Legal practitioners and the provision of legal services in Australia are primarily regulated at state and territory level. Each state and territory, with one exception, has enacted a Legal Profession Act against the background of model laws developed over the period 2002–06 under the imprimatur and policy decisions of the then Standing Committee of Attorneys-General. The exception is South Australia, whose Legal Practitioners Act 1981 (SA) predates this period, but nevertheless regulates legal practitioners.
While some slightly different approaches may have been taken in some jurisdictions, the fundamental core standards regulating the way legal practitioners work and conduct legal practice remain the same.
At the time of writing, the primary legislation regulating legal practitioners in Australia is the:
- Legal Profession Act 2006 (ACT);
- Legal Profession Act 2004 (NSW);
- Legal Profession Act 2006 (NT);
- Legal Profession Act 2007 (Qld);
- Legal Profession Act 2008 (WA);
- Legal Profession Act 2007 (Tas);
- Legal Profession Act 2004 (Vic); and
- Legal Practitioners Act 1981 (SA).
The scheme of regulation created under the Standing Committee of Attorneys-General model:
- introduced a substantial degree of regulatory uniformity (either through uniform provisions or the adoption of common standards) in key areas such as qualifications and suitability for admission, suitability to be granted practising entitlements, trust money and trust account regulation, information disclosure such as reporting show cause events, suspension and cancellation of practising entitlements, investigation and external intervention in the affairs of a law practice, and complaints and discipline; and
- provided for automatic recognition of practising entitlements across jurisdictional boundaries, accompanied by extensive information sharing and cooperation among regulatory authorities and the courts.
Depending on the jurisdiction concerned, regulatory functions under the legislation are shared between the law society, the bar association and/or an independent statutory regulatory or board (such as a legal services commissioner).
In addition to legislative regulation, legal practitioners are subject to ethical duties set out in legal profession rules (ie rules of professional conduct) and the common law. Unlike other professions, the rules of professional conduct that apply to legal practitioners are not voluntary codes of practice, but derive from the role of the legal practitioner as an officer of the court and his or her duty to the court and the administration of justice. Because of this, legal practitioners are, in addition to legislative controls, subject to the inherent disciplinary power of the court.
There are two key concepts underpinning discipline of the legal profession in Australia. First is unsatisfactory professional conduct, which is defined by legislation as including conduct that falls short of the standard of competence and diligence that the public is entitled to expect of a reasonably competent legal practitioner. The more serious concept is professional misconduct, which includes a substantial or consistent failure to reach or maintain a reasonable standard of competence or diligence and conduct (whether or not occurring in connection with legal practice) that justifies a finding that the practitioner is not a fit and proper person to engage in legal practice.
Complaints against legal practitioners are initially investigated by the relevant law society, bar associations and/or independent statutory regulator (depending upon local arrangements). If it is concluded that there is a reasonable likelihood that a disciplinary tribunal would find the practitioner guilty of unsatisfactory professional conduct, but the practitioner has otherwise been generally competent and diligent, the matter can be dealt with by way of penalties such as a fine and/or public reprimand and/or a compensation order and/or imposing conditions on the practitioner’s practising entitlements. However, matters relating to professional misconduct or unsatisfactory professional conduct that cannot appropriately be dealt with summarily are referred to an independent disciplinary tribunal. A finding by a disciplinary tribunal that there has been unsatisfactory professional conduct or professional misconduct can attract a range of orders by the tribunal. These include cancellation or suspension of the practitioner’s practising certificate, imposing conditions on the practising certificate, a compensation order, or an order recommending to the Supreme Court that the person be removed from the roll (ie disbarred from the profession). In addition, there are publicly available discipline registers that must record the names of legal practitioners against whom disciplinary action has been taken and the nature of that disciplinary action. The Law Council of Australia and the Australian Bar Association are the key national industry organisations for the legal profession in Australia. The roles of both organisations involve both representation of and advocacy for members. These organisations do not perform regulatory or disciplinary functions; however, the Law Council and Australian Bar Association have ratified uniform, national conduct rules for solicitors and barristers respectively. Solicitors also have existing requirements to report cash transactions of $10,000 or more under the Financial Transaction Reports Act 1988 (Cth).
The Council of Australian Governments (COAG) is in the process of developing nationally uniform state and territory laws to regulate the legal profession. At present, the Australian legal profession is a highly regulated profession and there are sufficient regulatory differences across jurisdictions to effectively impede the development of a truly Australian legal profession and national legal services market. COAG, in furtherance of its microeconomic reform program, agreed to the drafting of a new uniform law to be adopted by each state and territory, which will provide a single, uniform and simplified piece of legislation, supported a national regulatory framework. The overall goal is to move towards a more functional and efficient Australian legal services market by establishing an integrated regulatory framework that includes each state and territory, underpinned by uniform legislation. This approach is expected to facilitate the seamless delivery of legal services throughout Australia, which will also improve the overall level of protection for consumers of legal services (LCA 2010).
