May 2006 Top Story:
***MLI ARCHIVE***
Industries continue to seek exemptions:
The consultation period may be over, but it has not stopped a number of industry bodies lobbying the government to seek exemptions and changes on a number of issues related to the AML/CTF draft legislation.
After pressure mostly from the accountancy profession, the government last month agreed to review the definitions of designated services within the draft anti-money laundering bill to ensure they did not capture activities that were broader than those initially stipulated by the Financial Action Task Force in October.
Accountancy bodies, including the Institute of Chartered Accountants and CPA Australia, are now hopeful that a review of the draft will exclude them from the first tranche of legislation and effectively reduce their members’ compliance burden.
Designated services likely to be cut from the list of entities include trust accounting and trade credit. Accountants expect the review to clarify that businesses extending trade credit and trust account transactions will not be considered reporting entities under the first tranche of AML/CTF legislation.
The ICA has been concerned that under the original proposal, those members who provided trust account services would have to perform customer identification procedures on clients and report suspicious matters as well as implement the complex AML/CFT program.
Any business that provides a loan, which included deferred payment facilities and inter-company loans, would be captured as a reporting entity under the draft bill.
Companies and utilities including Qantas, Virgin and Telstra may yet be forced to comply with the reporting and identification rules if these services are included.
ICA chief executive Graham Meyer said that if the bill had remained unchanged “it would have produced complex, overly burdensome regulation that would impose unnecessary compliance burdens on businesses, particularly small business”.
“If they [the government] deliver on everything that was discussed in the revised draft of the bill, we’ll be pretty happy,” said CPA Australia business policy adviser Judy Hartcher.
The ICA wants any proposed legislation to allow its members to rely on the customer due diligence already undertaken by other reporting entities and government agencies.
The legal profession is having a tougher time with the government, with lawyers concerned that any loss of legal professional privilege might erode client confidence in lawyers as well as adding significant costs to legal practices.
The Law Council of Australia has said it will do everything in its power to protect privilege. LCA president John North said it would even be prepared to test the legislation on a constitutional basis.
“For the whole of society to work, it is absolutely vital that our clients have confidence in us because they tell us things that enable justice to prevail. That is something so crucial, so vital,” he said.
Company secretaries have also weighed into the argument warning that small businesses, especially rural ones, could face huge compliance costs and potential criminal sanctions under the proposed legislation.
According to Chartered Secretaries Australia, the proposed laws will punish small businesses in remote areas that had become agencies providing financial services after the banks pulled out.
CSA said businesses potentially affected by the proposed rules would include newsagencies and pharmacies acting for banks or Western Union agents issuing travellers cheques.
It has also warned that big businesses would suffer as well, by preventing different units in an entity from reporting as a single unit. Law firm Allens Arthur Robinson has also sought clarification in this area, requesting that inter-company tip-offs be exempted from the laws.
As part of its submission to the Senate Legal and Constitutional Committee, Allens said reporting entities that were part of the same corporate group should be allowed to share information on suspicious activities rather than solely reporting it to Austrac.
“If a reporting entity, and that could be any of a number of reporting entities within the group, makes a suspicious matter report under the legislation, it can’t tell anyone else except Austrac about that,” said Anna Lenahan, a partner at AAR.
“What if you are one entity in one of these groups and you are really suspicious about something and need to report it?”
According to the AAR submission, taking the existing approach would not minimise the chance of a company unwittingly laundering money.
As a matter of sound business practice and risk management, if one member of a corporate group has information relevant to an offence or attempted offence it should be able to advise other members of the group of that suspicion, for example, to minimise the likelihood of offences being perpetrated across the group or another member of the group unwittingly facilitating a money laundering or terrorist financing offence,” Peter Jones, a partner at Allens, wrote in the submission.
A revised package of the draft bill, including rules and guidelines, is due for release later this month. The government has said there will be a further three weeks of consultation with industry before the government completes the bill.
DelMonte Publications May 2006
