AML Tranche 2 and the legal profession

The possibility of criminal misappropriation escalates for lawyers and other legal practitioners such as  notaries and corporate formation agents. Criminals are attracted to lawyers because via association, they can swiftly establish the perception of legality, respectability, and reliability. A FATF Report from 2013 listed several of the  frequently seen methods  by which lawyers either purposefully or unwittingly assist with Money Laundering/Terrorism Financing (ML/TF) operations.

According to the Australian Criminal Intelligence Commission (ACIC), the majority of their inquiries into illicit marketing strategies show the participation of Designated Non-Financial Busineeses and Professions (DNFBPs),  such as bankers, attorneys, and accountants.

It reported that it had found “at least 185 persons who are aiding the operations of Australian Priority Organisation Targets (APOTs)” to  a recent Federal Senate hearing. These are the most dangerous criminal organisations that influence the Australian marketplace and constitute a significant concern for AML rules. It 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 the function attorneys 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. It was discovered that such gatekeepers appeal to criminals and organised mafia organisations because they allow them to obscure the connection between their holdings and organised wrongdoing.

Although attorneys and other legal experts are not expressly mentioned in the following Transparency International Australia (TIA) statement, their 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 thorough 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 certain 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 flak for not adhering to international norms and standards of conduct, and in some aspects, falls far behind them. As per FATF’s 2015 Mutual Assessment Report, Australia is one of the only three  countries which do not comply with the organisation’s most recent recommendations. The nation is at risk of  being non-compliant and failing to execute even a single  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 practitioners working in Australia need to implement Tranche 2 because they are being monitored by the authorities as Australia becomes an increasingly attractive market for money laundering and terrorism financing. If you are a lawyer or a partner at a legal firm, you, and your firm should take necessary steps to comply with Tranche 2 as the legal landscape in Australia relating to this standard will see rapid change.

Staying secure through Momenta’s advisory

AML/CFT compliance is already mandatory for certain industries within Australia, and no business should risk its future by avoiding key compliance regulations. Compliance teams can benefit from the skillsets and with the help of specialist teams. Momenta have worked with multiple companies across industries globally, successfully building their contingent workforce. Momenta can help 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.

Using the expertise of  specialist risk and compliance resourcing can offer many firms breathing space in terms of resolving the  issues their AML controls may have. Setting up the right teams to ensure any gaps are found will be key for firms this year as regulators place more pressure on financial service participants to strengthen current compliance systems and controls.

Momenta Group are addressing genuine industry issues in AML/CTF based on over 30 years of experience collaborating with small and large companies. The solution to common compliance concerns is an experienced and specialized workforce. Momenta is ready to provide a small or large contingent team to companies regardless of size. We offer skilled and experienced industry experts with in-depth knowledge about the continuously changing requirements of relevant industry  sectors.

As your business  is  impacted by upcoming and additional regulatory/ compliance pressures and needs additional staffing support in your 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.
  • “Tranche II Is Coming: Legal Professionals as Gatekeepers.” Law Society Journal, 2 Feb. 2022, Accessed 3 Jan. 2023.
  • 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.
  • McComish, Patrick. “AML/CTF Tranche 2: How to Prepare Your Practice.” FeeSynergy Collect, 14 June 2019, Accessed 3 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 3 Jan. 2023.
  • Don’t Get Blindsided by New Regulations. 2017. Accessed 6 Dec. 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.