Legal professional regulation in New South Wales
The Legal Profession Act 2004 (NSW) (Legal Profession Act) limits legal practice to Australian legal practitioners (those admitted to the profession in New South Wales or another state or territory) who hold a practising certificate. The Legal Profession Admission Board (Admission Board) makes a recommendation for admitting an applicant to the profession by issuing a compliance certificate. An applicant for admission must meet education and training requirements, set out in rules for admission used by the Admission Board and be assessed as a fit and proper person to be admitted to the legal profession. The assessment of a person’s suitability to enter the legal profession is stringent and requires disclosure of, for example, offences (including spent convictions) in Australia or a foreign jurisdiction where there has been a finding of guilt or acceptance of a guilty plea, whether or not a conviction has been recorded. The Supreme Court of New South Wales admits a practitioner to the profession.
The Law Society and Bar Association of New South Wales issue practising certificates for solicitors and barristers. Solicitors are bound by the rules set by the Law Society of New South Wales. Barristers are similarly bound by the rules of the New South Wales Bar Association. The OLSC, appointed by the New South Wales Attorney-General, the Law Society and the Bar Association, co-regulate solicitors and barristers in New South Wales.
The Legal Profession Act and Legal Profession Regulation 2005 (NSW) (Legal Profession Regulation) establish ongoing obligations for legal practitioners in New South Wales. They include requirements for dealing with funds held in trust, mortgage financing and managed investment schemes.
Solicitors are bound by the Revised Professional Conduct and Practice Rules 1995 of the Law Society of New South Wales (1995). The Practice Rules were made by the Council of the Law Society of New South Wales. The Statement of Principle for the Rules relating to relations with clients notes ‘[p]ractitioners should not, in the service of their clients, engage in, or assist, conduct that is calculated to defeat the ends of justice, or is otherwise in breach of the law’ (Law Society of New South Wales 1995: np).
Conduct that is in contravention of the Legal Profession Act, the Legal Profession Regulation, or legal professional rules that does not result in a conviction may still lead to a finding of professional misconduct or a less serious finding of unsatisfactory professional conduct. Professional misconduct is defined by the Act as a substantial or consistent failure to meet standards of competence or diligence or no longer being a fit and proper person to engage in legal practice. Specific examples offered by the Act of professional misconduct include convictions for serious offences, tax offences, or offences involving dishonesty.
Barristers in New South Wales are bound by the New South Wales Barrister’s Rules issued by the New South Wales Bar Association (NSWBA 2011). These rules specify clearly the requirements for barristers to act honestly and in accordance with the law. Rule 12, for example, provides:
A barrister must not engage in conduct which is:
(a) dishonest or otherwise discreditable to a barrister;
(b) prejudicial to the administration of justice; or
(c) likely to diminish public confidence in the legal profession or the administration of justice or otherwise bring the legal profession into disrepute (NSWBA 2011: 3).
Public notaries in New South Wales are further regulated by the Public Notaries Act 1997 (NSW) (Notaries Act). The Notaries Act limits eligibility for appointment as a public notary to those with at least five years’ standing as a solicitor or barrister. The Supreme Court of New South Wales may appoint public notaries once the Admission Board approves an application for admission as a notary. The Admission Board maintains a roll of public notaries.
The Supreme Court of New South Wales may order the name of a public notary to be removed from the roll for incompetence as a public notary, misconduct as a public notary, or for another reason as the court sees fit. Misconduct as a public notary includes professional misconduct or unsatisfactory professional conduct as a legal practitioner under the Legal Profession Act. Public notaries may also be removed from the roll by a decision from the Administrative Decisions Tribunal or if the notary ceases to be a legal practitioner.
The Notaries Act prohibits performing notary services to one’s employer, or clients of one’s employer, unless the employer is a legal practice. The Notaries Act also criminalises providing notary services without being legitimately on the roll held by the Admission Board.
Trust fund regulation
Legal practitioners holding funds in trust are bound by obligations in the Legal Profession Act and Legal Profession Regulation. The Legal Profession Act requires legal practices to hold trust funds in a trust account and does not limit the number of trust accounts a practice might operate. Most practices, however, are likely to have only one or two trust accounts (C Cawley personal communication 9 June 2009). The definition of trust funds in the Legal Profession Act does not include funds held by a practice for a financial service offered by that practice, or for other managed investment schemes or mortgage financing. Barristers may not receive trust money in the course of practice as a barrister.
