust and company service providers, real estate agents and dealers in precious metals and stones (also known as tranche-two entities or Designated Non-Financial Business and Professions).

Currently the AML/CTF Act applies to financial institutions, money remittance dealers, digital currency exchanges, gambling service providers and bullion dealers.

The AML/CTF regime establishes ‘Six Key Regulatory Obligations’ regulated entities must comply with to protect businesses from misuse by criminals:

• Customer due diligence: Regulated entities must verify a customer’s identity before providing a designated service and understand the customer’s risk profile.
• Ongoing customer due diligence: Regulated entities must conduct ongoing customer due diligence throughout the course of the business relationship, including transaction monitoring and enhanced customer due diligence.
• Reporting: Regulated entities must report to AUSTRAC all ‘suspicious matters’, cash transactions of AUD10,000 or more, all instructions for the transfer of value sent into or out of Australia and annual compliance reports. All persons must report cross border movements of monetary instruments above the threshold of AUD10,000 or the foreign equivalent.
• Developing and maintaining an AML/CTF Program: Regulated entities must identify the risks they face in providing designated services to customers, and develop and maintain an AML/CTF program containing systems and controls to mitigate and manage those risks.
• Record keeping: Regulated entities must make and retain certain records that can assist with the investigation of financial crime or that are relevant to their compliance with the AML/CTF regime for seven years, and ensure they are available to law enforcement, if required.
• Enrolment and registration with AUSTRAC: Regulated entities must enrol with AUSTRAC if they provide a designated service. In addition, remittance service providers and digital currency exchange providers must also register with AUSTRAC to permit additional checks to ensure that criminals and their associates are kept out of these sectors.

If implemented the changes will affect lawyers, accountants, conveyancers, and trust and company service providers when they prepare or carry out transactions for clients, relating to the following:
• buying and selling of real estate
• managing of client money, securities or other assets
• management of bank, savings or securities accounts
• organisation of contributions for the creation, operation or management of companies
• creation, operation or management of legal persons or legal arrangements (e.g. trusts), and
• buying and selling of business entities.

It is proposed to exclude services provided for non-commercial purposes and in representing a client in litigation. AML/CTF obligations will not arise in relation to litigation unless during the course of such representation, the legal professional also engages in one or more of the services listed above.

With respect to the legal professional privilege of solicitor-client communications, the consultation paper notes that the privilege does not apply where the communication was part of a criminal or unlawful proceeding or was made in furtherance of the commission of a crime or fraud. This extends to crimes such as money laundering.

The paper refers to New Zealand’s AML/CTF regime which already applies to legal services; it does not require any person (lawyer or otherwise) to disclose any information that the person believes, on reasonable grounds, is a privileged communication. Where a person refuses to disclose information because it is privileged communication, a District Court judge may make an order determining whether or not the claim of privilege is valid. A similar model has been adopted in the United Kingdom.

It may also include trust and company service providers when they prepare for or carry out transactions for clients, relating to the following:
• acting as a formation agent of legal persons
• acting as (or arranging for another person to act as) a director or secretary of a company, a partner of a partnership, or a similar position in relation to other legal persons
• providing a registered office, business address or accommodation, correspondence or administrative address for a company, a partnership or any other legal person or arrangement
• acting as (or arranging for another person to act as) a trustee of an express trust or performing the equivalent function for another form of legal arrangement, and
• acting as (or arranging for another person to act as) a nominee shareholder for another person.

Real estate sector
The Paper proposes the regime would cover real estate agents and property developers involved in transactions to buy or sell real estate, including any legal or equitable interest in real property, including freehold title, strata title or leasehold tenure.

The Paper also considers including property management and leasing services.

Dealers in precious metals and precious stones
The Paper proposes the regime would be improved by covering dealers in precious metals and stones when they engage in any cash transaction with a customer equal to or above AUD10,000, including in the capacity of an agent or auctioneer.

The FATF’s guidance for dealers in precious metals and precious stones interprets the sector widely to encompass a wide range of persons engaged in the business of buying and selling precious stones and metals, including:
• those who produce precious stones or precious metals at mining operations
• intermediate buyers and brokers
• precious stone cutters and polishers and precious metal refiners
• jewellery manufacturers who use precious metals and precious stones
• retail sellers to the public, and
• buyers and sellers in the secondary and scrap markets.

The proposed nominated threshold for the regulation of dealers in precious metals and precious stones is a cash transaction equal to or above AUD10,000. It would not include other forms of funds transfer, for example, electronic funds transfer or payment by cheque as these payments are processed through the regulated financial system.

A second consultation paper will be released later this year.

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