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AUSTRAC Calls For Lawyers, Accountants, and Real Estate Agents To Be Brought Under AML Regime

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Nicole Rose, CEO of the Australian Transaction Reports and Analysis Centre (AUSTRAC), has expressed further concern over “gatekeeper professions” not being subject to the country’s anti-money laundering (AML) regime. Rose argues that a failure to regulate these professions, also known as designated non-financial businesses and professions (DNFBPs), could induce further criticism from the Financial Action Task Force (FATF) on Australia’s regulatory and supervisory regime. The FATF first raised DNFBP regulation in its 2015 mutual evaluation review (MER).  

Echoing her call for gatekeeper reform in 2020, Rose warned that members of these professions, including lawyers, accountants, and real estate agents, could knowingly or “unwittingly” help their clients wash dirty money by allowing them to buy assets. 

In June 2022, Rose noted the importance of establishing a culture of compliance ahead of Australia’s next MER in 2024, beginning with changes in corporate behavior. Rose’s warning about gatekeepers and AUSTRAC’s recent inquiries into Crown Resorts, Star Entertainment, and NSW pubs and clubs reiterates this stance.

“Tranche 2” Reforms

Australia’s anti-money laundering and counter-terrorism financing (AML/CFT) regime currently applies to casinos, bullion dealers, and solicitors that deal with cash transactions of over $10,000 under the Financial Transaction Reports Act 1988 (FTR Act). While Australia committed to extending these laws to gatekeeper professions in its AML/CTF Increased Transparency Bill, the so-called tranche 2 reforms have remained dormant for over a decade. The 2008 financial crisis, shifts in political priorities, and opposition from DNFBP representatives have all been cited as reasons for the delay.

A March 2022 Senate Committee Report examined Australia’s failure to expand the scope of AML measures to cover DNFBPs. While the report acknowledged that the tranche 2 reforms might duplicate existing DNFBP regulatory obligations and practices, it ultimately recommended that Australia accelerate consultation on its timely implementation. It also advised that AUSTRAC should be provided adequate resources to effectively implement and manage the regime. 

Real Estate a Prime Target For Money Laundering

Repeatedly identified as a weak spot in Australia’s AML regime, Rose singled out real estate as posing “a particular danger” of money laundering. In 2020, AUSTRAC estimated that more than $1 billion was laundered through Australian real estate by Chinese entities alone.  Furthermore, the Australian Federal Police (AFP) told the Federal Senate that of the $187 million in assets it seized in the 2021 financial year, $116 million related to real estate assets.

In its 2022 report, global civil society organization Transparency International (TI) commented on the role of Australian real estate in the fight against Russian dirty money. It noted that with no centralized real estate ownership register, it is exceedingly difficult to identify the ultimate beneficiaries of transactions and stop Russian kleptocrats from investing in the country’s real estate market. 

Implementing a beneficial ownership register was also identified in the Senate Committee’s report as an important enabler of tranche 2 reforms. It calls for Section 242 of the AML/CFT Act 2006 to be amended to ensure the proper operation of legal professional privilege. 

Rose did not explicitly call for the laws to change ahead of the Financial Action Task Force’s 2024 assessment, noting that decision lies with the federal government. DNFBPs should therefore ensure they remain abreast of any updates issued from the federal government and familiarize themselves with the Committee Senate’s recommendations, which are likely to form the basis of any upcoming reforms. 

 

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Originally published November 11, 2022, updated November 11, 2022

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