Practices are prohibited from withdrawing funds from a trust account unless they are made electronically or by cheque. The Legal Profession Act specifically prohibits cash withdrawals, ATM withdrawals, or telephone banking transfers or withdrawals.
Controlled monies are funds that must be paid into a controlled money account for that client only. The same limits on withdrawal methods apply to controlled money accounts. Transit money, defined as funds with instructions to pay it to a third party, is regulated in the Legal Profession Regulation.
Any trust money received as cash must be deposited into a general trust account. The Act prohibits following any instructions from the client to do otherwise. Any transit money taken as cash must also be deposited into a general trust account before following the payout instructions for the money. Controlled money received as cash must also be paid into a controlled money account. These controls combined with obligations under the Financial Transaction Reports Act 1988 (Cth) mitigate many of the risks that a legal practice could unwittingly be used to launder cash. Furthermore, the regime under the Legal Profession Act for annual external examination of trust accounts, combined with the regulator’s own powers of random inspections and investigations provide an effective safeguard against deliberate attempts to launder cash through law practice trust accounts.
Practices are prohibited from using trust money to pay debts or to satisfy a judgement made against the practice. Trust money may be used to pay fees for legal services if a client has authorised doing so. The Act places a further prohibition on mixing trust money with other funds.
Legal practitioner associates are required by s 263 of the Legal Profession Act to report any irregularities in the practice’s trust accounts or trust account ledger to the Law Society and any other authority responsible for trust account regulation. Legal practitioners are further required to make the same reports of any reasonably suspected irregularities in the trust account or ledger of another practice. Legal practitioners are not liable for any loss or damage suffered by complying with s 263.
Section 265 prohibits receiving and recording funds under a false name. The practice must also record all of the names used by a client known by more than one name.
All trust account records must be externally examined once every financial year. The external examiner may also examine the affairs of the practice connected with the operation of the trust account. The Law Society, if not satisfied this process was completed in accordance with the regulations, may appoint another external examiner. The external examiner must submit a report to the Law Society on completing the examination. The Legal Profession Act also allows the Law Society to appoint an investigator to examine the affairs of a legal practice, including trust accounts, on a routine or other basis.
The Legal Profession Regulations require trust accounts to be held only at authorised deposit taking institutions (ADIs). The Law Society Council may approve ADIs to hold trust accounts. ADIs are required by the Legal Profession Act to report any suspected offences or deficiencies in trust accounts to the Law Society Council on forming a suspicion. ADIs must also produce records for the external examiner of a trust account or for Law Society investigators.
Legal practices cannot conduct managed investment schemes. Managed investment schemes must be conducted by separate entities and these entities are regulated by ASIC. All financial services, including any financial services when offered by legal practices, may only be offered by an Australian Financial Services Licence (AFSL) holder. The financial services that require the provider to hold an AFSL are already subject to AML/CTF obligations.
Complaints about legal practitioners must be lodged with the OLSC. The OLSC may refer complaints to the Law Society or Bar Association. Complex or serious matters such as those involving fraud or trust account breaches are usually referred on (OLSC 2009a). The OLSC is more likely to retain consumer issues, those of public interest, or those involving conflicts of interest for professional associations.
The OLSC, Law Society and Bar Association take disciplinary action to the Administrative Decisions Tribunal Legal Services Division (the Tribunal) for hearing. All three may make a decision on some complaints without referring the matter to the Tribunal. Appeals against Tribunal decisions may be heard in the Supreme Court of New South Wales.
Complaints investigated by the OLSC have several possible outcomes. The OLSC may dismiss complaints if it considers the Tribunal unlikely to find the legal practitioner guilty of unsatisfactory professional conduct or of professional misconduct. The OLSC may initiate Tribunal proceedings if a guilty finding is likely. If a finding of unsatisfactory professional conduct is likely (not a finding of misconduct), the OLSC itself may retain the matter and choose to impose a caution, issue a reprimand, or dismiss the complaint in some circumstances.
The Tribunal may impose a range of sanctions for findings of unsatisfactory conduct—cancelling practising certificates, imposing fines of up to $10,000, issuing private or public reprimands and imposing orders for further education (OLSC 2007a). Findings of professional misconduct may attract these sanctions and may also result in removing the practitioner from the roll of legal practitioners. The Tribunal, in cases of professional misconduct, may impose a fine of up to $75,000.
