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Garreth Hanley:
This is With Interest, a business finance and Accounting News podcast, brought to you by CPA Australia.
Neville Birthisel:
Welcome to CPA Australia's With Interest. I'm Neville Birthisel, Policy Advisor, Regulation and Standards, here at CPA Australia, and today I'm joined by Adrian Verdnik as we explore the anti-money laundering and counter-terrorism financing obligations that will apply to many accountants from next year.
Adrian is the section leader of the national banking and financial services practice at law firm, Hall and Wilcox. Adrian's financial services law practice covers superannuation, managed funds, insurance and financial advice. His work includes both advisory and transactional services.
He works for a variety of participants in the financial services industry, including issuers, investment professionals and service providers. Welcome to With Interest, Adrian.
Adrian Verdnik:
Thank you, Neville.
Neville Birthisel:
With the changes to AML CTF legislation, the whole cohort of entities estimated by the regulator AUSTRAC to be around 80,000 are being brought into the AML CTF regime. These are entities that may have limited knowledge of AML or indeed AUSTRAC. Can you tell us a bit more about the new regime and how our members will know if they're part of it?
Adrian Verdnik:
What we call the tranche two reforms to the AML CTF regime will bring into the regime professional services providers, and that includes accountants and some real estate agents and lawyers, and it will regulate those who provide what is known as designated services. Designated services in the case of the professions can be assisting clients with legal arrangements. It could be restructuring, it could be certain simple services like providing a registered office for a client, assisting to establish trusts, powers of attorney and so on, or it could be more complex arrangements, so assisting with restructures and financing transactions and so on.
So, there's a range of services that professionals such as accountants ordinarily provide as part of their business as usual practice that will be designated services and accountants will be regulated in respect to those designated services. So, they'll have to enroll as reporting entities with AUSTRAC being the regulator that regulates anti-money laundering and counter-terrorism finance. And then there will be obligations that apply to them as providers of designated services.
Neville Birthisel:
It sounds like it goes beyond just the $10,000 transaction threshold that most people are familiar with.
Adrian Verdnik:
Reporting those kind of transactions is part of the reporting regime, but you provide designated services notwithstanding that you don't necessarily have involvement with those threshold transactions. So, some simple arrangements and assisting with simple arrangements will be a designated service. There is a common misconception that AML CTF will only apply to such threshold transactions, but it's much more than that.
That is one of the reporting obligations, but it's a form of KYC, know your client and ongoing due diligence that to some extent accountants will be familiar with through their professional and ethical standards, but it's probably a bit more enhanced than that, it would be fair to say.
Neville Birthisel:
How can members go about checking if their services are designated services?
Adrian Verdnik:
The list of designated services that is set out in the tranche two reforms is comprehensive, but there is guidance from AUSTRAC that gives a bit more clarity around whether certain advisory services are provided and so on. AUSTRAC itself provides various tools that people can use to self-assess whether they are going to be providers of designated services and therefore, caught by the regime.
Firms such as ours are trying to assist the industry by providing tools and flow charts and decision trees that the industry can use to determine whether you are likely to be caught by the new regime and if so, what some of the obligations are from there. There's going to be a range of publicly available tools. Of course, there's going to be support from the likes of CPA and ourselves with workshops which are coming up at the start of 2026. And then there should be a range of online tools as well.
Neville Birthisel:
If the services they're providing are designated services, what should our members be doing right now?
Adrian Verdnik:
Well, right now the preliminary work is to consider whether you are providing any of those designated services. The entry to the regime commences from the 1st of July of 2026 and there's no ability to enrol before March, but members can start turning their minds to whether they do provide designated services by looking at some of the publicly available information from AUSTRAC and through CPA. And then considering what the obligations are going to be, and particularly one of the key features of the regime is the requirement to have an AML CTF program that conducts a risk assessment of the designated services.
And given the designated services that are being provided, the likely anti-money laundering and counterterrorism finance risk is low and then having procedures for ongoing customer due diligence that are commensurate with that low risk. Or if the risk associated with the designated services such as more complex transactions, some offshore activities might cause the AML CTF risk to be a bit higher and then calibrating some of the initial KYC checks and also some of the ongoing due diligence according to that risk assessment.
Members will be familiar with the idea of risk management and risk assessment in their business. This is a further component of risk assessment in the business that's really focused on that MLTF risk and trying to get an assessment at this stage as to the likely designated services and the risk attached to those designated services in the business.
Neville Birthisel:
The AUSTRAC website talks about registration and enrollment, so do you need to do both?
