Australian Consultation on DNFBPs

Australian Consultation on DNFBPs

On 29 April 2016, the Minister for Justice released the Report on the Statutory Review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and Associated Rules and Regulations.

The report contains 84 recommendations to streamline and strengthen Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime.

Recommendation 4.6 of the report states that the Attorney-General’s Department and AUSTRAC, in consultation with industry, should:

  • Develop options for regulating lawyers, conveyancers, accountants, high-value dealers, real estate agents and trust and company service providers under the AML/CTF Act, and
  • Conduct a cost-benefit analysis of the regulatory options for regulating lawyers, conveyancers, accountants, high-value dealers, real estate agents and trust and company service providers under the AML/CTF Act.

In October 2016, the Attorney-General’s Department issued a draft project plan for consultation, design and implementation for the AML/CTF reforms that will continue through to 2019.

Consultation Details

On the 26th November 2016, the Attorney-General’s Department announced it was conducting a consultation on regulatory models for lawyers, conveyancers, accountants, high-value dealers, real estate agents, trust and company service providers under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act), https://www.ag.gov.au/Consultations/Pages/amlctf-statutory-review-implementation.aspx and published five consultation papers – one covering each type of Designated Non-Financial Business or Profession (DNFBP).

Each consultation paper is set out providing an overview of:

  • What the benefits of regulation are;
  • What the Money Laundering and Terrorist Financing vulnerabilities are for the type of DNFBP;
  • How the type of DNFBP regulated overseas;
  • Existing regulation of the type of DNFBP in Australia;
  • Existing AML/CTF obligation on the type of DNFBP in Australia;
  • The type of services offered by the DNFBP that should be regulated;
  • How AML/CTF regulation would impact the DNFBP; and
  • The model for regulation across the range of AML/CTF Australian obligations.

Public submissions to the consultations close on the 31st January 2017.

After written submissions have been received, roundtable discussions with industry representatives and other interested stakeholders will be held to discuss the issues raised in the submissions responding to the consultation paper.

The feedback from the submissions and the roundtable discussions will be considered as part of designing a preferred model for AML/CTF regulation of the sector.

The roundtables will be used to facilitate a cost-benefit analysis to assess the benefits of regulating these sectors relative to regulatory costs, and to make an informed decision about any future regulation.

Industry will also be consulted about the conduct of the cost-benefit analysis.

Consultation Questions

The questions posed by each DNFBP consultation paper are split into various topics:

Why regulate under the AML/CTF regime?

  • What products and services offered by the DNFBP pose a ML/TF risk?
  • Do any of the products and services provided and identified by the FATF as requiring regulation pose a low ML/TF risk in the Australian context?
  • What are the benefits of requiring the DNFBP to comply with AML/CTF obligations when offering products or performing services that may pose an ML/TF risk?

What are the existing Laws that regulate the DNFBP?

  • To what extent do existing mechanisms that allow for regulatory oversight of DNFBPs mitigate any ML/TF risks that may be posed by the products and services provided?

What are the obligations under the AML/CTF Act?

  • What lessons can be learned from the experience of regulating DNFBPs under AML/CTF regimes in other jurisdictions?

What DNFBP Products and Services should be regulated?

  • What products and services should be regulated under the AML/CTF regime?

How would AML/CTF obligations affect the DNFBP?

  • How would AML/CTF obligations impact the DNFBPs?
  • What other aspects of the DNFBP sector /business would be impacted by AML/CTF obligations?

Model for Regulation?

Within the consultation papers the model for regulation is set out and specific questions asked regarding specific obligations under the Australian AML/CTF regime:

  • Enrolment with AUSTRAC
  • Customer due diligence
  • Ongoing customer due diligence
  • Reporting obligations
  • Internal controls – AML/CTF programs
  • Record-keeping
  • Monitoring and supervision

Conclusion

In publishing the five consultation papers the Attorney-General’s Department has made an important first step on the road to addressing one of the main weaknesses identified by the FATF’s mutual evaluation of Australia in 2014.

The consultations on first read appear to address all the main issues associated with introducing regulation into each of the DNFBPs.

Industry representatives and other interested stakeholders are being offered an opportunity to input into an important set of AML/CTF reforms that in some people’s view have been a long time coming.

Initialism and its partners are planning to respond to the consultations and we would urge those that have an interest in Australia’s AML/CTF regime do the same.

However, the jury is still out on whether industry representatives and other interested stakeholders have just been given an early Christmas present or with all the work involved in responding to five consultations Christmas has just been cancelled.