Complaints referred to the Law Society by the OLSC are investigated by a solicitor in the Professional Standards Department. The investigator reports to the Professional Conduct Committee. The Professional Conduct Committee makes a final decision on whether the Tribunal is likely to find the legal practitioner guilty of unsatisfactory professional conduct or professional misconduct. The Professional Conduct Committee can dismiss the complaint if it is in the public interest to do so, impose a sanction, or refer the matter to the Administrative Decisions Tribunal Legal Services Division for hearing. Matters with a reasonable likelihood of a finding of guilty of professional misconduct cannot stay with the Law Society and must be referred to the Tribunal.
Complaints referred to the Bar Association are investigated by one of four Professional Conduct Committees in the Professional Conduct Department.
Reporting of offences
Section 730A of the Legal Profession Act 2004 (NSW) imposes a positive obligation on regulators who suspect on reasonable grounds, after investigation or otherwise, that a person has committed an offence against any Act or law, to report the suspected offence to any relevant law enforcement or prosecution authority and to make available to the authority the information and documents relevant to the suspected offence in its possession or under its control.
Accountants in Australia are not subject to statutory regulation as a single profession. The services provided by accountants and members of the broader profession are regulated individually. Most of the services provided by a public accountant are subject to some regulation, although not all of the services offered by accounting professionals are captured by the separate pieces of legislation.
The services regularly provided by an accountant in public practice subject to regulatory controls are tax matters, financial advice, company auditing services and liquidation services, and bankruptcy trustee services.
Subsection 1 of s 251L of the Income Tax Assessment Act 1936 (Cth) criminalises charging a fee for preparing or lodging tax liability-related documents, giving advice, preparing an objection, or dealing with the Tax Commissioner unless registered as a tax agent. The six Tax Agents’ Boards maintain a register of tax agents. Tax agents are registered for three year periods. The registration requirements are based on assessments of being a fit and proper person. The fit and proper person assessment includes meeting education and experience requirements, character assessments and being free of convictions for serious tax offences in the last five years.
Tax Agents Boards currently receive complaints about tax agents and deal with matters from the Tax Agent Integrity Unit at the Australian Taxation Office (ATO). The sanctions available to the Tax Agents Board are to issue a caution or to suspend or cancel registration.
The Tax Agent Services Act 2009 (Cth) (TAS Act) will replace the Tax Agents Board with a national Tax Practitioners Board. The Tax Practitioners Board will register tax agents and BAS agents. The TAS Act establishes a Code of Professional Conduct for tax and BAS agents. The Code of Professional Conduct requires tax and BAS agents who receive money or property from a client to be held on trust to account for that money or property to the client (s 30(10)).
Failure to comply with the Code may result in the Tax Practitioners Board issuing a caution to the tax or BAS agent, applying an order, or suspending or terminating the registration of the agent. The TAS Act provides civil penalties for offering tax and BAS services without registration. Civil penalties are also available for making false or misleading statements or being reckless as to whether a statement is false or misleading. The Act does not set out identification or verification procedures for tax or BAS agents.
The Tax Practitioners Board’s role will include investigating breaches of the TAS Act or regulations. The investigative powers extend to requesting documents and witnesses.
The Corporations Act 2001 (Cth) requires businesses providing financial services, including accountants who provide financial advice, to obtain an Australian Financial Services Licence (AFSL) which is issued by the Australian Securities and Investments Commission (ASIC). AFSL holders who provide any of the designated service item(s) in Table 1 S6 of the AML/CTF Act have obligations under the AML/CTF Act and are regulated by AUSTRAC. An AFSL holder who is acting in the capacity of the holder of that licence and makes an arrangement for a person to receive a designated service is providing designated service item 54 of S6 of the AML/CTF Act. Reporting entities providing designated services falling within item 54 have reduced obligations under the AML/CTF Act. For example, reporting entities providing only item 54 services may adopt a ‘special’ AML/CTF program, which sets out the entity’s applicable customer identification procedures (Part B) but not the general requirements (Part A) of a standard AML/CTF program. The regulation of auditors, liquidators and bankruptcy trustees are discussed in the trust and company service providers subsection of this section of the report.
Industry association and self-regulation
The accounting profession has a number of industry bodies that have self-regulatory functions for members. The key accounting professional bodies in Australia are CPA Australia, the Institute of Chartered Accountants in Australia (ICAA) and the National Institute of Accountants (NIA). The Association of Accounting Technicians (AAT) is a professional organisation for accounting and finance paraprofessionals.
Membership to any of the accounting professional bodies is voluntary. Membership to CPA Australia, ICAA and NIA is available on meeting education and experience requirements. The educational and experience-based membership requirements for AAT are based on accounting or bookkeeping qualifications.
