00:00:03.350 [Music] [Applause]
00:00:17.840 Hello everyone, my name is Angelique Opie. I am normally the property editor for Channel 7 News Sydney. Today I am
00:00:24.240 hosting Settlement Day, the first edition of Australia Conveyancer Magazine’s podcast. It covers a topic of
00:00:33.200 compelling interest to property professionals. That is the looming of tranch two of Australia’s anti-money
00:00:40.800 laundering and counter-terrorism financing regulations. They already
00:00:46.000 embrace banks, clubs, pubs, and casinos. Soon, conveyances, lawyers, real estate
00:00:52.879 agents, and accountants will be included. Among our guests today, we
00:00:58.079 have the man overseeing the implementation of these regulations, Brendan Thomas, the chief executive of
00:01:05.360 Australia’s financial regulator. Welcome. Thank you, Angelie. And we also have uh Jenny Toner, the
00:01:13.119 Australian uh Institute of Conveyances president for the New South Wales division and Shaquila McClean, the
00:01:20.159 president for the Victorian division. Welcome to you both. Thank you. Thank you. Let’s start off with you,
00:01:25.920 Brendan. Uh, walk us through how did we get here? Why are these reforms
00:01:31.360 important? So, the anti-moneylaundering uh legislation in Australia deals with quite a significant problem. We do have
00:01:38.799 a major problem of illicit finance in Australia. We we estimate that there’s about $68 billion worth of illicit
00:01:45.759 finance flowing through the Australian economy. And our intelligence does show a significant proportion of that finance
00:01:52.079 going into Australian real estate. We have the challenge of not only dealing with moneyaundering and illicit finance,
00:01:58.880 but criminals trying to store their wealth somewhere. And they’re often looking for places where they can hide
00:02:04.719 it or keep it for long periods of time without it losing value. And so we see Australian criminal organizations and
00:02:11.200 criminal organizations from overseas storing illicit wealth in the purchases of Australian real estate. And that’s
00:02:17.040 not only an Australian problem, it’s a global problem. And the regulations that we’re bringing in in Australia have been
00:02:23.840 applicable to most countries in the world for some time. Australia really is behind the eightball in protecting its
00:02:31.120 economy from illicit finance. And so these changes that are coming into place next year really bring us into line with
00:02:36.560 the rest of the world. So what have you taken from the overseas experience then? Will Australia be better?
00:02:41.680 We will be better. We’ve paid a lot of attention to the implementation of these changes in a number of other
00:02:47.360 jurisdictions. We’ve spoken closely to our counterparts in other countries, particularly recently in New Zealand
00:02:53.599 about their experience in in implementing these kinds of changes. And one of the things we’ve learned very
00:02:59.120 clearly is to listen clearly to the needs of industry and business and very much to focus on the concerns of small
00:03:05.440 business in how we design this anti-moneyaundering regime and how we’re
00:03:10.640 going about implementing these changes. Jenny and Shaquila, both of you are conveyances and are aware of the cost
00:03:17.040 and administrative burden of compliance. What do you make of what Brendan has
00:03:22.800 outlined? There’s definitely an issue in this country that is ever increasing
00:03:28.239 that we become aware of and I fully understand why conveyancing legal firms,
00:03:34.480 real estate agents need to get on board with AML. As the representative of my
00:03:40.959 conveyancing members in New South Wales, majority of our members are very small businesses. So for me the key is to make
00:03:50.239 sure that we don’t lose small businesses with the cost of implementing what is
00:03:55.280 required um and that we get the assistance we need to be able to get our members ready uh for when it starts next
00:04:03.040 year. Shquila, do you feel ready? No, we don’t feel ready. there’s uh still a few unknowns, gray areas and um
00:04:12.080 I know that OSRA um are trying to support the illegal and conveyancing
00:04:17.600 industry and my question to Brendan is um how is it that they will be sort of supporting us down the track as as we
00:04:24.320 sort of get close to the D-Day. Yeah. So the legislation was passed in November last year and since then we’ve
00:04:30.080 been working very closely with all of the industries that are coming under our regulation next year. firstly in
00:04:35.280 designing the rules which is kind of the the next level of detail that sits under the legislation. We also then
00:04:42.560 subsequently recently published guidance which is the next level of detail again and in developing both the rules and the
00:04:48.320 guidance we’ve had intensive engagement with all of those industry sectors huge amounts of feedback. We had more than
00:04:54.400 160 submissions to the first consultation process and more than 140
00:04:59.600 to the second one. and we’ve really listened to what industry have told us and have made significant adjustments to
00:05:05.280 the rules and the guidance that have come out. The next phase of the work that we’re doing is guidance for
00:05:10.479 specific industries. So guidance for conveyances and most importantly one of the things where we’re really focused on
00:05:16.960 is the development of what we call starter programs. And this is where we’re really differing from other countries around the world who’ve
00:05:22.800 implemented these changes. We really understand that we’re dealing with a large number of small businesses. The
00:05:29.600 last thing you want to worry about is additional regulation and additional cost and additional burden. And we also
00:05:34.960 appreciate people like conveyances really don’t know anything about money laundering or financial crime.
