Future Law: Anti-Money laundering and the legal profession Presented by: Jonathan Smithers CEO, Law Council of Australia Thursday 26 October 9am 10am Conference of Regulatory Officers Adelaide, 26 27 October 2017
Future Law: Anti-money laundering and the legal profession Jonathan Smithers CEO, Law Council of Australia Outline Where did AML/CTF regulation come from? Australia s current AML regime. Tranche 2. What does Tranche 2 mean for practitioners? What does Tranche 2 mean for legal profession regulators? The Law Council s view on the extension of AML/CTF regulation to the legal profession. The state of play. Where did AML/CTF regulation come from? What is the problem? The Financial Action Task Force (FATF). How does AML/CTF regulation attempt to address the problem of ML/TF? 1
Australia s AML regime. Legislation and rules Anti-Money Laundering and Counter- Terrorism Financing Act 2006, Financial Transaction Reports Act 1988. AUSTRAC. Overview of the AML/CTF regime. Risk management. Transaction reporting. Suspicious matter reporting. The AML/CTF Pathway 1. PROVIDE OR PREPARE TO PROVIDE A 2. ENROL WITH AUSTRAC AS A REPORTING ENTITY 3. ESTABLISH AN AML/CTF RISK MANAGEMENT PROGRAM 4. APPLY THE AML/CTF PROGRAM WHEN PROVIDING A 5. LODGE THRESHOLD TRANSACTION AND SUSPICIOUS MATTER REPORTS TO AUSTRAC 6. MANAGE AUSTRAC AND OTHER AGENCY REQUESTS AND INTERVENTIONS Suspicious matter reports and any of the following conditions is satisfied: (d) at the relevant time or a later time, the reporting entity (g) at the relevant time or a later time, the reporting entity suspects on reasonable grounds that the first person is not the suspects on reasonable grounds that the provision, or person the first person claims to be; prospective provision, of the service is preparatory to the (e) at the relevant time or a later time, the reporting entity commission of an offence covered by paragraph (a), (b) or (c) suspects on reasonable grounds that an agent of the first of the definition of financing of terrorism in section 5; person who deals with the reporting entity in relation to the (h) at the relevant time or a later time, the reporting entity provision or prospective provision of the designated service suspects on reasonable grounds that information that the is not the person the agent claims to be; reporting entity has concerning the provision, or prospective (f) at the relevant time or a later time, the reporting entity provision, of the service may be relevant to the investigation suspects on reasonable grounds that information that the of, or prosecution of a person for, an offence covered by reporting entity has concerning the provision, or prospective paragraph (a), (b) or (c) of the definition of financing of provision, of the service: terrorism in section 5; (i) may be relevant to investigation of, or prosecution of a (i) at the relevant time or a later time, the reporting entity person for, an evasion, or an attempted evasion, of a suspects on reasonable grounds that the provision, or taxation law; or prospective provision, of the service is preparatory to the (ii) may be relevant to investigation of, or prosecution of a commission of an offence covered by paragraph (a) or (b) of person for, an evasion, or an attempted evasion, of a law the definition of money laundering in section 5; of a State or Territory that deals with taxation; or (j) at the relevant time or a later time, the reporting entity (iii) may be relevant to investigation of, or prosecution of a suspects on reasonable grounds that information that the person for, an offence against a law of the reporting entity has concerning the provision, or prospective Commonwealth or of a State or Territory; or provision, of the service may be relevant to the investigation (iv) may be of assistance in the enforcement of the Proceeds of, or prosecution of a person for, an offence covered by of Crime Act 2002 or regulations under that Act; or paragraph (a) or (b) of the definition of money laundering in (v) may be of assistance in the enforcement of a law of a section 5. State or Territory that corresponds to the Proceeds of Crime Act 2002 or regulations under that Act; 2
The AML/CTF Pathway 1. PROVIDE OR PREPARE TO PROVIDE A 2. ENROL WITH AUSTRAC AS A REPORTING ENTITY 3. ESTABLISH AN AML/CTF RISK MANAGEMENT PROGRAM 4. APPLY THE AML/CTF PROGRAM WHEN PROVIDING A 5. LODGE THRESHOLD TRANSACTION AND SUSPICIOUS MATTER REPORTS TO AUSTRAC 6. MANAGE AUSTRAC AND OTHER AGENCY REQUESTS AND INTERVENTIONS Australia s AML regime. Who does the AML/CTF regime currently apply to? Tranche 2. Statutory review and FATF Mutual Evaluation Report. Designated Non-Financial Businesses and Professions. Designated services. 3
Tranche 2. Lawyers, notaries, other independent legal professionals and accountants when they prepare for or carry out transactions for their client concerning the following activities: 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 arrangements, and buying and selling of business entities. What does Tranche 2 mean for practitioners? How many will be affected? What does Tranche 2 mean for practitioners? In 2016, nearly seven in ten solicitors (69.0%) worked in private practice, followed by 15.9% of solicitors working in the corporate sector, and 10.0% in government In 2016, a majority of private practice firms were sole practitioners (73.0%), followed by 19.0% comprising firms with 2 to 4 partners, and 4.9% comprising firms with 5 to 10 partners. Of all private practice solicitors in 2016, nearly one third (30.3%) worked as sole practitioners, followed by around one in five solicitors working for firms with 40 or more partners (22.4%), and for firms with 2 to 4 partners (19.6%). 4
What does Tranche 2 mean for practitioners? Cost. Conflicts with ethical duties and professional obligations. The role of lawyers and the administration of justice. Awareness and education. The UK experience. What does Tranche 2 mean for legal profession regulators? Dual regulation. Potential role of regulators. The Law Council s work. Law Council s submission to AGD s Consultation Paper. Building on and utilising existing and robust regulation systems in the States and Territories. Lack of evidence of involvement of lawyers. Barristers. Regulation-lite model. No suspicious matter reporting. Leverage existing systems where possible. Leverage existing legal profession regulatory systems where possible. The Law Council s AML Working Group. 5
The state of play. AGD Consultation and cost-benefit analysis. Home Affairs department. Law Council continuing to engage with Government. Recap. Where did AML/CTF regulation come from? Australia s current AML regime. Tranche 2. What does Tranche 2 mean for practitioners? What does Tranche 2 mean for legal profession regulators? The Law Council s view on the extension of AML/CTF regulation to the legal profession. The state of play. Questions and comments? 6