CPA Australia and the ICAA established the Accounting Professional and Ethical Standards Board (APESB) in 2006. NIA is also a member of the APESB. APESB is independent from CPA Australia, ICAA and NIA, but issues ethical and occupational standards for members of CPA Australia, ICAA and NIA. The APESB’s standards are enforced by the accounting professional bodies and not by APESB.
APESB has issued Quality Control for Firms (APES 320) that incorporate international accounting and auditing standards. The member industry bodies of APESB conduct reviews of their member firms against the APES 320. Firms with assurance practices are bound by more stringent requirements in the APES 320.
The professional accounting bodies investigate and may apply disciplinary action to matters stemming from complaints made to the organisation about their members, matters identified in public practice quality review processes and completed regulatory disciplinary matters or legal proceedings. The professional accounting bodies do not have the investigative powers of law enforcement agencies or government regulators.
The sanctions available to the professional accounting bodies are not uniform. CPA Australia may forfeit or suspend membership to CPA Australia, issue a fine, or review the member’s practice. The ICAA may forfeit membership to the ICAA, impose a fine, or require additional training. The Disciplinary Tribunal of NIA may impose fines or withdraw or suspend membership.
The sanctions available to the AAT are also limited to suspending or cancelling membership to the organisation, fines of up to $10,000, censure, or admonishment. Other industry associations, such as the Association of Taxation and Management Accountants and the Taxation Institute of Australia, are able to impose similar sanctions on members.
The APES 110 Compiled Code of Ethics for Professional Accountants is the code of conduct for members of the professional accounting bodies. APES 110 establishes five fundamental principles for accountants bound by the Code of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. APES 110 does not have specific requirements for customer identification, auditing or monitoring received funds or transactions, or record keeping. Auditing and record keeping requirements for trust accounts are contained in separate APESB standards.
The APES 320 Quality Control for Firms provides principles and procedures for quality control for firms. APES 320 directs firms to consider the integrity of clients when accepting new clients or continuing a relationship. APES 320 does not have specific customer identification requirements. The guideline states that firms should determine the information they need for accepting a client and suggests considering the identity and reputation of clients, key owners and related parties. The guideline directs accounting firms to retain client engagement documentation in accordance with statutory and regulatory requirements, but does not include blanket standard document retention practises.
APS 10 Trust Accounts, currently under review by APESB, contains trust account requirements for accountants bound by the APESB’s guidelines. APS 10 defines trust money as any funds held or received on behalf of any person in the course of offering or performing public accounting services (including financial planning, investment advisory and taxation services), where the firm has no present entitlement to the money.
APS 10 requires accountants opening a trust fund to notify the financial institution of the nature of the account although it does not require a separate account for each client. The guideline requires an annual audit of trust accounts and trust account records, and for the results of the audit to be available to the member accounting professional bodies.
Real estate agents
Regulation for persons acting as real estate agents, buyers’ agents, stock and station agents, onsite property managers and strata management agents, is at the state and territory level in Australia. The legislation that outlines the requirements for entry into the profession and some operational regulations is contained in the following statutes:
- Agents Act 2003 (ACT);
- Property, Stock and Business Agents Act 2002 (NSW);
- Agents Licensing Act (NT);
- Property Agents and Motor Dealers Act 2000 (Qld);
- Land Agents Act 1994 (SA);
- Auctioneers and Real Estate Agents Act 1991 (Tas);
- Estate Agents Act 1980 (Vic); and
- Real Estate and Business Agents Act 1978 (WA).
Property valuers have licensing or registration requirements and other regulations in some Australian states. The relevant legislation governing property valuers is:
- Valuers Act 2003 (NSW)—licensing requirements;
- Land Valuers Licensing Act 1978 (WA)—registration requirements; and
- Valuers Registration Act 1992 (Qld)—registration requirements.
South Australia and Tasmania have educational requirements for performing property valuation services. Valuers in South Australia can become approved valuers on application to the Commissioner of Consumer Affairs. The requirements are established in the Land and Business (Sale and Conveyancing) Act 1994 (SA). The Land Valuers Act 2001 (Tas) has educational and experience requirements but, like South Australia, does not set out a formal licensing regime.
COAG has sought to establish a national licensing system for the real estate industry that would include licensing for property valuers. The Valuers Registration Board of Queensland has expressed concerns about the stringency of any proposed national standards and has reservations about the current mutual recognition processes between states (VRB 2008).
Regulation of real estate agents in New South Wales
The licensing requirements for real estate agents are in the Property, Stock and Business Agents Act 2002 (NSW) (PSBA Act). The PSBA Act criminalises providing real estate agent services for a fee without a licence. Sales staff employed by a licence holder must obtain a registration certificate. Licence holders must meet minimum education requirements and be a fit and proper person. The current education requirements are set out in the Property, Stock and Business Agents (Qualifications) Order 2003 (NSW).
