Anti-money laundering reforms require a whole-of-government approach: SMSFA

However, it stated that the resources required by tranche two entities to build, implement and monitor their AML/CTF programs should not be underestimated.

“Especially for professional service providers (PSPs) which we think will be mainly small to medium sized businesses. Currently, many of these PSPs face significant challenges in their own businesses, including skills shortages and operating in a challenging economic environment,” the report said.

“Furthermore, some sectors are already responding to or implementing other government reforms, including new compliance programs, further stretching available human and financial resources.”

The report goes on to say that to ensure the effective implementation of the AML/CTF measures and avoid unnecessary regulatory burden and costs for new reporting entities, it recommends a whole-of-government approach to consider all current and upcoming regulatory reforms that affect entities in the second tranche.

“A plan for the implementation of all relevant reforms should then be developed to ensure that small to medium-sized businesses can meet their legal obligations and, importantly, support the successful implementation of these reforms,” the report said.

“Successful implementation of the reformed AML/CTF regime will also depend on AUSTRAC taking a proactive role, including by working closely with affected sectors through their representative trade associations.”

In addition, the association said the extension of the AML/CTF regime to tranche two entities would also significantly expand the range of regulated designated services, increasing the risk that some services would be inadvertently intercepted.

It also said it was concerned about the proposal to create a new service where a professional services provider provides a “legal arrangement” with a registered office address where the client has no real office address or physical presence in Australia.

“In Australia, approximately two-thirds of SMSFs have a corporate trustee, with both the SMSF and the corporate trustee (company) will be considered ‘legal arrangements’ under the expanded regime.”

“There are many benefits to using a company trustee, including perpetual succession of the SMSF. It is common for the accountant to be listed as the registered office of the company trustee. This practice ensures that there is a system in place to handle important or time-sensitive correspondence and reduces the risk of the address not being updated if, for example, the customer moves.”

The argument continued that the SMSF and the business trustee were set up by the clients to save and prepare for retirement, and not to run a business.

“Every year the SMSF must be audited and lodge an annual return with the ATO. Funds within the SMSF cannot be accessed until the customer meets a condition for release, such as reaching retention age or turning 65,” the report said.

“Given these facts and the associated low risk associated with this activity, we believe that acting as a registered office for the trustee of a client of an SMSF should be exempted as a designated service.”