AML Tranche 2 and the legal market

AML Tranche 2 legislation means that the risk of criminal misappropriation escalates for lawyers and other lawful practitioners such as notaries and corporate formation agents.

Their assistance can be utilised to help with a variety of illegal financial transactions and money laundering while maintaining an appearance of legitimacy  Criminals are attracted to the services of lawyers because they can be used to swiftly establish their legality, respectability, and reliability.

According to the Australian Criminal Intelligence Commission (ACIC), most of their inquiries into illicit marketing strategies show the participation of Designated Non- Financial Businesses and Professionals (DNFBPs), including bankers, lawyers, and accountants. It reported that it had found “at least 185 persons who are aiding the operations of Australian Priority Organisation Targets (APOTs)” to the senate hearing. These are amongst the most dangerous criminal organisations that influence the Australian marketplace and constitute a significant concern for AML rules. It further said that “about one-quarter of these 185 mediators are attorneys, financial experts, accountants, or realtors.” (Legal and Constitutional Affairs References Committee, 2022).

The Australian Federal Police (AFP), also provided testimony to the same committee, indicating that lawyers are frequently involved in their larger organised crime organisations and asset seizure operations. You will see attorneys, accountants, and real estate agents—not that’s unusual, it said. Such gatekeepers appeal to criminals and organised crime  organisations because they allow them to obscure the connection between their holdings and organised wrongdoing.

 Lawyers and other legal experts services may contribute to the issue:

“We are witnessing the growth of professional service organisations whose business strategy is to help foreign persons or entities find a nominee director and help register Australian corporations that may later be employed as a means of money laundering.” (Legal and Constitutional Affairs References Committee, 2022).

Inadequate Legislative Laws

The Law Council responded to an AUSTRAC discussion paper on DNFBP coverage by publishing a  study outlining the major current laws and guidelines and the lack of crucial AML requirements. Although the research emphasised the effectiveness of present regulations, it also acknowledged that the regulatory environment had  significant shortcomings. The majority of the loopholes resulted from insufficient enforcement:

Lawyers who knowingly or unknowingly let money laundering crimes take place by not conducting adequate investigations might face criminal charges under Division 400. Despite the implementation of Division 400 of the Crimes Act and ten years of the AML/CTF Act, the Constitutional Court is not aware of any prosecutions of Australian lawyers for violating these requirements.”.  (Law Council of Australia, 2017)

It further added that:

The government has been heavily chastised for not enforcing the current standards of foreign investment legislation. According to a 2014 House of Representatives investigation, there have been no convictions for violating rules since 2006, and the fines enforced have been ineffective .” (Law Council of Australia, 2017)

Commitment to the Global Protocol

Australia consistently receives criticism  for not fully adhering to international norms, and in this instance, falls far behind them. As per FATF’s 2015 Mutual Assessment Report, Australia is one of only three sovereign states  which do not comply with the organisation’s most recent recommendations. Australia is accused  of being non-compliant and failing to execute even one AML guideline for the DNFBP industry. Australia continues to be tardy with its execution, given its current failures to keep its commitments to increase its regulatory coverage (FATF, 2015).

The Australian Panel expressed their viewpoint at the G20 Summit in October 2021 by saying:

“The Commonwealth Government has long expressed its dedication to the FATF and putting Tranche 2 reforms into effect. Instead of debating whether to execute these policies, the discussion should focus on how to accomplish it.” (Ross & Yates, 2022)

AML Tranche 2 to disrupt legal landscape in Australia

Professional service providers such as legal practices working in Australia will be required  to implement Tranche 2 legislation because they are being monitored by the authorities as Australia becomes an increasingly attractive relative market for money laundering and terrorism financing. If you are a lawyer or a partner at a legal firm, you should consider taking the  necessary steps to comply with Tranche 2 legislation as the legal landscape in Australia  will rapidly evolve.

Staying secure through Momenta’s advisory

AML/CFT compliance is already mandatory for certain industries within Australia and no business can risk its future by avoiding pending key compliance regulations. Compliance teams can work cohesively with the help of contingent teams. Momenta have worked closely with many companies across various industries globally, successfully building and supporting their contingent and permanent workforce. Momenta can  assist as your business  is impacted by additional regulatory or compliance pressures and needs additional staffing support within your claims handling and risk/compliance departments. industries.

Using the expertise of contingent resourcing can offer  breathing space in terms of resolving any issues their AML controls may have. Setting up the right teams to ensure any gaps are found will be key for firms  within this revised regulatory environment as  additional pressure is generated to strengthen current compliance systems and controls.

Momenta Group are addressing genuine issues in AML/CFT based on our 30 years of experience in collaborating with small and large companies. The solution to common compliance concerns is often an experienced outsourced workforce. Momenta is ready to provide a  contingent workforce of any scale . Momenta offer skilled and experienced industry experts with in-depth knowledge  of the continuously changing requirements of multiple  sectors.

If your business has been impacted by additional regulatory or compliance pressures and needs additional staffing support in your claims handling and risk/compliance departments, speak to us to see how we can help in supplying experienced and effective members to your team.


 Works cited: 
  • (2015). Mutual Evaluation Report Australia 2015. FATF.
  • Law Council of Australia. (2017). Response to Consultation Paper: Legal practitioners and conveyancers: a model for regulation under Australia’s anti-money laundering and counterterrorism financing regime. Law Council of Australia.
  • Legal and Constitutional Affairs References Committee. (2022). The adequacy and efficacy of Australia’s anti-money laundering and counterterrorism financing (AML/CTF) regime. Legal and Constitutional Affairs References Committee.
  • “Don’t Get Blindsided by New Regulations.” 2017. Accessed 6 Dec. 2022.
  • Momenta Group. “What Will AML Tranche 2 Mean for Your Business.” Momenta, 6 Oct. 2022, Accessed 3 Jan. 2023.
  • Moody’s Analytics. “KYC Insights / Blog / the Tranche 2 Anti-Money Laundering Reforms in Australia.”, 5 Apr. 2022, Accessed 10 Nov. 2022.
  • Ross, Anna, and Tegan Harrington. “AML and CTF Gatekeeper Reform: What Could “Tranche 2” Reforms Look like in Australia?” Corrs Chambers Westgarth, 27 June 2022, Accessed 3 Jan. 2023.
  • Ross, A., Yates, D., Harrington, T. and Santos, B.D., 2022. Money laundering reform recommendations for ‘gatekeeper professions’. Governance Directions, 74(4), pp.504-507.