Australia’s AML/CTF Reforms: What Lawyers Need to Know

Kirsten Bromley, Head of Privacy APAC at GBG Plc, provides this update.

On 20 April 2023, the Attorney General’s Department announced consultations on proposed reforms to Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime. 

These reforms aim to expand the scope of AML/CTF legislation to cover additional high-risk services, known as Tranche 2 services. These include services provided by lawyers, accountants, trust and company service providers, real estate agents, and dealers in precious metals and stones.

Key objectives of the proposed reforms

The reforms seek to:

• Simplify and modernise the AML/CTF regime to align with international standards and best practices;
• Reduce complexity and regulatory burden on industries;
• Ensure the regime is adaptive to evolving threat environments;
• Strengthen Australian businesses and sectors against exploitation by serious organised criminals.

Following a second round of consultations that concluded on 15 June 2024, the final draft of the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 was presented to Parliament by Attorney General Mark Dreyfus on 11 September 2024.

As the Bill progresses through Parliament, the legal sector must assess the implications for their businesses. This article provides an overview of new obligations for lawyers and guidance on how to set up an effective AML/CTF program.

Step 1: Assess if your services are ‘Designated’

The first step is determining whether the services you provide meet the criteria for a “designated service” under the AML/CTF Act.

AUSTRAC defines designated services as those that pose a potential risk for money laundering and terrorism financing. Certain services, such as auditing financial statements, representing clients in legal proceedings, or providing pure advisory work with no underlying transaction, are not considered high-risk and, therefore, not regulated under the proposed changes.

The proposed reforms list eight designated services specifically for the legal sector, which can be reviewed in the appendix.

Step 2: Understanding your obligations

If your business provides a designated service, here are the key obligations under the new AML/CTF requirements:

• Enrol with AUSTRAC: ensure your business is properly registered;
• Develop and maintain an AML/CTF program: this program will outline your processes for compliance;
• Conduct customer due diligence (CDD): you must verify the identity and determine the risk level of your clients before providing services;
• Ongoing customer due diligence (OCDD): regularly monitor for changes to your clients’ risk profiles to ensure they are up-to-date;
• Report suspicious activity: certain transactions and suspicious activities must be reported to AUSTRAC;
• Recordkeeping: maintain accurate records of all customer interactions and transactions.

Step 3: Tailoring your compliance program

Your approach to managing AML/CTF obligations should be guided by the risk level and volume of services you provide. Higher-risk services demand more rigorous customer verification, while businesses handling a higher volume of transactions may need automated solutions to minimise manual effort.

Key considerations for your AML/CTF program:

• Risk: evaluate your risk exposure by analysing the services you offer and the specific characteristics of your client base.
• Efficiency: simplify customer due diligence and ensure clear, concise records for reporting and auditing.
• Technology: the right service provider can help automate identity verification and ongoing monitoring, making compliance effortless.

Learn more about the latest changes in Australia’s AML/CTF laws and their impact on legal practices. Fill out the form if you need additional information for your firm.