00:05:40.479 That’s right. And all of this is quite new to people. And so the focus on these starter programs, we will give you everything
00:05:47.440 you need to know as a small business person to be able to comply with the law. So, we’ll tell you what the risks
00:05:53.199 are that we expect you to face from money laundering and illicit finance and we’ll give you details of how to run a
00:05:59.280 moneyaundering program and the steps that you need to take to put that in place to comply with the law. Perhaps a question on the timeline for
00:06:06.319 you both. Would you like to ask about I have to I have to say it’s great that
00:06:12.160 OSRA are providing these starter kits. They were I understand that they went around to all the countries, asked what
00:06:18.240 the issues were, and it became quite um obvious that something like a starter
00:06:23.919 kit needed to be given. Um we were told last week that we’re not going to get the starter kits before Christmas. It is
00:06:30.800 probably the number one fear of our our members nationwide that they’re still
00:06:36.720 not able to get concrete information as to what they’ve got to do and and in
00:06:42.080 terms of the industry and uh the institutes it’s delaying us being able
00:06:47.360 to set up our conferences our training and education um training and education
00:06:53.120 just of the compliance officer. So I understand that’s now been delayed to the end of January. Can you confirm that
00:06:59.759 it won’t be delayed again? Yes. So, they’ll be coming out in January. Yeah. And the reason for that is we’ve gone
00:07:05.840 through a number of different rounds of consultation in the development of these starter programs and we’ve involved
00:07:12.000 small businesses in the development of those programs. We really wanted to make sure that the voice of small business
00:07:17.120 was in there and that we were listening to the way people operate their businesses. And through those
00:07:22.639 iterations, we’ve got extensive feedback from those business people about what they want to see in those starter programs. And because of that feedback,
00:07:29.440 they’re taking slightly longer to develop, but because it’s taking slightly longer to develop, it will be a
00:07:34.800 much more comprehensive starter program than we’d originally envisioned. And so your time frame to implement that
00:07:40.960 program should be shorter because that program will have more comprehension in it. So there’ll be like a a toolkit that we
00:07:47.440 can have that will help us write how do we develop, how do we set up our program. Yeah. Will give us the steps as to how to do
00:07:53.919 that. It will give you the program. It won’t just give you the steps. It will give you the bulk of what you need to do. That’s great.
00:07:59.440 And we can expect that in January. You can expect that in January. Okay. And then once we’ve got the starter kits and now we know there’s a
00:08:05.759 date that everyone has to be um enrolled by and um is it fair to expect um full
00:08:11.440 compliance from day one. Is that what your is that what Ostra’s expectation is? Yeah, it certainly isn’t. So there’s a
00:08:18.479 period of time when we ask businesses to enroll with us. So that’s between March and July next year. And we’ve invested a
00:08:25.199 lot of time and effort into new online tools to make that registration process as straightforward and simple as it
00:08:30.560 possibly can be. And those new websites will be launched later this year. So you’ll be able to have a look at those
00:08:36.559 um shortly. But we certainly don’t expect people to be perfect from July next year when those compliance
00:08:43.120 obligations start. We expect it to be quite a learning curve for people. one to understand what financial crime is
00:08:50.160 and to understand what you need to do to comply with these new anti-moneylaundering laws. And we’ll
00:08:56.640 work with you, particularly yourselves, as representatives of of your industry in every step of the way to make sure
00:09:03.200 that we’re listening to your experience of being regulated and listening to your experience of implementing those starter
00:09:09.200 programs and providing direct feedback to you on how that performance is going. But we
00:09:15.519 certainly don’t expect perfection from day one. We expect people to gradually come into this and to get better as they
00:09:22.160 do do it more often. So your main the most well the only expectation at the moment is to register.
00:09:27.920 So to register with us between March and July that’s really what the main expectation
00:09:32.959 is and then to commence the implementation of your starter program from one July. one July. Yeah.
00:09:38.399 And I think sorry the messaging also needs to be and what we’re hearing from members is if I don’t do something by a
00:09:45.839 particular date or if I don’t lodge a suspicious report um because I haven’t
00:09:51.680 really seen anything and it turns out that it is actually high level suspicion. Am I going to get fined? Uh
00:09:58.480 $19,000 is that number that keeps going around. Um can you give us some sort of
00:10:04.480 more clarity around what that those fines are? Yeah. So we don’t do that.