The PSBA Act also has requirements for operating a trust account as a real estate agent. The key aspects require all money received by an estate agent to be paid into a trust account and for an external audit on all trust accounts to be conducted by a qualified person. Additional regulations for managing a trust account, such as record keeping requirements, are in the Property, Stock and Business Agents Regulations 2003 (NSW).
The New South Wales Office of Fair Trading (NSW OFT) publishes rules of conduct for real estate agents. Breaches of the rules of rules, regulations, or the PSBA Act may result in disciplinary action by the Commissioner for Fair Trading. Members of the public are able to make complaints to the NSW OFT for investigation. The NSW OFT is also able to investigate matters outside of consumer complaints that may also warrant disciplinary proceedings.
The sanctions available to the Commissioner are:
- cautions, reprimands and issuing public warnings about licence holders;
- fines up to $11,000 for individuals or up to $22,000 for companies;
- directives and undertakings;
- licence conditions, suspensions and cancellations; and
- disqualification from holding a licence or managing and conducting the business of a licence holder.
The disciplinary decisions made by the NSW OFT can be appealed to the Administrative Decisions Tribunal.
Trust account auditing in New South Wales
All money received by a real estate agent on behalf of another person must be paid into a trust account. Trust accounts must be held at ADIs approved by the Director-General of the Department of Fair Trading.
The PSBA Act further requires real estate agents to undertake external auditing of any trust accounts. The auditor is required to lodge the audit report with the Director-General. Other records held by real estate agents may be viewed by an authorised inspector. An authorised inspector may also view financial records held at ADIs upon serving the institution a notice to do so.
The Director-General has the authority to freeze real estate agents’ trust accounts under the PSBA Act.
Conveyancing requirements in New South Wales
Conveyancing in New South Wales can be undertaken by a solicitor, a licensed conveyancer, or by the individual purchasing the property. The NSW OFT issues licences for conveyancing in accordance with the Conveyancers Licensing Act 2003 (NSW). The Act contains requirements for maintaining trust accounts, record keeping and external auditing.
Regulation of real estate agents in Western Australia
The Real Estate and Business Agents Supervisory Board regulates the real estate industry in Western Australia. The Board receives complaints about industry participants in Western Australia and prior to 2007, heard disciplinary matters for the industry. The State Administrative Tribunal now undertakes this role.
Mortgage brokers acting only as an agent for other lending companies, or providing services to lenders under contractual agreement, do not currently have AML/CTF obligations. Those who offer a designated service under the AML/CTF Act have AML/CTF obligations when providing those services only.
Licensing, registration and regulation of mortgage brokers is done at the state and territory level. Western Australia requires brokers to obtain a licence and the Australian Capital Territory requires brokers to register. New South Wales and Victoria have a negative licensing (disqualification) system.
The Consumer Credit Administration Act 1995 (NSW) requires brokers to retain records of all transactions for seven years. The Act authorises officers of the Director-General of the Department of Fair Trading to investigate complaints made against brokers including authorisation to enter their business premises. The Director-General may issue an order prohibiting brokers from providing services where other disciplinary action has been ineffective. In 2008, COAG agreed to transfer the regulation of mortgage brokers to the Commonwealth (COAG 2008a).
Regulating property developers in Queensland
Queensland is the only jurisdiction requiring property developers to obtain a licence. The licensing obligations are in the Property Agents and Motor Dealers Act 2000 (Qld). Property developers are also subject to the Property Agents and Motor Dealers (Property Developer Practice Code of Conduct) Regulation 2001 (Qld).
Individuals selling more than six residential properties in one year, or marketing properties in which they have an equity stake of at least 15 percent, must obtain a licence as a sole trader. Those operating a business as a property developer need an individual (director) licence. Those affected by a bankruptcy action, convicted of a serious offence in the last five years and disqualified as company directors by ASIC cannot hold a licence.
Corporate licences are limited to companies that have not been placed into receivership or liquidation and whose executive officers and directors meet the requirements of an individual licence. Executive officers and directors with a suspended or cancelled property agent licence, or who have caused a payout from the property agents and motor dealers claim fund, will also render an application for a corporate licence invalid. Sales persons must obtain a registration certificate.
Property developers in Queensland are not required to have a trust account. All funds they receive that are subject to a cooling-off period must be deposited into the trust account of a real estate agent, the Public Trustee, or a solicitor within three days of receipt.
The Department of Fair Trading maintains a register of enforceable undertakings issued to property developers and reserves the right to set conditions on the licences issued (Queensland Government 2009).
