News & Insights

Accountants in Australia are set to face new regulatory challenges as the scope and application of the Anti-Money Laundering and Counter-Terrorism Financing (AML / CTF) regime is proposed to be expanded. The anticipated new regulations will aim to help those in the profession identify and mitigate money laundering and terrorism financing risks, ensuring that trusted services will continue while adhering to stricter compliance requirements.

What is the AML / CTF regime?

Each year, billions of dirty dollars are generated from illegal activities and corrupt practices. Australia’s AML / CTF regime establishes a specific regulatory framework for businesses offering specific types of designated products and services, to help prevent money laundering, terrorism financing and other serious financial crimes.

AML and CTF laws are nothing new in Australia, having been legislatively introduced in 2006. Traditionally, these laws have targeted financial institutions, but recent Government consultations suggest that Accountants will soon be included as ‘tranche 2 entities’. This change acknowledges the critical role Accountants play in managing and advising on financial matters, which can be exploited for money laundering and terrorism financing.

What changes are proposed?

The Government has been consulting on two main aspects of the AML / CTF regime, including how to:

1. Simplify and modernise the current AML/CTF Rules – to make it easier for all businesses to meet their obligations; and
2. Address money laundering and terrorism financing risks in certain professions – proposing that the AML/CTF Rules should be expanded apply to particular industry groups including Accountants (being, “tranche 2 entities” along with Real Estate Agents, Conveyancers and Lawyers).

While these proposals have not yet been finalised and the amending legislation is still pending, the Government is currently seeking feedback on the practical impact on these “tranche 2 entities”.

Why include Accountants in the AML/CTF regime?

Accountants often maintain a close advisory relationship with their clients, offering guidance on both personal and business financial matters. However, this close involvement also exposes Accountants to potential exploitation, especially when clients engage in activities that may violate tax laws, AML/CTF regulations, or other criminality. This means there’s a risk Accountants may unwittingly facilitate money laundering or terrorism financing, or innocently provide the criminals’ required veneer of legitimacy. Examples of how this might occur include:

• Establishing arrangements that actually conceal the proceeds of crime;
• Creating complex structures that actually obfuscate the true ownership (or beneficial ownership) of assets; or
• Being reckless, indifferent or mis-instructed as to the clients’ activities and true sources of wealth.

Globally, the range of services provided by Accountants is recognised as high risk for money laundering exploitation, but Australia is one of only a few countries that does not presently regulate such sectors in its AML/CTF regime.

The regulation of Accountants as ‘tranche 2 entities’ aims to provide Accounting businesses with tools to interrupt the misuse of their legitimate services by criminals, and to help Accountants identify early indicators of suspicious transactions and criminality.

What might be the “designated services”?

The proposed AML/CTF reforms would potentially introduce a wide list of “designated services” performed by Accountants, being services that have been identified as posing a risk for money laundering and terrorism financing. The relevant “designated services” proposed to apply to Accountants include:

• Involvement in the buying and selling of real estate, including residential, commercial, agricultural properties, and leasing.
• Managing client money, securities, and other assets, such as trust accounts.
• Managing bank savings or securities accounts.
• Organising contributions for the creation, operation, or management of companies.
• Assisting with the creation, operation, or management of legal persons or legal arrangements, such as trusts.
• Involvement in the buying and selling of business entities.

How can my Accounting business prepare for these proposed changes?

Australia seems to be on a compressed timeline for the introduction of its expanded AML/CTF commitments, with an expected ‘hard deadline’ around mid 2025. As time to prepare for proper compliance may be tight, Accountants should start to think about the key issues now:

• Does your business undertake one – or any – of the likely new “designated services”?
• Does your business want to continue to undertake any of the likely new “designated services”? Are there any “designated services” that you could cease, so as to fall outside of the AML/CTF regime?
• What customer / client services do you offer? Are any of these services high risk?  Should any of these services been altered or removed from your business?
• What new file / matter opening processes will you need to implement, prior to providing your services?
• What identification and verification information is already collected about your customers and clients? How is it stored?  How often is it reviewed?
• How much do you “know” about your customers and clients, and their sources of wealth?
• What screening tools may be available for purchase to help your business comply?
• What processes do you already have in place to identify potentially suspicious activity and transactions?
• What record keeping practices are already in place in your business?
• Who in the business will take the lead to ensure AML/CTF compliance is properly and fully achieved?

Accountants should also start to consider how to handle the obvious tension between the industry-honoured concept of client confidentiality, versus the AML/CTF regime’s reporting obligations.

How can MK help my business prepare?

Whilst the introduction of the simplified (yet expanded) regime is still being refined, it’s likely that the changes will come into effect in early 2025.

The AML/CTF regime is complex and has a lot of policies, procedures and training that will need to be introduced. If businesses wait for the certainty of the introduction, the time to prepare relevant documentation and the significant costs involved in complying with the regime may become overwhelming, risking non-compliance by the due date.

As it stands, compliance with the AML/CTF regime has six key obligations:

1. Enrol with AUSTRAC
2. Develop and maintain an AML/CTF program tailored to your business
3. Conduct customer due diligence
4. Conduct ongoing customer due diligence
5. Report certain transactions and suspicious activity
6. Make and keep records.

Seeking advice? Contact Macpherson Kelley for assistance with all or any of the following:

• Advice on the steps you can be taking now to prepare for the anticipated changes;
• Foundational AML/CTF training seminars for your business and staff, outlining how the regime is anticipated to apply to Accounting businesses;
• Auditing your current products, services, practice and procedures, to ascertain the scope of “designated services”;
• Undertaking a risk assessment of your current business;
• Preparing the drafts of your required AML/CTF policies and Program documents; and
• Providing updates on the AML/CTF changes as they become known.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.