00:10:09.519 Yeah. So um if people are honestly trying to comply with the law whether they’re
00:10:14.560 doing it perfectly or not we won’t find people. We never have and we won’t in this instance. The only people we pursue
00:10:22.240 for for penalties are people who are completely doing the wrong thing who are completely ignoring their legal
00:10:28.160 obligations. people deliberately deliberately ignoring it. People who are
00:10:33.920 turning a blind eye to crime and criminality and profiting from crime and I mean if you look at the track record
00:10:39.839 of Ostra we have received some pretty significant penalties against big corporate bodies in Australia but we’ve
00:10:46.800 never pursued any small businesses for not ticking the right box or failing small elements of their programs. That
00:10:52.880 just has never happened and we have no intention of doing that. So people that are worried about getting some kind of
00:10:58.320 $19,000 fine because they haven’t filled in the right form or they haven’t submitted the right report, they don’t
00:11:03.920 need to worry about that from us. Would Ora consider creating something like a feedback loop if uh you know
00:11:11.120 conveyances can receive anonymized case studies or trend reports? Is that
00:11:16.399 something that OSR would consider? Yeah, absolutely. So we’ve changed the way we we work in the in the course of
00:11:22.399 the last year. We’ve established a new industry engagement branch and we’ve done that specifically so that we’re
00:11:28.640 always talking to the industries that we’re involved in regulating so that we’re getting direct feedback from those
00:11:33.760 industries about their experience of regulation. Also getting feedback from those industries about experience of
00:11:39.120 crime and ways in which we can then use the intelligence that we get to better inform those industries about the nature
00:11:45.440 of crime that we’re seeing people experiencing and what’s working to prevent that crime. So certainly that
00:11:51.440 feedback loop you’ll see much more from us once you start um implementing your
00:11:57.120 programs and come under our regulation and we’re significantly changing the way we work so that we are providing more
00:12:02.800 direct real time regular feedback to business. M if say on the nature of
00:12:08.320 crime if conveyancer reports a suspicious client would ostra have some
00:12:14.800 sort of plan to protect the conveyancer and their families from any retaliation.
00:12:20.480 Yeah, it is a common question I’ve heard from conveyances. If I sus if I submit a suspicious matter report,
00:12:27.040 is that person going to know that and is my safety at risk? The answer is no. And if I can explain why, when you submit a
00:12:34.639 suspicious matter report to us, that report is protected by the moneyaundering law from being made
00:12:40.000 public or being used again. What we do with that report is we turn that into
00:12:45.440 financial intelligence. We provide it to law enforcement bodies, but in itself can’t be used in a prosecution. So if
00:12:52.639 you provide a suspicious matter report to us and a person ends up facing a criminal charge as a result of that, the
00:12:59.519 report that you’ve provided can’t be used in court. It can’t be given to that person as evidence and the police need
00:13:05.920 to build additional evidence on which to make that charge separate to that suspicious matter report. So it is what
00:13:12.480 it says it is. It’s reporting a suspicion. It’s not the equivalent of making a report to the police or submitting a crime report to the police.
00:13:19.760 So it’s like a very high level crime stopers. It’s a suspicion. Yeah. Yeah. And it
00:13:25.600 can’t in its own right be used for prosecution. So what happens is we get those reports often we’ll get multiple
00:13:31.519 reports on the same person from a whole range of different entities. We’ll turn that into financial intelligence and work with police on understanding the
00:13:38.800 nature of the criminality and the police will then go and develop their own evidence and their own case and bring charges against that person. So the
00:13:45.760 suspicious matter report is the thing that informs that. but it doesn’t form the basis of the prosecution that goes
00:13:51.279 forward. Do either of you have concerns about potential red flags and being able to
00:13:58.800 identify and report um those to Ora where we’re hearing the greatest fear is
00:14:05.199 in the regional areas because everyone knows everyone um and they’re sort of concerned that if
00:14:13.199 they lodge a suspicious report that their office or home is going to suddenly be hit with bullets um you know
00:14:20.000 to the extreme. So that’s where that concern is coming from particularly in
00:14:25.199 those smaller regional areas. I think it’s really important to sort of emphasize that you know their name will
00:14:32.399 never be seen in any uh charges or any court proceedings. They wouldn’t be
00:14:37.680 asked to uh be at the court proceedings um to to to you know be a witness or or
00:14:46.079 anything. So, it’s all about this constant education that we’re still trying to give them without any sort of
00:14:53.120 solid facts yet and that that’s still coming. If I can reassure people as well, I mean, we’ve been regulating businesses
00:14:59.279 since 2006. We regulate around 19,000 businesses at the moment. Some of those are very big businesses, but quite a
