Criminal gangs and corrupt officials may find it easier to launder money in Australia if lawyers are given more power to conceal their client’s information from authorities, transparency advocates warn.
Australia is one of the only nations not to force accountants, real estate agents and lawyers to report suspicious transactions – including unexplained wealth used to purchase property – to a financial intelligence agency.
Transparency advocates warn the federal government’s legislation to change this may be undermined if lawyers are given “generous provisions for legal professional privilege”, which can be used to hide confidential dealings with clients.
“We would argue that the carve out for legal professional privilege may indeed limit the effectiveness of the bill and the quality of the financial intelligence that goes to the Australian Transaction Reports and Analysis Centre (Austrac),” said Clancy Moore, the chief executive of Transparency International.
“So any further watering down will be giving a green light to organised crime gangs and their enablers like lawyers and accountants, to launder their ill-gotten gains in Australia.”
Moore said most other intelligence agencies including Asio did not have carve outs for legal professional privilege.
It is estimated billions of dollars are laundered in Australia each year and the federal police believe the Australian property market, given its value growth and liquidity, has become an “attractive destination for criminals to both store value and enjoy the fruits of their illicit activities”.
Austrac’s latest national risk assessment found lawyers posed a “high and stable money laundering vulnerability” and that some were “used to establish onshore and offshore business structures and associated banking arrangements to obscure transactions, assets and beneficial ownership”.
But the Law Council of Australia rejected claims the profession “as a whole presents a significant risk of money laundering and terrorist financing”. It has also urged the government to safeguard the “fundamental duty” of lawyers to protect confidential communication with clients.
“[The new regime] must not compromise the relationship of trust and confidence between legal practitioners and their clients,” said the Law Council of Australia’s submission to a parliamentary inquiry examining the government’s legislation.
The Uniting church has told the inquiry any claim of legal privilege should be regarded as “invalid” if used to conceal suspected money laundering.
“We are deeply disappointed by the expanded ability for reporting entities to claim legal professional privilege for the improper purpose of concealing matters that may relate to money laundering and the financing of terrorism,” the church’s submission said.
Anton Moiseienko, an expert in financial crime at the Australian National University, said removing legal professional privilege altogether would be a step too far.
“It would be a very dramatic shift to curtail legal professional privilege,” Moiseienko said. “It is not something that is required by international standards. It is not something comparative jurisdictions have done.”
A spokesperson for the attorney general, Mark Dreyfus, said the government was committed to striking a balance between protecting privilege and eliminating money laundering.
“The government is committed to preserving legal professional privilege to protect the administration of justice,” the spokesperson said.
