The AML/CTF Act was passed in 2006 and was phased in over two years. Known as Tranche 1, the reforms commenced in 2008 and regulated the bullion, gambling, financial and remittance service industries where the conversion and transfer of physical and electronic forms of money were seen as vulnerable to money laundering and terrorism financing. Lawyer’s trust accounts were specifically exempt from the Tranche 1 regime.
Obligations under Tranche 1 included:
- identification and verification: reporting entities must identify and verify the identity of clients before providing the client with any service;
- AUSTRAC reporting: reporting entities must report all suspicious matters, certain transactions above a threshold amount and international funds transfer instructions to AUSTRAC. AUSTRAC is entitled to share information with domestic security and law enforcement agencies, and some international counterparts;
- AML/CTF Program: reporting entities must develop and implement AML/CTF programs that are designed to identify, mitigate and manage money laundering and terrorism financing;
- Record keeping: reporting entities must make and retain records and certain client documents for seven years;
In 2007 there was an expectation the Tranche 1 obligations would be extended to lawyers, accountants, real estate agents and other so called ‘gate keepers’, however the change of government at the federal election and the onset of the global financial crisis interfered with the implementation.
Post GFC, in 2012 the potential extension of Tranche 2 met resistance from the legal profession and stakeholders generally and stalled.
In 2015 the Financial Action Task Force (FATF) conducted a mutual evaluation of the Australian AML/CTF regime and criticised Australia’s omission of ‘tranche 2’ entities from its AML/CTF regime.
2016 saw a statutory review of the Anti-Money Laundering and Counter Terrorism Financing Act 2006. The Review included Recommendation 4.6 which proposed developing options for the regulation of lawyers and conducting a cost-benefit analysis of those options.
In 2017, the Law Council of Australia and its constituent bodies responded to the Government’s “Consultation Paper: Legal practitioners and conveyancers: a model for regulation under Australia’s anti-money laundering and counter-terrorism financing regime”. This response included results of an implementation and ongoing cost survey conducted by the QLS in 2016 and 2017, which demonstrated significant costs to the profession associated with the expansion of the AML/CTF regime.
The expected 2020 FATF follow up report on Australia’s compliance with AML/CTF laws after the 2015 mutual evaluation was paused indefinitely by FATF in October 2019. Australia was scheduled for further review by FATF no earlier than 2027.
In 2022 the Senate conducted a Committee Inquiry into AML/CTF regulation and recommended expediting consultation on the implementation of Tranche 2.
In 2023 the newly elected Government commenced consultation on the form of Tranche 2 regulation, leading to the amendment Act passed by the Australian Parliament in late 2024, with obligations to commence in 2026.