00:15:06.160 number of them are small businesses as well, and they’ve been giving us suspicious matter reports for that time. There’s never been a threat to anybody
00:15:12.399 who’s submitted a suspicious matter report in Australia. And certainly talking to my colleagues around the
00:15:17.920 world who have the same regime, I can’t give you any examples of where there’s been any threats coming from any of
00:15:23.519 those either. Anything you’d like to add on that? I guess it’s just more just we’ve got to
00:15:28.800 get that messaging out to the practitioners. Uh I know that our practitioners are worried like Jenny
00:15:35.440 said from the country, but even so, but it’s important that we understand that if we report make a suspicious report
00:15:41.680 today doesn’t mean that tomorrow the police are going to go and act on it. I guess they’ve got to still get find some
00:15:47.040 more information and gather their information before they take the following steps. And that’s probably
00:15:52.560 what we need to get out to the um practitioners out there. That’s right. So if if one of your
00:15:59.440 practitioners gives us a suspicious matter report because they can’t see where a person’s source of wealth comes
00:16:04.800 from, for example, and they might be suspicious of how this person’s got the money that they’re buying the property with. That might be the source of the
00:16:11.199 submission suspicion that’ll come to us. We’ll link that with other reports that we might have on that same individual
00:16:17.440 from banks or other financial institutions and we’ll then develop if that person is suspicious
00:16:24.160 a detailed profile that will or detailed piece of intelligence that will then go to law enforcement. The charges that
00:16:29.759 would flow for that person might be around drug dealing or arms trafficking or something like that. Not this it won’t be around the purchase of a house,
00:16:36.639 right? It’s it helps us build a picture of criminality and it often helps us build a picture of criminal networks so
00:16:42.959 we understand where money is flowing and who’s involved in different transactions and helps us build that criminal
00:16:49.120 intelligence that law enforcement can use to make charges. We might touch on another topic for both
00:16:55.279 of you. Often conveyances may at times devalue their services but now you will
00:17:02.320 be taking on an added responsibility. Does that open the opportunity to
00:17:07.679 increase charges, increase fees? Absolutely. This is the time. I think as
00:17:13.039 conveyances, we are um tax collectors and now we’re um law law enforcement
00:17:19.359 officers. You know, we’ve got multiple hats on, but they’re very dig diligent people. They do they work really hard
00:17:26.160 and conveyances are very task focused. And so they need to understand that the
00:17:32.799 amount of time that they’re going to need, be it with the starter kits or be it with um however they go about this,
00:17:40.320 but they’re going to need extra time per file per client. It’s not just really um
00:17:46.720 the you know, you might have a client where they’ve got a trust attached. You need to investigate. You need to look
00:17:51.840 into all that. you need to make sure that all of that is um you’ve ticked off to comply and that you’ve ticked off to
00:17:58.559 make sure that you feel satisfied as a practitioner. So don’t undervalue um and
00:18:03.840 underell what you do and uh you know absolutely should be time for everyone to think of um putting their fees up and
00:18:11.760 really um making sure that they’re um being um that they are accounting for
00:18:17.039 that. Absolutely. What would you like to add on that Jenny? Well, I think for too long
00:18:23.039 conveyances have been treated almost like we’re settlement agents. Um,
00:18:29.200 in this country, conveyances in this country, certainly in our states, um, we
00:18:35.520 do the exact same amount of work and take on the exact same risk that a lawyer does. Uh, we do the exactly same
00:18:43.200 conveyancing work. So we not only take the risk, we now got the additional burden of both state and federal uh
00:18:50.640 requirements on top of that which just adds more risk to us. So we need to
00:18:57.679 probably have the general public understand those additional things that we’re now taking on so they understand
00:19:04.720 why our prices need to increase. And we have to believe that we own it. Um that
00:19:10.960 we’ve burnt it and we own it and we earn it every day. We earn it every day uh
00:19:16.080 with the amount of files that we deal with in order to make a living. You know, if if I could if I could charge an
00:19:23.039 agent commission on a conveyance, I would be doing a tenth of the work I do. But that’s not the case. So that is a
00:19:31.840 perfect opportunity for us now to uh market and and uh ourselves and let
00:19:40.240 people understand what it is that we’re being asked to take on. And I I would
00:19:45.520 hope OSA will help us, you know, give that information to the general public
00:19:50.559 as to what’s coming, what will be asked of them. It’s more than just a verification of identity check. Now we
00:19:57.039 do need to under uh ask more questions um and they need to know that that’s
00:20:03.039 coming and that they will need to provide it. So a lot of the general public will include new clients if conveyances file
00:20:10.559 suspicious matters. Are they obligated to then continue with that transaction?
00:20:15.600 What does it look like with the client relationship protecting staff and then not I guess tipping off the clients?
