The Financial Planning Association (FPA) is concerned draft legislation designed to prevent the financing of terrorism is too prescriptive, could impose too high a cost on financial planning businesses, and does not contain enough detail to allow proper industry scrutiny.
In its submission to the Government’s forum on proposed anti-money laundering legislation (AML), the FPA said the draft legislation was too prescriptive because it didn’t contain details of a more risk based approach — where certain low risk client transactions might require less action on the part of planners.
To give the Government room to detail such a risk based process, the FPA has asked for an extension of the current consultation deadline of April 13 for the draft legislation.
“If the AML regime is to be truly principles based, then it should explicitly recognise the role of risk in determining the extent of obligations,” the FPA submission said.
But talking to Money Management, FPA policy manager John Anning said he was confident the Government would heed the FPA’s, and other’s, advice.
“[Minister for Justice and Customs] Chris Ellison has agreed that they should look at incorporating a risk based approach. In relation to superannuation products or some securities and derivatives, we’ve argued that goes further than what is required under FATF [Financial Action Task Force] requirements. The Government seems prepared to explore other options.
“We’re not suggesting that superannuation products should be carved out of the legislation altogether, low risk products should still be in the regime, but only if other risk factors come into play.”
Anning said these factors should include not only the type of product, but also the method of dealing with the client — whether it its face-to-face or over the internet — and the type of client, for example, clients who are not Australian residents may pose a higher risk.
Anning said the FPA would like to see risk triggers and definitions excluded from the black letter of the legislation and included in underlying rules to be developed by financial planners and other affected professionals in cooperation with the corporate regulator.
In its submission the FPA also asked that planners not have to go through identification procedures when a client comes into see them to discuss the possibility of putting money into a managed investment product. Anning said the FPA would rather see identification procedures kick in when the client has made a final decision and funds are put into the chosen product.
The FPA also asked that individual planners don’t bear total responsibility for reporting suspect clients.
“FPA considers the effective fulfilment of the AML obligations will require recognition in the legislation of the pivotal role played by the Australian Financial Services Licensee in the provision of financial services.”
