The Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act was introduced in 2006 to prevent financial crime. The Act requires businesses in the financial sector to collect and verify specific information about their customers.
It’s looking increasingly likely that Tranche 2 of the Act will be implemented soon – so those who operate in the law, real estate, and accounting sectors need to start looking at how this will affect them, and get their processes in place.
Why is now the time to educate yourself on AML?
Time’s up. Governing bodies are indicating that AML/CTF changes are coming and gatekeeper professions, with deep connections into the financial system, will be included. With this in mind, lawyers, accountants and real estate agents are starting to educate themselves so they’re ready when the change is made.
How it affects Australians
Recent allegations and trials against Crown Casino and Perth Mint indicate that AUSTRAC is serious this time.
In addition, money laundering has become a household phrase thanks to the Panama Papers. The public now knows, for example, that if a criminal based overseas wants to buy 10 properties in Sydney, at $1 million each, that’s 10 transactions for their lawyer, which, depending on the state, will net the legal firm anywhere from $5,000 to $40,000. Just like that, $10 million in dirty cash has now been quietly hidden in Australia’s property market, and the property pool for everyday Australians has also just shrunk.
Lawyer’s trust accounts are also being used, settling property transactions through them allows the money to be cleaned without ever entering the actual financial system.
Why should you get prepared for AML changes?
We’ve seen in Tranche I businesses that regardless of how much has been spent (in time, training and money) to build internal processes to stay compliant, many organisations still fail.
Additionally, law firms will soon be in a talent war with all other tranche 2 entities. Because Australia does not currently have broad AML/CTF regulations the pool of skilled financial crime and compliance experts is small. Once the regulations come in, everyone will be haggling over the same small pool. Finding the right ‘fit’ is difficult and training takes a while. As we’ve seen in other markets this leads to inefficient AML processes, disgruntled clients and often churn to competition. Not to mention the risk of non-compliance.
By the numbers
So what about the cold, hard numbers? Here at First AML we’ve spent a lot of time understanding our customers in the legal sector – developing ROI calculators to help them see the true cost of compliance. Let’s assume the following based on a charge-out rate of $180/hr for a Graduate or Junior Lawyer, and $300/hr for a Lawyer or Associate.
|In-house(Graduate/Junior Lawyer)||In-house(Lawyer/Associate)||Outsource(e.g. First AML)|
|Entity structure analysis (20min)||$60||$100||–|
|Client contact and follow-ups (30min)||$90||$150||–|
|Document collection and verification (45min)||$135||$225||–|
|In-house(Graduate/Junior Lawyer)||In-house(Lawyer/Associate)||First AML|
|Client contact and follow-up (15min)||$45||$75||–|
|Document collection and verification (15min)||$45||$75||–|
|Number of Complex Matters per year||100|
|Number of Individual Matters per year||50|
|Breakdown of time spent on AML by %|
|Lawyer or Associate||10%|
|Senior Associate or Partner||0%|
|Total Savings:||$15,250 per year|
The decision to outsource the entire process becomes a ‘no-brainer’ when law firms see that they can save money, ensure they are compliant and provide an excellent customer experience. The simplest option is to take an already established compliance solution, and implement it into your law firm.
Is it possible to outsource the effort but keep the risk decision in-house?
In short, yes.
Many law firms are hesitant to outsource compliance programs, citing concerns over risk
assessment vs. analysis tasks. However, outsourcing compliance doesn’t have to mean that you are letting go of the risk analysis. In fact, many tech solutions allow a firm to outsource the heavy lifting and administration of compliance, but keep risk assessment in-house.
Law firms can task these agencies and software providers (such as First AML) with the time consuming aspects of AML compliance. Ask them to define and analyse an entity structure, liaise with end users back and forth for data collection, and complete an analysis of the documents provided.
An in-house compliance officer can then analyse the outcome of this information and decide on the risk assessment of a client. Essentially, lawyers are outsourcing the admin, leaving more billable time available for use.
Compliance software solutions generally have a decision engine made up of feedback from hundreds of customers that use their solution, as well as working closely with government regulators, to understand what best practice truly is, meaning you are likely to be better prepared for meeting upcoming compliance requirements.
Leading law firms around the world are choosing to outsource their AML/CTF compliance processes in order to meet their AML regulation requirements because it:
- Is an easier way to ensure compliance with AML requirements
- Provides reputation protection against media and government scrutiny
- Avoids pain and sunk time associated with recruitment
- Can improve profitability due to it being generally cheaper than doing it in-house
- Keeps the risk assessment in-house while outsourcing the ‘heavy lifting’ admin (allowing for increased revenue via more billable hours)
- Provides peace-of-mind that come audit time you’ll pass the first time, thanks to the outsourcer focusing only on this process, being in close collaboration with the regulators and knowing that their future depends on providing an exceptional service
- Provides a more consistent, sustainable and scalable approach to meeting your AML/CTF requirements.
About First AML
First AML streamlines the entire anti-money laundering onboarding and compliance process. Backed by real expertise, its cloud-based KYC passport allows complex entities to share their verification across multiple companies and geographies.
Making an otherwise complex and manual onboarding process simple for clients and cost effective and compliant for businesses, First AML delivers efficiency and time savings, protecting reputations, and enabling companies to be on the right side of history in the face of global threats.
Find out more at firstaml.com
This sponsored content article represents the views of the sponsor and does not necessarily reflect the views of Queensland Law Society