The real estate sector, as with the accounting and legal sectors, has numerous industry bodies, some of which perform disciplinary and compliance functions. Generally, the real estate industry bodies do not have the powers of rulemaking, compliance and enforcement that the organisations for accountants and legal practitioners hold.
Real Estate Institute of Australia
The Real Estate Institute of Australia (REIA) is an industry association with a membership pool comprising Real Estate Institutes from each state and territory. Membership of the state-based Institutes is voluntary, although REIA estimates that approximately 80 percent of all real estate agents are members of the state organisations (REIA 2008). REIA conducts research and lobbying activities and does not issue directives to real estate agents in the same way as accounting industry bodies issue advice or rules.
The Real Estate Institute of New South Wales (REI NSW), along with similar organisations in all other states, is a member of REIA. REI NSW’s members are individuals and legal entities in the industry including those working in property management, auctioneering and as buyers’ agents. REI NSW has a code of conduct for members. The organisation, unlike accounting bodies, does not offer guidelines for risk reduction, although it does offer a compliance review service. This process is a compliance risk assessment covering topics including OFT NSW supervision guidelines, banking and trust account practises, conflicts of interest and privacy. The compliance review is not a mandatory aspect of membership and is marketed as a service only (REI NSW nd).
REI NSW does not appear to have mechanisms for enforcing compliance with the code of conduct, although it previously offered a complaints resolution service to the public. The REI NSW Legal Council still takes complaints from real estate agents about other members. The organisation has not released the details of any complaints it has received.
The Australian Property Institute
The membership base of the Australian Property Institute (API) encompasses:
- residential, commercial, plant and machinery valuers;
- property analysts and investment advisors;
- property fund and asset managers;
- property and facility managers;
- property legal practitioners; and
- property researchers and academics.
Membership to the API is voluntary.
The API identifies its primary role as being to set practice standards, including professional and ethical conduct, and to provide education to members and others in the profession. The API has a division in each state and territory. The Code of Ethics, available from the API Western Australia, is a broad statement of values. The Rules of Conduct outline requirements for any arising conflicts of interest and some basic requirements for maintaining client relationships (API 2008a, 2004).
The state and territory divisions of the API are headed by a Divisional Council. The API’s By-Laws require each Divisional Council to appoint a Complaints Chair. Complaints made are referred to the complaints committee for hearing. Serious breaches are referred to a Disciplinary Tribunal. The Committee can impose lower level sanctions, such as fines of up to $5,000 or reprimands, although the Tribunal may impose fines of up to $20,000 and expel the member (API 2008b).
Property Council of Australia
The Property Council of Australia (PCA) is an industry body that engages in advocacy and public affairs for businesses in the property investment industry. The PCA’s members include real estate investment trusts, fund managers, and property developers and managers. Membership is voluntary and restricted to legal entities rather than to individuals. PCA does not offer advice or professional conduct standards for members.
Mortgage and Finance Association of Australia
MFAA is an industry body for mortgage brokers, finance brokers, mortgage managers, and bank and non-bank lenders. The MFAA has a lobbying role, as well as issuing conduct guidelines and standards including a Code of Practice.
The MFAA investigates complaints made against members and a tribunal holds disciplinary hearing for cases with sufficient evidence. Findings of misconduct may result in sanctions spanning from censure to expulsion from the MFAA and a fine.
The MFAA offers an AML/CTF program for all mortgage brokers. The course aims to help brokers understand the requirements of lenders and to provide a standard accreditation mechanism for the industry.
Dealers in precious metals and stones
Pawnbrokers and secondhand dealers, including antique dealers
Secondhand dealers and pawnbrokers are the only traders of precious metals and stones to require a licence or to seek registration in order to trade. They are also the only traders of precious metals and stones who are subject to other specific legislative requirements. The legislation currently regulating secondhand dealers and pawnbrokers across Australia is:
- Secondhand Dealers and Pawnbrokers (Amendment) Act 2001 (Vic);
- Pawnbrokers and Secondhand Dealers Act (1996) (NSW);
- Secondhand Dealers and Pawnbrokers Act (2003) (Qld);
- Secondhand Dealers and Pawnbrokers Act (SA);
- Pawnbrokers and Secondhand Dealers Act 1994 (WA);
- Secondhand Dealers Act (1906) (ACT);
- Pawnbrokers Act (1902) (ACT);
- Consumer Affairs and Fair Trading Act 1990 (NT); and
- Secondhand Dealers and Pawnbrokers Act (1994) (TAS).
