Anti-money laundering vulnerabilities analysis
9 October 2023
Money laundering and terrorism financing are serious crimes with devastating consequences. The Australian Criminal Intelligence Commission reports that serious and organised crime groups are increasingly turning to the professions to exploit specialist knowledge and skills to launder profits within complex and globalised financial systems.
Anti-money laundering and counter terrorism financing (AML/CTF) regulation aspires to be risk based at all levels. This is the position taken by the leading global agency the Financial Action Task Force (FATF). The Law Council of Australia supports a risk based approach to regulation.
The Law Council recently commissioned an independent expert to analyse the vulnerabilities of the Australian legal profession to money laundering and terrorism financing risk. The report by New Zealand law firm Russ + Associates, Vulnerabilities Analysis—Money Laundering and Terrorism Financing: The Australian Legal Profession is available to read and download here.
The report documents the positive attitudes and behaviours among the profession towards integrity, risk awareness and aversion, and to fulfilling statutory and professional obligations. While these traits emerge clearly, some vulnerabilities have been identified. The report demonstrates that these vulnerabilities vary to a degree across jurisdictions and practice types and activities. The report does not support an overall assessment of the Australian legal profession as high risk for money laundering or terrorism financing.
Importantly, the report shows that the legal profession is proactively working to mitigate the risk of being a party to money laundering and that, where vulnerabilities exist, those not already being addressed, can be addressed through augmentation of existing controls to which the Australian profession is already subjected.
To first establish baseline vulnerabilities that could signify inherent risk, Russ + Associates drew on literature produced by FATF which documents the risks faced by “Designated Non Financial Businesses and Professions” including legal practitioners. The authors also drew on their own extensive AML/CTF experience in New Zealand and upon discussions with the Australian Federal Police and AUSTRAC.
Russ + Associates conducted over 90 meetings, with more than 200 people, including practitioners, regulators, insurers, regional and state representative bodies across the country. The aim was to analyse these vulnerabilities in practice. Practitioners participated on the basis of their practice types, sizes and locations and an alignment with the FATF’s recommended areas for legal practitioner regulation.
The results of these meetings contributed to the authors’ assessment of the risk based measures and controls that currently apply to the Australian legal profession which could mitigate the inherent vulnerabilities of practitioners to facilitating money laundering and terrorism financing. Residual vulnerabilities were accordingly identified and are documented in this report.
The Law Council is actively working on next steps with the profession and Government to address the identified vulnerabilities so as to maintain and improve AML/CTF measures that are effective, proportionate to risk, and closely aligned with existing risk management practices.