A Victorian principal has won a disciplinary appeal in one of the first cases relating to a practitioner’s failure to consider and understand their AML obligations since Tranche 2 began.
In the Victorian Civil and Administrative Tribunal in Melbourne on 16 September, Judge My Anh Tran set aside a Victorian Legal Services Board decision from October 2023 to cancel the practitioner’s practising certificate and bar him from reapplying for one for five years.
The VLSB argued that the practitioner was unable to fulfil the inherent requirements of a lawyer to comply with the duties to be honest and to uphold the law, in light of various financial breaches.
Those included failing to report cash payments of $10,000 or more received from, or on behalf of, his clients to AUSTRAC; accepting multiple cash payments from individual clients, each of under $10,000 on successive days, or within a few days of each other; making multiple bank deposits for individual clients in one day, each under $10,000; and keeping inadequate records of the cash payments.
The practitioner, who was admitted in 2006, worked mainly as a criminal defence solicitor for a decade before setting up his firm. He was a principal there until his practising certificate was cancelled.
During his time as principal:
- section 15A of the Financial Transaction Report Act 1998 (Cth) (FTR Act) required a solicitor to report all cash transactions of $10,000 or more to AUSTRAC;
- section 43 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML Act) required financial institutions to report cash transactions of $10,000 or more to AUSTRAC;
- section 400.9 of the Commonwealth Criminal Code (Criminal Code) made it an offence to deal with money where it was reasonable to suspect that the money was the proceeds of indictable crime; and deemed it to be reasonable to hold this suspicion if the conduct involved a number of transactions which were structured to avoid the reporting requirements of the FTR Act or the AML Act; and
- rule 36(2)(e) of the Legal Profession Uniform Law General Rules 2015 (NSW) (General Rules) required a trust receipt to record the name of the person ‘from whom the money was received’.
Judge Tran described how the firm received “a very large number of cash payments which were just below $10,000 and none of $10,000 or more”, many of which “were delivered in close succession in respect to the same client”.
She said the practitioner’s process for any cash payments at the firm was that “they would be placed in an envelope with the name of the client on it and then banked as soon as possible”.
“(The practitioner) did not generate a trust receipt until the end of the day, when he could review all the deposits in the trust account,” she said.
“It is surprising that a lawyer would accept payments of thousands of dollars in cash, and permit staff to receive thousands of dollars in cash, without asking for the name of the person who delivered it or making any written record of the person of that name; or even the amount of the cash received.”
Judge Tran said the circumstances as a whole suggested the practitioner adopted a “don’t ask, don’t tell” approach.
“I find that, if (the practitioner) did not realise that $10,000 was a threshold for AUSTRAC reporting obligations, and that some of his clients were actively avoiding exceeding that threshold, it was through avoidant wishful thinking or a deliberate failure to ask reasonable questions,” she said.
“The term ‘wilful blindness’ is a difficult one, particularly applied outside the elements of a recognised cause of action or criminal charge.
“However, (the practitioner’s) conduct could fairly be described as wilful blindness, if used in the sense of refraining from making enquiries for fear that what would be discovered would be contrary to his interest in obtaining and accepting payment from his clients.”
Judge Tran said she accepted that the practitioner’s conduct, in involving himself and his firm in transactions that had an appearance structured to avoid AUSTRAC reporting obligations, could be viewed as conduct inconsistent with an obligation to uphold the law.
She said, however, her task was to determine whether he was unable to fulfil his ethical obligations to be honest and to uphold the law.
“An inference of inability is harder to draw in the case of ethical obligations, given the operation of free will,” she said.
She said she had not found the practitioner was deliberately dishonest.
“I have found some of the structuring allegations proven, but I have not found that he was aware of s 400.9 of the Criminal Code at the time of the structuring,” she said.
“I have found that he breached s 15A of the FTR Act on three occasions, but at a time when he was unaware of lawyers’ AUSTRAC reporting obligations.”
Judge Tran said it was clear from his evidence at the final hearing that the practitioner was “deeply affected by his experiences” and had learned from them.
“I accept that since shortly before the examination, (the practitioner) has understood his AUSTRAC reporting obligations and trust receipting obligations; the importance of seeking out appropriate guidance and advice; and the potential for criminal sanctions if he is involved in the structuring of payments to avoid AUSTRAC reporting obligations and that he will be keenly aware of the need to strictly comply with his ethical obligations in the future,” she said.
“In all the circumstances I have not formed the belief that (the practitioner) is (or was at the time of the decision) unable to comply with the duty of honesty or the obligation to uphold the law.
“I have not formed the belief that (he) is unable to fulfil an inherent requirement of an Australian legal practitioner. Accordingly, (his) application for review is successful and the VLSB’s decision is set aside.”
She noted the practising certificate the practitioner held at the time it was cancelled by the VLSB had expired.
“In the circumstances, it is appropriate that (the practitioner) be required to lodge a formal application for consideration of whether he meets the requirements to be granted a practising certificate in accordance with the Uniform Law if he wishes to be issued with a practising certificate,” she said.
Read the case here.
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