00:20:24.160 we will upgrade and our cost agreements in terms of what is required and what
00:20:31.200 they must provide. Now my attitude towards that is uh if through your
00:20:37.360 checking know your client check you feel that it’s suspicious but they’re giving you everything that allows you to
00:20:43.280 complete a conveyance you should continue to do so uh because if you don’t then I think that is a bit
00:20:50.799 of a tip off but if they’re refusing to give you the information you need to be
00:20:55.840 able to complete your know your client or check your source of funds then your cost agreement should have a paragraph
00:21:02.799 that allows you to cease acting because then you can’t fulfill your obligations.
00:21:08.240 So that’s my recommendation to our members um that we will uh bolster our
00:21:15.039 cost agreement around that. And what do you believe suspicious transactions look like beyond say the uh
00:21:22.000 obvious large cash deposit? What are some non-financial red flags that
00:21:27.600 conveyances will now be expected to identify and then report? I think it
00:21:32.720 comes down to identification checks because people have people are already
00:21:38.640 wary about doing identity checks and doing identity checks through their phone um and what they’re you know uh
00:21:46.640 what they’re putting out there that people can get access to. I think where they’re unable to give you two forms of
00:21:53.679 photo identification and are reluctant to give you a birth certificate or
00:21:58.960 Medicare card or there might be different names documents might be in different names then I would consider
00:22:04.240 that to be probably suspicious but if they give you all that information and
00:22:09.520 their money is coming from CBA um into my Westpak trust account how can
00:22:17.200 I see that as suspicious? I don’t know the answer to that yet as to how I determine that. But if it’s already gone
00:22:23.919 through the checks of one bank to go into my bank, um I’m not quite sure I
00:22:29.200 would consider that a suspicious activity. Do you have anything on on providing
00:22:35.679 those answers? Yeah, sure. Sure. Do we expect the bulk of your clients to be low risk? We make
00:22:42.559 the assumption that most real estate transactions in Australia don’t involve moneyaunders or illicit finance. And so
00:22:48.240 the bulk of the clients that we expect conveyances to be dealing with should be low-risisk clients where you won’t see any suspicion nor should you see any
00:22:54.799 suspicion. They’re regular people doing regular real estate transactions. What we ask you to do is to to cast your mind
00:23:01.120 to those things that that seem unusual. So if someone’s is refusing to provide
00:23:06.400 you with sources of identity, I mean real estate transactions are often the
00:23:11.520 largest purchase a person will make in their life. It’s not too much to think that you need to prove who you say you are to make that kind of a transaction,
00:23:18.400 but if someone refuses to to do that, that might be a cause for suspicion. We do see money being laundered through
00:23:24.400 company structures. So, if you’re being approached by somebody and you can’t really see who the real
00:23:30.720 client is or who the beneficiary of the that transaction is, and that’s being obiscated or hidden, that can often be a
00:23:36.960 cause a cause of suspicion. If financial dealings are coming from a third party and you can’t really tell who that third
00:23:43.200 party is, that’s often a cause for suspicion. But what we never really do is ask people to stop transactions. So
00:23:49.760 truly important to know we get hundreds of thousands of suspicious matter reports from banks every year. Hundreds
00:23:55.760 of thousands of them. And most of those involve transactions that continue. There’s something in that transaction to
00:24:01.360 be suspicious about, but there’s not necessarily enough in that transaction for someone to realize that there’s a
00:24:07.360 criminal activity underneath that transaction. It’s just a suspicion. And so, you can still proceed with that
00:24:14.080 transaction if you form a suspicion, but it’s a matter for yourself and for for individual practitioners as to what they
00:24:20.000 want to do. If you’re knowingly dealing with a criminal and you’re knowingly dealing with the proceeds of crime,
00:24:26.640 that’s an offense anyway. That’s an offense under Australian laws now and you shouldn’t be doing that and you should shouldn’t be transacting in that
00:24:33.039 way. What we’re talking about is where you’ve got a suspicion that’s possibly not enough to result in a police report,
00:24:39.600 but where yourself you’re suspicious about the person, you’re suspicious about their source of wealth and you might be suspicious about their kinds of
00:24:46.000 activity, put in a suspicious matter report to us. Now, in preparation for this podcast, we
00:24:51.919 have asked conveyances nationwide to submit their own questions. Some of those answers may have already been
00:24:58.480 addressed, but Mr. Thomas Brendan, we’ll start with you. Staff training, what
00:25:05.200 what does that look like? What is considered adequate training? Yeah, there are really a couple of
00:25:10.799 things that the training should focus on. One is the know your customer check. So, making sure people are doing those
00:25:16.400 effectively and they’re satisfying themselves that they know who the person is that they’re dealing with. Secondly
00:25:22.400 is training around understanding what those red flags are. So what are the things that should cause a suspicion and
