Leading industry bodies are lining up to attack the Federal Government’s anti-money laundering (AML) reforms as the original consultation period closes.

As Risk Management went to press, Minister for Justice and Customs Senator Chris Ellison’s chief AML adviser said a decision over whether to extend the consultation period was pending.

The protests cross the gamut of the intended bill from the Law Council of Australia to the Australian Direct Property Industry Association.

Rival accounting bodies CPA Australia and the Institute of Chartered Accounts (ICA) teamed up to deliver a stinging critique of the reforms.

In a joint submission to the Senate committee reviewing the draft AML bill, the CEOs of the two bodies, Geoff Rankin (CPA) and Graham Meyer (ICA), said that while they support the objectives of the Financial Action Task Force’s (FATF’s) recommendations, on which Australia’s reforms are based, they are unhappy with the Government’s handling of the situation.

“The Government has regularly confirmed its commitment to improving the regulatory environment for business and cutting red tape,” Rankin and Meyer wrote. “Despite this stated commitment, our consultations with the Attorney-General’s department and Austrac to date suggest that the pre-regulatory development process is not adequately factoring in commercial realities and the practicalities of undertaking business in Australia.”

Senator Ellison told a luncheon last month that his department was sensitive to the cost of compliance, but added that costs would not be known until the rules were finalised.

“Cost is a key issue, and we appreciate that can’t be assessed until the rules are in place,” Ellison said. He added the Government would be taking into account its commitment to reducing red tape when drafting the bill.

The accounting chiefs, however, believe the process will deliver unworkable legislation, singling out a number of issues. While the Federal Government spent two years working on its reforms, when it released the exposure draft in December the Government said it planned to introduce the bill to Parliament in June.

“The majority of the rules and guidelines, which provide the detail on compliance processes and obligations, have not yet been released and many have not yet been drafted,” they wrote. This would result in a rushed process, they added.

Rankin and Meyer added that the bill goes too far, outstripping the requirements of the Financial Action Task Force’s (FATF’s) recommendations. “There appears to be little willingness to balance the risk of money laundering against the impact on business and the general public in terms of inconvenience and compliance costs.”

Individuals purchasing a new television or fridge on credit could be subject to customer identification and be required to produce a birth certificate or other primary identification, they wrote. The accountants also claimed that the regime will not be a truly risk-based one and is actually a prescriptive piece of regulation.

“Unless the AML/CTF (Counter Terrorism Financing) reform is targeted at the highest-risk transactions it will impose an unnecessary compliance burden, particularly on small businesses. The prescriptive nature of the bill and draft rules is also inconsistent with the FATF recommendations,”Meyer and Rankin wrote.

Ellison has attempted to hose down speculation about the bill, but found his comments at a recent luncheon reported as a rewrite of the bill.

While some have claimed that recent comments by Ellison constituted a ‘watering down’ of the bill, experts said that missed the mark. “The supposed rewrite of the bill is just a clarification and it just confirms that the primary basis for this bill will be a risk-based approach, supplemented by a level of prescription,”said one. “I was actually gobsmacked by how little he has said.”

The Australian Bankers Association (ABA), meanwhile, claimed the Government had reneged on promises made during the industry round-table events held last year, after which Ellison issued several upbeat press releases. The association said there had been an agreement that the bill would be risk-based and would be designed to counter money laundering, rather than being a compliance tool to monitor the performance of reporting entities.

“The draft legislation revealed to date has not followed this approach and is delivering a very large overhang of mandatory and prescriptive (rather than risk-based) legislation and rules, with very little scope left for industry guidelines,” wrote Tony Burke, CEO of the ABA in its submission. “Additionally there are serious reservations among industry participants that the April deadline set for the consultation period cannot be met at the present pace.”

He added that unless more time is allowed, the bill will be doomed to fail. “The industry concern is that if the AML legislative package is pulled together in a rush to meet the current mid-April deadline, issues will not be properly resolved, or will be overlooked, resulting in implementation difficulties and ongoing operational problems,” Burke wrote.