Senator Chris Ellison, Minister for Justice and Customs may still have his legal practicing certificate, but he is headed for a bust-up with the legal profession over the Federal Government’s anti-money laundering (AML) reforms.

The Federal Government’s reforms, which will see lawyers required to inform on clients if they suspect money laundering is taking place. The reforms are based on the Financial Action Task Force’s (FATF’s) 40 recommendation on money laundering. Other regions that are ahead of Australia in their AML reforms have failed to fully include the legal profession, which objects to the potential loss of professional priviledge brought on by the reforms.

In Canada, for example a legal challenge resulted in lawyers being exempted from the reforms and having privileges protected. According to Senator Ellison, Canada is a case-study of how not to bring in AML reforms. Canada’s reforms included every impacted industry at the same time, wheras after lengthy delays, the Federal Government decided to roll out its reforms in two stages, with legal professionals to be covered by the second tranche.

“Canada is an example of where we were headed initially,” Ellison told a luncheon last month. “Canada took in everyone at once, and there was a court case which challenged the process and as a result, lawyers have been excluded from the process. Canada is a lesson that including everyone initially can slow you down and confuse things.”

However, lawyers have privately expressed serious concerns over any bid to limit their professional privilege. The Law Council of Australia, meanwhile has said it will do every in its power to protect privilege.

“What we cannot achieve is any consensus at this stage that the legal profession, due to the importance of client confidentiality, should be outside the ambit of the proposed legislation,”John North, LCA president, said last year. “Further, it has the potential to seriously erode the confidence of clients in their lawyers and will add considerable cost to legal practices.”

So serious is the issue, North said, that the LCA will go as far as it can to defend professional privilege. “In a small town where a lawyer was obliged to secretly report a client’s suspicious transaction, if it all turned out to be legitimate, then that client’s faith in the lawyer would probably be shattered.”