00:25:27.919 how might we put in a suspicious matter report to OSRA? What form does that take? What are the kinds of things that we should include in that in that kind
00:25:34.720 of suspicious matter report? They’re two key elements that we’d ask people to be trained in. Um there might be other
00:25:40.960 elements of a program that a business might have depending on the complexity of that business that you might want to train people in. But those know your
00:25:47.440 customer checks is really the key um to the AML regime. and then knowing what to
00:25:52.880 do when you form a suspicion. So, if I’m acting for a purchaser um who is just buying a property um
00:26:00.880 they’re a cash buyer, how do I check source of funds? Well, it depends if that buyer causes
00:26:07.200 you to be suspicious. So, if you know who that person is, you’re satisfied you know who that person is, you’re
00:26:12.400 satisfied you know their course of business, it makes sense for that person to come and purchase with cash and
00:26:17.919 you’ve got no reason to be suspicious as to why they’re doing that, then you don’t need to check their source of funds. The key threshold here is the
00:26:24.880 suspicion. So, if you’re dealing with someone that you don’t know and you’re
00:26:30.320 not sure or not completely confident they are who they say they are and it
00:26:35.760 doesn’t look right that they that they have the wealth they have to purchase a property, they don’t, you know, I can
00:26:42.240 give you an example. We had a case last year where we had um one family with
00:26:47.600 connections to people on the Interol red list that bought $170 million worth of property in Sydney. One of those
00:26:53.919 purchases was $35 million and the person’s stated occupation was a housewife. That should have raised
00:26:58.960 suspicion everywhere. It didn’t because there was no requirement to do that, but it should have. And you can try and
00:27:04.799 establish the source of that person’s wealth. I can guarantee in this case that person wouldn’t have provided any information about that. That should then
00:27:11.039 form the basis of a suspicious matter report to us. The source of wealth check is for you to satisfy that suspicion. So
00:27:18.320 if you try and establish the source of wealth of a person and you can do that and you’re satisfied that this looks
00:27:24.480 like a legitimate source of wealth and it allays your suspicion and you don’t really need to do anything else. So if I get an identity check and that
00:27:32.320 identity check tells me uh provides two forms of photo ID that are current. The
00:27:38.880 facial recognition is 99% correct. The address is correct on all
00:27:44.960 identification. I would be comfortable not to have to go further
00:27:50.080 in check source of funds. Yeah, that’s right. Okay. So, just going back onto that scenario you just provided with the housewife
00:27:56.960 buying a $35 million property. So, as a from a practitioner standpoint, we
00:28:02.399 obviously will uh I verify the client, but really um are you sort of suggesting
00:28:09.679 conveyancer should be saying to the client, well, where did you get this money from? because I mean you can’t
00:28:14.799 really say cuz they’re a housewife and you know um so I’m just trying to understand sort of how the practitioner
00:28:20.320 would have known that that was a suspicious activity because really they would have checked and balanced
00:28:25.840 everything on our end uh and so how is it that our practitioners how how do we
00:28:32.159 go back to our practitioners and tell them that you need to you know check the say for like you said the housewife
00:28:38.399 buying a $35 million property I mean that I’m just trying to understand how we would have known to say that that was
00:28:44.960 or report it as a suspicious activity. Yeah. So, this is probably an extreme case, but in this case, a short internet search would have highlighted the family
00:28:52.080 connections this person had with known criminal organizations. The person was coming from an overseas high-risk crime
00:28:58.559 jurisdiction, and they had $35 million worth of cash that they were putting down um on a property in a very
00:29:05.120 expensive part of Sydney. some questions about what that person does for a living, where they get their wealth
00:29:10.880 from, and if the person is a legitimate purchaser, those are pretty easy questions to answer. If you can’t get
00:29:17.520 straight answers out of that um person, and you can’t establish that source of wealth by reasonable means, we don’t ask
00:29:23.520 you to be a detective. We don’t ask you to be a financial crime detective. You’ve got no legal authority to demand
00:29:29.200 information from people. We just ask you to do what’s reasonable to try and satisfy yourself that you don’t continue
00:29:35.440 to have that suspicion. But if you can’t satisfy yourself through reasonable checks, that’s when you put in the suspicious matter report to us.
00:29:40.960 Right. So it could be a legitimate housewife buying a property. Could be. It could well be, but Okay. Right. So it’s if if we get that feeling of a
00:29:47.679 suspicion. That’s right. Yeah. Okay. Suspicion is a threshold. And the red flags that we’ll provide you
00:29:54.240 will help establish those causes of suspicion. Excellent. Did you? And they’re the ones that are coming through in January.
00:30:01.039 Yes. And they’ll constantly be coming through from us. We’ll continue to update those as we get more and more
00:30:06.480 information about the nature of crime and the and the red flags that conveyances are seeing and reporting to us.
