Last month, the federal government introduced the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024, which it said, at the time, introduces significant, long overdue reforms to Australia’s AML/CTF regime.

“The bill will close a significant regulatory gap in Australia by expanding the regime to address vulnerabilities within ‘tranche-two’ entities, including lawyers, accountants, real estate professionals and dealers in precious stones and metals,” Attorney-General Mark Dreyfus said in September.

At the time of the bill’s introduction, the Law Council of Australia warned that the proposed laws, intended to bring Australia in line with international standards, will add billions of dollars in expenses to affected businesses – which may especially harm small law firms.

Those boutique practitioners are not the only legal professionals set to be impacted if the bill passes in its current form, barristers suggested, with numerous associations arguing for exemptions for those at the Bar.

Requirement for independence

Barristers, the Victorian Bar espoused, must be independent and cannot reserve themselves to act solely at the behest of a single client.

“Instead, barristers are generally briefed by solicitors and by large accounting firms, who themselves will be subject to the AML/CTF regime,” it said.

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“Furthermore, while barristers often advise on transactions, [they] are not able to execute transactions for clients, nor do they handle client monies or act as the agent for any client.”

Given that other professionals will already be performing such relevant AML/CTF checks, “the risk level of the work briefed to the barrister is significantly reduced, and any checks performed by the barrister themselves is likely to constitute a ‘double-up’,” Victorian Bar said.

Legal professional privilege

Fiona McLeod SC – who has formerly led the Law Council of Australia, Australian Bar Association, Victorian Bar, and Australian Women Lawyers – made a submission and pointed out that lawyers are “in a unique relationship of trust and confidence with their clients”, such that their communications are protected by legal professional privilege.

“The common law and statutory protection of the privilege recognises the essential value of the privilege to the administration of justice,” she said.

“Requiring lawyers to report suspicious matters places them in an immediate position of conflict that may require a breach of legal profession privilege and would ordinarily require a lawyer to cease to act.”

The NSW Bar also flagged a concern that the proposed amendments “do not strike an appropriate balance between the reporting and record-keeping requirements of the AML/CTF Act and the duties of lawyers to their clients”, including the duty to preserve the clients’ fundamental common law right to legal privilege and to access to lawyers.

Cab-rank rule

The inclusion of barristers under the expanded regime also presents problems for the cab-rank rule – whereby barristers must accept a brief where the work is within the barrister’s skill and expertise, the barrister is available to take on the work and the fee is acceptable, the NSW Bar Association remarked in its submission.

“The operation of the cab-rank rule ensures that within our adversarial system of justice, those in need of a barrister are able to access a barrister. It follows that a barrister must accept a client even if there are aspects of the client’s business that would raise a reasonable suspicion for the purposes of the reporting obligations under the AML/CTF Act,” the association said.

“The imposition of sections 41 and 123 of the AML/CTF Act on barristers may result in a barrister having to refuse to act further for a client as to continue to act would potentially compromise their duty to the client.”

Sole practitioners

The effect of services provided by barristers being treated as part of the “designated services”, under the expanded regime, would – the Australian Bar Association (ABA) submitted – be to impose a “very significant burden” on barristers at the independent Bar who are required, by the Bar rules, to be sole practitioners.

“Each barrister would be required to develop his or her own systems and employ staff and procure storage capacity in order to comply with the act,” the ABA said.

“The Bar structurally is ill-suited to meeting the compliance requirements of the legislation, and most barristers would likely opt to not take work that would oblige them to take on these compliance obligations unless such work was the core of their practice.”

The reason for this, the ABA continued, is that barristers instructed by solicitors can leave the administrative infrastructure needed to support such compliance with solicitors.

“It is a major feature of the separate roles of barristers and solicitors, which, amongst other things, permits justice to be delivered as cost-effectively as possible. Consequently, barristers share accommodation, and most have limited, and increasingly no, secretarial support,” it said.

“The result would be far fewer barristers would take this work, so competition among barristers would be reduced. Moreover, those likely to remain would be specialists/leaders in such fields and are likely to legitimately command higher fees for their skill set. The consequence would be in respect of smaller matters costs would inevitably become relatively higher, and access to justice reduced.”

Barristers, Victorian Bar outlined, often have no employees and little capital.

Following on from its earlier point about the requirement for independence, the association stressed that given a lack of resources for sole practitioners, “any checks done are unlikely to add to the checks by the law firm or accounting firm”.

“There is a real risk that making individual barristers register, so they can advise on contracts being executed by law firms and accounting firms, will force junior and country practitioners to stop servicing basic requests for advice,” it said.

Ultimately, McLeod wrote, if the costs of complying with AML/CTF additional regulation becomes too burdensome, “many lawyers, particularly sole practitioners, including barristers, will opt not to undertake low-value and pro bono work with potentially devastating impact upon the work of the courts and unmet legal need across Australia”.

Pro bono

A further concern in the face of the absence of a blanket exemption for barristers, Victorian Bar wrote, is the potential for “grave consequences” for pro bono work.

“If there is no exemption for barristers, it will be difficult to undertake pro bono work from court referrals with the proposed added burden,” the association said.

“Referral schemes … rely significantly on referrals to barristers on a direct brief basis, [which will be] severely negatively impacted by the introduction of the proposed … reforms,” Victorian Bar said.

“The trade-off in applying the proposed AML/CTF rules to barristers at the cost of pro bono and public interest work and the consequential harm to litigants requiring legal assistance should be of real concern to the government.”

The NSW Bar supported this, noting that clients who engage barristers on a direct access basis may be vulnerable, at least in the sense that they cannot afford a barrister and solicitor.

“Many direct access clients (such as in criminal, family and migration cases) are vulnerable in other respects, and compliance with know-your-customer requirements at the outset of an engagement has the potential to be intimidating and to interfere with the trust and confidence needed for the barrister to discharge their duty to the client,” it said.

These risks are more acute where barristers are engaged on an urgent basis, the association pointed out. “This often occurs in pro bono matters where a barrister is retained by referral arrangements with a court or tribunal where a litigant in need of legal assistance is identified,” it said.

“To require a barrister to undertake customer due diligence before the barrister is permitted to act in such cases would significantly impair access to justice and potentially deny clients the effective exercise of their legal rights.”

Recommendation

For these reasons – as well as others put forward in the aforementioned submissions to the Senate standing committee on legal and constitutional affairs – the bar associations and McLeod recommended that barristers be exempt from the expanded regime.

The bill should, NSW Bar wrote, “include a provision [that] specifies that services provided by a person in the course of legal practice as a barrister on the instructions of a solicitor are not taken to be designated services”.

Such an exemption is necessary, Victorian Bar implored, given the “critical concerns” barristers harbour about an extension to the AML/CTF regime. Such an extension, it declared, “will detract from the independent role of counsel in the administration of justice, or the centrality of trust and confidence to the barrister-client relationship”.