Planners best placed to stop money laundering

With new anti-money laundering legislation expected any day, Ernst & Young partner Rob Walsh has warned financial advisers that the Government will expect them to practice extra vigilance because “they work at the coalface of financial investment”.

“Where can you catch money launderers? It’s easiest at the placement stage, where the money is closest to the criminal and the crime.

“Therefore, financial planners are best placed to make assessments on money laundering,” Walsh said.

Walsh added that Australia will hopefully benefit from a “last mover advantage” following the introduction of legislation in both the US and Europe.

He said the Australian rules will be founded on risk-based know your client principles, similar to those adopted in the United Kingdom, rather than the prescriptive regulations contained in the US’ Patriot Act.

Financial planners, therefore, will be able to identify which of their client base is likely to pose a greater risk in terms of money laundering, rather than apply a one-size-fits all compliance approach.

For instance, Walsh said that non-resident individuals looking to invest large amounts in complex investment schemes would pose a greater risk than Australian citizens making regular contributions to a managed fund via salary contributions.

Certain sectors of the financial services industry will also be more vulnerable, Walsh said. “Cash investments will be more attractive [to money launderers] than insurance policies where you need a body to get the proceeds.”

Current estimates show that around $2-3 billion in money is laundered through the Australian financial services market each year.

In addition, Walsh said money launderers would share up to 40 per cent of their total funds in order to get the cash through the system and ‘cleaned’.