AUSTRAC has begun issuing fines under its expanded anti-money laundering regime, with small businesses facing new compliance costs and administrative demands.
The reforms, which came into effect earlier this year, now extend to accountants, lawyers, real estate agents and jewellers providing designated services.
The watchdog confirmed on September 30 that it had begun issuing infringement notices for failing to enrol under the new rules, with penalties of $21,840 for companies and $4,368 for individuals.
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Charles Sturt University financial crime expert Dr Michael King estimates the reforms could bring approximately 100,000 additional businesses under AUSTRAC’s oversight.
Affected businesses must enrol with AUSTRAC, assess money laundering risks, conduct customer checks and establish compliance programs.
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AUSTRAC Deputy CEO Regulation Katie Miller told SmartCompany around 90% of organisations identified as at risk of non-enrolment had since enrolled or taken active steps to do so.
“The overwhelming majority of businesses are doing the right thing and taking their obligations seriously,” Miller said.
“For the small minority that continue to disregard their obligations there will be consequences.”
However, Council of Small Business Organisations Australia (COSBOA) chair Matthew Addison told SmartCompany the reforms are placing a disproportionate burden on smaller operators.
“It’s absolutely an administrative burden for a small firm,” said Addison, who argued the rules are too broad and will impose unnecessary compliance costs on smaller firms.
King warned, in commentary published via Charles Sturt University’s research website, that the expanded regime could force smaller businesses to close, merge or abandon regulated services because of compliance costs and exposure to substantial penalties.
He also questioned whether an enforcement framework developed for Australia’s largest banks was appropriate for small accounting practices and jewellers.
“AUSTRAC’s penalty regime, by design, is not calibrated that way,” he wrote.
However, Miller said the reforms are designed to close longstanding gaps in Australia’s anti-money laundering system.
“Criminals look for weaknesses in legitimate businesses and professional services to move, disguise and invest the proceeds of crime,” she said.
“The law applies when a business provides a designated service. It doesn’t matter if the business is big or small.”
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Small businesses rethink services
Addison, who is also executive director of the Institute of Certified Bookkeepers, said some smaller accounting practices are already adjusting their operations in response to the new requirements.
“We do see some of the professional advisers changing the range of services that they’re prepared to offer,” he said
Jewellers may also rethink their services, as those declining cash or virtual-asset payments of $10,000 or more can avoid certain AUSTRAC obligations, provided they offer no other designated services.
The Law Council of Australia has likewise warned of the burden on smaller legal practices, citing New Zealand, where some firms stopped offering regulated services or closed because of additional compliance costs.
Addison said affected firms also faced further costs from third-party providers offering anti-money laundering compliance software and services.
“A big firm, one of the Big Four accounting firms, would have a team working on their anti-money laundering,” Addison said.
“A small one-man practice in the suburbs, the regulatory burden is disproportionately imposed upon them.”
Balancing risk and red tape
Addison said money laundering risks do vary across industries, with property transactions and corporate restructuring warranting closer scrutiny.
However, he said the reforms also captured smaller, lower-risk practices.
Miller said AUSTRAC has provided guidance and support to help businesses comply.
“We do not expect perfection but we do expect effort from businesses to understand and manage their risks and report if they see suspicious matters,” she said.
Addison also pointed to AUSTRAC’s consultation and guidance, including clarification of when bookkeepers would not need to enrol.
“AUSTRAC had been on a journey of trying to make it as easy as possible for the simple firms, but ultimately the small firm is still carrying a fair compliance burden,” he added.