Can advisers avoid another layer of compliance?

Lawyers, accountants and financial advisers should not be able to use additional cost as an excuse to resist the extension of Australia’s Anti-Money Laundering/Counter Terrorism Financing regime, according to evidence provided to a Parliament Committee this week.

Three expert witnesses told the Senate Legal and Constitutional Affairs Committee that contrary to claims made by the Law Society of Australia (LCA), the cost of extending the current regime would be minimal.

The evidence provided to the expert committee comes against the background of the Financial Planning Association (FPA) recommending that financial advisers be excluded from the proposed extension of the regime.

The LCA claimed that the proposed legislative extension might cost law firms as much as an extra $119,000 a year while AML Experts managing director, Paddy Oliver said the firm’s own analysis and experience in assisting with implementation in New Zealand suggested it was closer to $10,000 a year for a small law firm.

What is more Oliver and Artic Intelligence’s Anthony Quinn claimed Australia’s hopes of becoming a regional financial centre could be placed at risk by being placed on a “grey list” in similar fashion to Turkey because it, with Haiti and Madagascar had not yet moved extend the AML/CTF regime.

The committee was also told that one of the weaknesses of the current Australian AML/CTF regime was that it failed to hold directors and executives within corporations individually accountable.

AML Experts consultant, Neil Young said that while the regime imposed penalties on corporate entities it was not geared towards imposing penalties on individuals within those corporate entities.

Arguing its case for the exclusion of financial planners, the FPA recommended The FPA “the priority area should be implementing tranche 2 which would see the regulatory obligation extended to Designated Non-Financial Business and Professions (DNFBPs), such as Lawyers, accountants and real estate agents”.

“As financial planners are already required to have in place an AML/CTF Program B, and comply with the current Know Your Client rules when providing a designated service, any new obligations put in place for tranche 2 should not extend to financial planners and item 54 reporting entities,” the FPA’s submission said.

“Whilst financial planners direct clients to certain types of businesses to establish trusts appropriate for families, estate planning, company set up etc or to assist with the purchase of an investment property for example, financial planners do not provide these services and are prohibited by law from receiving a fee for referring clients to any specific business entity,” it said.

“Financial planners will often suggest clients seek professional assistance for areas they cannot assist with, for example setting up a Trust. Furthermore, whilst financial planners can recommend the use of direct property as an asset class within their overall portfolio of assets, they are not able to advise on the actual property to purchase.”

“Therefore, real estate agents are the key providers who assist consumers in the actual investment/transaction in a property, which is often where large sums of money are spent. Purchasing property could potentially be used to shelter assets or launder criminal wealth.”