00:30:11.679 Um there’s been a lot of talk through real estate uh institutes
00:30:17.919 um about sharing information um identity checks and asset searches
00:30:23.600 and so forth where it applies. Um, we as a as a legal industry, I suppose we’re a
00:30:29.919 little bit concerned about uh breach of privacy in providing that information to
00:30:35.279 another party. Um, and also not wanting to be connected to to an agent should an
00:30:41.760 agent be a rogue um and be found that way. Uh, is that encouraged by OSRA to
00:30:48.399 do it? the purposes of I can see is to try and save the client from having to
00:30:53.679 do duplicates of things. Um but has AUSTRAC sort of land landed on what that
00:31:01.840 should be or whether that should be allowed? So the legislation allows for the information to flow through the course
00:31:08.159 of the transaction. So it can be the case where uh a bank might do customer
00:31:14.720 due diligence on a on a particular client and that bank’s diligence activity can flow with that client to
00:31:20.799 other parties through the course of the transaction where it doesn’t have to be done again. The law allows for that to happen but it only allows for that to
00:31:27.679 happen where there’s an agreement in place between those parties about how that information might be managed, how
00:31:33.360 that information can flow and in fact that the information actually does flow. Mhm. So, it’s not enough for um a party
00:31:40.720 to a transaction to say, “Well, the bank’s done that. I don’t have to do that.” So long as the information does
00:31:45.840 flow to that party, that’s enough. So, the law allows for it to happen, but it doesn’t mandate it.
00:31:51.039 Okay. But what’s flowing through? Is that certified copies of what the bank’s
00:31:56.559 done or is that just copies? Because I’m not quite sure we could say we could rely on a copy of a document to complete
00:32:04.399 that task. Yeah. So if a bank satisfies itself that it knows who that customer is and it’s
00:32:11.039 done its diligence around that customer and it asserts that it’s satisfied
00:32:16.559 um according to AML law that it’s it’s satisfied that person is who it says it is. You can take that assertion and the
00:32:23.360 documents that flow with it to establish your your diligence so long as it’s a low-risk customer. But it depends on
00:32:29.519 your on your own preference as a practitioner. If you want to do it yourself then certainly do it yourself. There’s nothing that mandates you having
00:32:36.240 to take somebody else’s assertion around that. What are the recordeping requirements
00:32:42.720 overall from how long? What’s the format? Yes. So, we ask you to keep one record
00:32:48.559 of your moneyaundering program. We ask you to keep records of how you’ve satisfied yourself of a person’s
00:32:54.480 identity. So, our regime doesn’t require you to keep those documents. It requires you to keep a record that you’ve
00:33:00.559 satisfied yourself. So, if you look at a person’s birth certificate and their driver’s license and you say, “I’m satisfied that this person is who they
00:33:07.039 say they are,” that’s the record that you keep. We don’t require you to keep those documents. Um, but to keep that
00:33:13.279 record and if you’re forming grounds of suspicion and reporting uh a suspicious
00:33:20.159 matter to us, you should keep a record of that. You should keep a record of the training that your staff do. And if
00:33:26.240 you’re a company um that’s providing reports to a board or to a senior executive on the performance of a
00:33:32.000 money laundering program, you should be keeping records of those things. For bigger companies that we regulate, we
00:33:37.279 like to see their board papers where they’ve been considering their AML program where they’re looking at their risks and we’re look where they’re
00:33:43.279 looking at their compliance. That’s for for larger programs that do have B for larger companies that are are doing
00:33:48.880 those kinds of board reports. We like to we like to see that and we ask for them to keep those kinds of records. So just
00:33:54.640 to be um clear so from a conveyance or a legal um and a practitioner’s standpoint
00:34:01.600 what you need or what you require. So when we go back in 3 years and get these audits done the audit will only require
00:34:08.320 us to show them if we’ve made a suspicious activity uh they want to see that we’ve got the right documentation.
00:34:14.879 Is that what they’re what the requirements will be? Yeah. And showing us that you’re satisfied your clients are who they say
00:34:20.079 they are. So you should keep a record that you’ve satisfied yourself that this person is who they say they are.
00:34:25.119 So that’s all we need to keep that basically one page satisfied. Satisfied or we might have a tick box system or
00:34:31.520 you’ll get that in your starter program. So that that’s all we need to have in our unless you form a suspicion.
