Tranche 2 is coming – what accountants need to know

19 October 2017

Money laundering and terrorism financing are serious financial crimes that pose a threat to Australia’s economic and financial stability and national security. Money laundering is the process of concealing the origins of illegally obtained money. Successful money laundering allows criminals to benefit from the profits of their crimes and reinvest into future criminal activity. Terrorist financing is the act of raising funds to supply terrorists with the resources needed to carry out their activities.   To combat these threats, Australia has implemented an AML/CTF (Anti-Money Laundering/Counter-Terrorism Financing) regime, known as the AML/CTF Act 2006. At current, this Act regulates those in financial businesses, including financial, gambling, bullion dealers and remittance services and requires businesses to comply with obligations that aim to mitigate risks related to money laundering and terrorism financing.   With a rise in both international and national ML/TF occurrences, in November 2016, the Australian Government launched a feasibility study into broadening the AML/CTF Act to additional industries, informally referring to the scheme as ‘tranche two’. Implementing tranche two would extend the regulations to non-financial businesses with similar vulnerabilities, such as the real estate industry and ‘gatekeeper industries’, such as accountants.  Transnational and Australian-based crime groups have increasingly been using financial system gate-keepers, such as accountants and lawyers to establish networks to facilitate money laundering and support criminal activity. The majority of victims are unaware of their exploitation due to a lack of identifying processes. Across the globe, the number of international jurisdictions that are including accountants in their AML/CTF regulations has increased, including countries such as the UK, USA, Canada, New Zealand and several states within the European Union. With international regulations increasing, the Australian Government has been receiving rising pressure to extend AML regulations. With an implementation announcement date set for early 2018, it’s important that those affected by tranche two understand how these changes will affect their business.

How will accountants benefit from being regulated under the AML/CTF regime? 

Under the current AML/CTF regulations, the finance industry bears the brunt of the burden associated with combatting money laundering and terrorism funding. Whilst these obligations increase the risk of detection for criminals seeking to launder illicit funds, it also increases the attractiveness of using non-regulated professionals (such as accountants) to facilitate financial crime. If accountants were to be included under the AML/CTF Act, they could benefit in the following ways: 
  • Strengthen your firm’s reputation, as well as contribute to strengthening Australia’s finance sector’s reputation both nationally and internationally. 
  • Reduce harm to your firm’s economy from ML/TF impacts as well as contribute to reducing harm to the Australian economy and society from ML/TF impacts.
  • Enhance security both within your firm and nationally. 
  • Contribute to strengthening Australia’s international reputation as a foreign business/investment destination. 

What are the obligations under the AML/CTF Act 2006? 

Under the AML/CTF Act 2006, reporting entities (or regulated businesses) have numerous obligations, including: 
  • Enrolling their business with AUSTRAC 
  • Conducting customer due diligence (CDD), including verification of identity 
  • Complying with several AML/CTF recordkeeping obligations 
  • Establishing and maintaining an AML/CTF program 
  • Maintaining ongoing CDD and reporting. 

How will Tranche 2 obligations affect Accountants and Lawyers? 

A recent InfoTrack survey found that the main concern for businesses who’ll be affected by tranche two was the regulatory impact it will have on the sector. Whilst the initial implementation will require more time and resources if you work with a trusted provider to help you streamline your due diligence process your business will be far better off in the long term. 

What can I do to prepare? 

The best way to prepare for the introduction of tranche two is to commence practising your customer due diligence today. Carrying out such practices even if AML/CTS obligations aren’t yet compulsory for you gives your business a competitive advantage, as well as ensuring that those who you are conducting business with can be trusted.    Interested in learning how InfoTrack can help you prepare for the implementation of Tranche 2? Book a demo today!

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About the author

Roseanne Perez

Rosey joined InfoTrack in 2015 and has a vast background in the legal industry spanning over 19 years. As Head of Products, Rosey is responsible for everything from market research initiatives and determining customer needs, to reviewing product specifications and requirements. Rosey works closely with InfoTrack’s development team and clients in order to deliver innovative solutions that are in line with customer needs. She maintains a constant line of communication with InfoTrack’s client base to keep her finger on the pulse and ensure she and her team are developing products that truly improve the lives of the clients they serve.