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Background
Designated non-financial businesses and professions (DNFBPs) such as accountants, lawyers and real estate agents are largely exempt from regulation under Australia’s anti-money laundering/counter-terrorism financing (AML/CTF) regime. This is inconsistent with the international AML/CTF standards developed and promoted by the Financial Action Task Force (FATF) and is considered to be a significant vulnerability in Australia’s efforts to detect and prevent money laundering and terrorism financing (ML/TF). However, AML/CTF regulation is unpopular in Australia with many DNFBPs warning of the adverse impact that any extension of Australia’s AML/CTF regime could have upon their professions.
In August 2014, the FATF in collaboration with the regional AML body, the Asia–Pacific Group on Money Laundering (APG), undertook a mutual evaluation of the effectiveness of and compliance with the FATF recommendations for Australia’s AML/CTF regime. In April 2015, the FATF released its fourth Mutual Evaluation Report of Australia (MER). Overall, Australia’s compliance with the FATF recommendations and the effectiveness of its AML/CTF regime was satisfactory. However, there were some areas, notably in regard to DNFBPs, where Australia was non-compliant with the FATF recommendations and exposed to ML/TF risks (FATF & APG, 2015).
The fourth MER on Australia revealed similar concerns to those identified in Australia’s third mutual evaluation in 2005 (FATF, 2005), namely, that Australia had not initiated AML/CTF compliance obligations for the majority of DNFBPs. Although the extension of the Commonwealth Anti-Money Laundering and Counter-Terrorism Financing Act, 2006 (AML/CTF Act) to DNFBPs has been anticipated for several years, reforms to the AML/CTF Act, commonly referred to as Tranche Two, had not been implemented. Tranche Two reforms are deeply unpopular amongst some DNFBPs, particularly the legal profession, and this has created speculation of a lack of political will to implement the reforms (Lynch, 2015).
Despite resistance from some DNFBPs, Lynch (2015) observes there is a general feeling that Tranche Two reform is inevitable. In a statement by the Australian Government in 2007, the Attorney-General’s Department (AGD) announced that DNFBPs would be affected by the Tranche Two reforms. Although the process was delayed following a change of Government in the 2007 Federal Election, and was largely suspended throughout 2009 in the wake of the global financial crisis, resumption of the process was anticipated from 2010 onward (Law Council of Australia, 2009,...