00:34:36.719 Oh yes that yes. So I’m I mean I’m talking about the for the bulk of people who are low risk regular people doing regular real estate
00:34:42.800 transactions is yeah that’s right. Okay. Okay. We did touch on this, but overall if honest mistakes are made,
00:34:49.119 will there be guidance rather than immediate penalties? Always from us. So we assume most people
00:34:55.119 want to comply with the law. Sometimes people don’t exactly know how to do that or they don’t do it well or they come
00:35:00.160 across new circumstances that they don’t understand. Our approach always with all the businesses that we currently
00:35:05.839 regulate is to work with them to help them comply with the law. We only take uh regulatory action when people
00:35:11.599 continue to refuse to comply with the law, when they turn a complete blind eye to their legal obligations or where they
00:35:18.160 might be overly overtly criminal. We do have criminals running some of the businesses that we we we get involved in
00:35:24.800 or where they’re directly profiting from crime and turning a blind eye to that. Jenny and Shaquila, we have spoken on a
00:35:30.960 few of the concerns, but what are maybe other feelings on the ground? you’re speaking to your constituents often. Uh
00:35:38.640 what are other kind of reactions to what will happen when the tranch 2 reforms
00:35:45.839 come into play? I think there’s a little bit of concern around the audits, but I think u Brendan’s been able to sort of
00:35:52.640 touch on that because people are not sure what require what’s required and obviously it’s it’s new so and they’re
00:35:58.079 hearing a lot of things and the concern around if they do miss a date or if they do miss something uh the heavy heavy um
00:36:05.119 penalties that will be applied. So I think um there have been a lot of noise
00:36:10.800 around that from our members in Victoria uh and then the unknown of of just making sure how how we’re going to put
00:36:17.680 this into practice which uh you know will come as we progress down the line. If you just to assure your members, if
00:36:24.400 you you want to have a look at our website, there’s a section on our website that lists all the enforcement action we’ve taken. Yes.
00:36:30.240 And if people want to go and have a look at that, they’ll you can see that we’ve never taken action against small businesses who are slightly missing
00:36:36.800 deadlines and not filling in the right forms. You you won’t see those cases there because we don’t do that. Yeah. Cuz because I think um a lot of
00:36:42.960 our members are one to two man operations. So they would be the um
00:36:48.240 they’d have to be managing the um uh suspicion they they have to do it all.
00:36:53.760 So you know you could see that u they want to they want to rest assured that if they do miss something that they you
00:36:59.280 know will be um you know not penalized. Yeah, we expect the bulk of your clients to be low-risk people as regular
00:37:05.680 citizens doing regular commercial transactions and but when you do deal with organized crime and money
00:37:11.119 launderers, they’re professionals at what they do. And I say this when I speak to the boards of Australia’s
00:37:16.480 biggest banks is we expect people to try and launder money through them and we expect some of those people to be successful. That’s the nature of the
00:37:22.400 criminal organizations that we work with. What we do ask people to do is put their best efforts into trying to comply
00:37:27.680 with the law and trying to understand suspicion and report it when they see it. Is there anything you’d like to add
00:37:33.520 to? Um, I suppose what I’m hearing is the cost to business. They’re very small
00:37:40.240 businesses with very small profit margins, if any. Um, they run off the
00:37:45.520 smell of an oily rag really. And yes, we do need to get our fees up to uh help
00:37:51.599 cover the cost of setup and ongoing compliance. But I am hearing that there
00:37:57.839 is discussion about a levy being imposed on us for doing this work which I’m a
00:38:03.839 little bit confused as to why we would be charged to do the work for OSAR.
00:38:09.520 The government has a levy at the moment for um businesses that we regulate. We regulate as I said about 19,000
00:38:16.880 businesses. About 200 of those businesses currently pay a levy. So at the moment only businesses that earn
00:38:22.960 more than $200 million pay a levy to Ora which can afford it. That’s right.
00:38:28.880 Um the levy is set by the government. So the government will consider any changes
00:38:34.320 to the levy through the course of the next year. Um but that hasn’t been determined. But I think it would be
00:38:39.760 highly unlikely for small businesses to face any kind of money laundering levy. It’s going to be very hard for us to get
00:38:45.440 our members on board if they’re being asked to pay for doing something for
00:38:50.880 someone else. Yeah. Um that’s just the reality. So from your what you’re saying is that
00:38:58.240 the government do have a levy for some industries, but there’s a threshold on on the turnover. Is that or is it
00:39:04.400 So there there has been a levy for for some time um on businesses that fall under money laundering regulation. That
00:39:10.400 threshold at the moment sits at $200 million. So the vast bulk of those businesses regulate 19,000 businesses.
00:39:16.960 There are 200 that pay a levy. So that 18,800 don’t pay any levy at all. I wish I could otherwise I’d have to
00:39:23.520 become a money launderer. Don’t do that. That is all we have time for. Thank you
00:39:30.720 so much for joining the first edition of Settlement Day. Stay tuned for the next
00:39:36.880 episode and please keep an eye out on updates on AUSTRAC’s website. uh your AIC
00:39:43.520 division and of course the Australian conveyance website. Thank you all for
00:39:48.640 joining us. See you next time.