Adrian Verdnik:
No, generally not. Registration is only for limited services, which are sort of remittance services and some services related to cryptocurrency. I think it's unlikely that accountants are going to have to register for any of the services that they provide, so it's likely that it'll be limited to enrollment and then the ongoing arrangements and compliance obligations that flow from enrollment.
Neville Birthisel:
You mentioned 1st of July and you mentioned enrollment from March, so you can't enrol now?
Adrian Verdnik:
No. There is some preparatory work that can be done, but I think it's really just about getting an assessment and an understanding of the regime of what the designated services are. There's going to be further industry-specific guidance provided by AUSTRAC, which hopefully will really provide some colour around what accountants ordinarily do as part of their business and whether they are designated services or whether they're not.
And then there will be a series of forms and so on that will be produced and then enrollment will effectively open at the end of March.
There is some information that businesses can start compiling as preparatory to enrollment about the business, about its financials, its ownership structure and so on, whether there are trusts, partnerships and so on within the ownership structure because that information will need to be provided to AUSTRAC with enrollment.
And then really thinking about what the AML CTF program is going to look like and starting to think about that risk assessment really. So, when enrollment opens, the members are prepared for that and can engage with the system and get through any teething issues that there may be and then are really ready to go by the 1st of July.
Neville Birthisel:
The AML CTF regime seems to have a long list of roles and responsibilities. Now, if you're a sole practitioner, do they need to go out and recruit people just to meet their AML CTF obligations?
Adrian Verdnik:
I'd say not. I think there's an understanding from the regulator that in a sole practitioner environment, provided they can adequately discharge their obligations, there's no need to go out and seek assistance or employ external consultants or other people. Again, the AML CTF program should be designed around, for sole practitioners, the idea that they will fulfil all of those functions and then try to bring an independent mind to their assessment of risk within the business, their obligations about suspicious matter reporting and transaction reporting and so on. But no, I think there's an understanding that in small practices, it may be the case that a founder and principal will discharge all of those obligations and that's permissible.
Neville Birthisel:
So, it'll be more a question for the practitioner whether they have the time to fulfill those roles rather than a legal obligation.
Adrian Verdnik:
I think that's right. Again, this sort of ties into some of the professional and ethical standards about having quality assurance in the business, risk management, and I think having the time, as you said, to ensure that you can adequately discharge these obligations. If you feel that you can do that as a sole practitioner, then you can fulfil the compliance officer and so on without having to go to get external help. But you really have to make an assessment of whether you can do that adequately as well as just running your business and discharging all of your other professional and ethical obligations as a practitioner.
Neville Birthisel:
As you mentioned before, there are know your client and client due diligence obligations under the AML CTF regime. There are similar obligations imposed by, for example, the Tax Practitioners Board. Can members just have one onboarding checklist that covers all obligations just in case the client they're onboarding requires designated services in the future?
Adrian Verdnik:
I think it's unlikely that you're going to be able to adapt to this new regime by just asking a few more questions or repurposing the information you currently collect about clients for TPB purposes. There's obligations under AML CTF law that really drill down into who the beneficial owners are of non-individual clients. And that regime is going to require, I think, quite a different process and verification of information than what would ordinarily be the case, I think, under TPB.
So, I don't want to alarm people with the extent of the information. There's support available and there's going to be third party providers that can be used to assist with some of these obligations, but I think it's going to be more extensive than what members currently do for TPB. And again, it really does have to be calibrated towards the risk profile of the business and the kind of clients that you deal with.
Neville Birthisel:
Right. So, it'll be a case-by-case decision?
Adrian Verdnik:
I think so. For example, we as lawyers, and I'm sure many accountants, deal with trusts, and really digging down into who the beneficial owner is of those trusts is likely to be a new process that they have to go through as part of that initial onboarding to satisfy the KYC requirements under AML law.
Neville Birthisel:
Well, there's certainly a lot to think about now and a lot to think about going forward. So, thank you for providing an insight into the new obligations that many of our members are facing.
Adrian Verdnik:
You're welcome, Neville. Thanks for asking me to be here.
Neville Birthisel:
For our listeners eager to learn more, please check out the show notes for links to the dedicated CPA Australia webpage, AUSTRAC resources, and Adrian's contact details. And don't forget to subscribe to With Interest and share this episode with your colleagues and friends in the business community. Until next time, thanks for listening.
Garreth Hanley:
You've been listening to With Interest, a CPA Australia podcast. To find out more about our other podcasts and CPA Australia, check the show notes for this episode and we hope you can join us again for another episode of With Interest.
