In a submission to the Legal and Constitutional Affairs Legislation Committee inquiry into the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 [Provisions], the association said it believes it is essential that Australia has in place a robust anti-money laundering and counter-terrorism financing (AML/CTF) regime.
However, it stated the resources required by tranche two entities to build, implement and monitor their AML/CTF programs should not be underestimated.
“Especially for professional service providers (PSPs) who we believe will be predominantly small-to-medium businesses. Currently, many of these PSPs are facing significant challenges in their own businesses, including skills shortages and operating in a challenging economic environment,” it said.
“Further, some sectors are already responding to or implementing other government reforms, including new compliance programs, further stretching available human and financial resources.”
It continued that to ensure the effective implementation of the AML/CTF measures and avoid unnecessary regulatory burdens and costs on new reporting entities, it recommends a whole-of-government approach to consider all current and pending regulatory reforms impacting tranche two entities.
“A plan for implementation for all relevant reforms should then be developed to ensure that small-to-medium businesses can meet their statutory obligations and, importantly, support the successful implementation of these reforms,” it said.
“Successful implementation of the reformed AML/CTF regime will also be dependent on AUSTRAC taking a proactive role, including working closely with impacted sectors through their representative professional associations.”
Furthermore, the association said the extension of the AML/CTF regime to include tranche two entities would also significantly expand the range of regulated designated services, increasing the risk of some services being unintentionally captured.
It said it is also concerned about the proposal to create a new service where a professional service provider provides a “legal arrangement” with a registered office address where the customer does not have a true office address or a physical presence in Australia.
“In Australia, approximately two-thirds of SMSFs have a corporate trustee, noting both the SMSF and the corporate trustee (company) will be captured as ‘legal arrangements’ under the expanded regime.”
“There are many benefits to using a corporate trustee, including the perpetual succession of the SMSF. It is common for the accountant to be listed as the registered office for the corporate trustee. This practice ensures there is a system for addressing important or time-sensitive correspondence and reduces the risk of the address not being updated if the customer moved residences, for example.”
The submission continued that the SMSF and corporate trustee have been established by the customers to save and prepare for their retirement, not to operate a business.
“Each year the SMSF must be audited and lodge an annual return with the ATO. The funds within the SMSF cannot be accessed until the customer meets a condition of release, such as reaching preservation age or turning 65 years old,” it said.
“Given these facts and the associated low risk with this activity, we believe acting as a registered office for a customer’s corporate trustee of an SMSF should be exempt as a designated service.”
