How to prepare for new anti-money laundering and counter-terrorism finance laws
The pay-off for being proactive about safeguarding your business from association with fraudulent or criminal behaviour will give you peace of mind and can act to increase trust among both existing and potential clients, writes Ches Rafferty.
In mid-March, the Australian Federal Police announced the launch of Taskforce Avarus, a new multi-agency operation to target criminals who it said are laundering tens of millions of dollars in Australia daily to fund criminal activities and support lavish lifestyles.
AFP Assistant Commissioner Stephen Dametto was blunt in his assessment of the syndicates involved, saying they acted on behalf of organised crime “…and rely on the expertise of professionals, such as lawyers and accountants, to help them evade law enforcement”.
For Australian lawyers, the risk of becoming unwittingly involved in criminal money laundering has never been greater. Australia has become a soft money laundering target for international crime gangs, as we are one of the few countries in the world yet to sign up for tougher anti-money laundering and counter-terrorism finance laws (AML-CTF) set by the global body, the Financial Action Task Force (FATF).
Currently, under Australian law, financial institutions, gambling operators and bullion dealers are required to report large or suspicious transactions to the Australian government financial intelligence agency Austrac. They are also required to perform “know your customer” (KYC) checks to make sure they know the true identity of their client and the real source of their money.
However, new AML-CTF laws called the Tranche Two reforms are on the agenda after a Senate committee recommended last year the federal government implement Tranche Two reforms that would bring lawyers, along with accountants and real estate agents, under the umbrella of the global AML-CTF system.
Tranche Two reforms could be tabled in Parliament this year, so preparing for the changes now would enable a smooth transition to a new regulatory regime.
To begin, it’s important to understand Australia’s current anti-money laundering and counter-terrorism laws and familiarise yourself with the proposed reforms. The government will likely conduct industry-wide consultation before the new laws are tabled, so monitoring that process will be valuable in anticipating how potential changes could affect your legal practice and client base.
Often, money launderers will use fake or stolen identities to cover their tracks, and in recent AFP money laundering raids, fake passports, fake driver’s licences, and stolen IDs have been seized, showing how easy it is for criminals to get their hands on these documents. Review your customer due diligence and proof-of-identity practices now so you have the systems and processes already in place when the changes are made.
Some lawyers already opt to verify their clients’ identities during onboarding, and there are digital platforms and apps that can simplify the process and minimise human error using artificial intelligence (AI) technology, which integrates with the Australian government’s Document Verification Service (DVS). This process can take seconds, as opposed to time-consuming manual ID service providers.
Assess the money laundering risk of your business or have an anti-money laundering (AML) company do one for you. There are several factors that can increase the risk profile of your business, including the types of clients you have, the size of the transactions, the source of client’s funds, and the client’s behaviour.
Although implementing and complying with any changes to the law will incur minor additional costs, preparing now will enable you to be ready for the upcoming changes, which are imminent.
Moreover, the pay-off for being proactive about safeguarding your business from association with fraudulent or criminal behaviour will give you peace of mind and can act to increase trust among both existing and potential clients.
Ches Rafferty is the chief executive of Scantek
Source: Lawyers Weekly