Tasmania requires pawnbrokers and secondhand dealers to notify the police one month in advance of commencing business. The other states and territories require pawnbrokers and secondhand dealers to obtain a licence. Mutual recognition legislation in each state and territory allows traders to apply to have their licences validated in other states and territories.
The Tasmanian legislation still requires pawnbrokers and secondhand dealers to conduct identity checks on customers selling or pawning items and to maintain records of goods received and sold.
Pawnbrokers and secondhand dealers in New South Wales
The Pawnbrokers and Secondhand Dealers Act (1996) (NSW) (Pawnbrokers Act) criminalises conducting either type of business without obtaining a licence. Individuals must be judged fit and proper persons, be over 18 years of age and not be disqualified from holding a licence. Corporations and each of their directors must also be judged fit and proper and not be disqualified from obtaining a licence. Licences are granted by the Director-General of the Department of Fair Trading.
The Pawnbrokers Act establishes identification requirements for people pawning or selling items to a licensed dealer. Dealers are prohibited from accepting items that are not reasonably believed to belong to the person presenting them to the dealer and the dealer must complete some title verification steps.
The specific identification requirements for those presenting goods to a secondhand dealer or pawnbroker in New South Wales are set out in the Pawnbrokers and Secondhand Dealers Regulation 2008 (NSW). Customers wishing to sell or pawn goods must present either:
- a card or document issued by the Commonwealth or a state or territory government that bears the customer’s photograph, name, address and signature; or
- a combination of cards or documents that include a photo, name, address and signature. One of these must be issued by the Commonwealth or a state or territory government;
- a foreign document, such as a passport, bearing the required information, or a combination of documents that include one issued by a foreign government and documented evidence from a landlord or hotel with current residential address.
The customer must also present evidence of their date of birth from a government-issued source such as a driver’s licence.
Pawnbrokers and secondhand dealers are required to maintain records of all transactions and be able to readily provide those records to a police officer, the Director-General of the Department of Fair Trading, or an inspector of the Department. Failure to do so is a criminal offence under the Pawnbrokers Act. The Pawnbrokers and Secondhand Dealers Regulation 2008 (NSW) currently requires all but small dealers to maintain electronic records of all transactions and to send these to the Commissioner of Police within three days of a transaction taking place.
The Fair Trading Act 1987 (NSW) outlines the investigation powers of the Department of Fair Trading. Investigators are given the ability to search premises and to obtain documents, information and other evidence when investigating contraventions to this Act or any other administered by the Fair Trading Minister. This includes the Pawnbrokers Act.
Antiques dealers are classified as secondhand dealers in New South Wales. Dealers in antiques, as secondhand dealers, require a licence from the Department of Fair Trading and are subject to the same customer identification and record keeping requirements.
The Australian Antique and Art Dealers Association (AAADA) is a national industry body. The AAADA has a code of practice for members and offers a dispute resolution service to members of the public with a complaint against a member. Membership to the organisation is voluntary and the AAADA does not perform disciplinary functions additional to those of the Department of Fair Trading.
Jewellers and valuers
Jewellers in each state and territory are not subject to industry-specific regulation establishing customer identification requirements, registration or licence requirements, or auditing requirements. Jewellery valuers are similarly unregulated.
The industry has numerous active industry associations such as the Jewellers Association of Australia, the Diamond Guild of Australia, the National Council of Jewellery Valuers, the Gemmological Association of Australia, the International Coloured Gem Stone Association, and the Australian Jewellery and Gem Industry Council. All of these organisations have self-regulatory mechanisms, although membership is voluntary. Members found to have breached the respective ethical guidelines may have their membership suspended or be expelled from the associations. These associations rely on the threat to individual reputation that professional misconduct poses as their principal mechanism to ensure standards of practise.
Membership of the National Council of Jewellery Valuers is restricted to valuers who have completed targeted training in gemmological study, gemstone grading and the detection of synthetic gemstones. Members must adhere to professional standards and meet continuing professional development requirements.
The retailing components of the precious metals and stones industry are the subject of a number of international initiatives. The Kimberley Process was established by United Nations Resolution 55/56 and commenced in 2003. It is designed to certify the origin of rough diamonds from sources that are free of conflict in order to prevent funding war through the diamond trade. The Process requires participating governments to ensure that all shipments of rough diamonds are imported or exported in a secure container with a government-validated certificate stating the diamonds are from sources free of conflict.
Currently, 74 governments are signatories to the Process (including the Australian Government) and it represents over 99 percent of the global production of rough diamonds (World Diamond Council nd). Individual Australian retailers and manufacturers are not responsible for complying with Kimberley Process obligations. The Australian Government complies with its international obligations by using customs and trade legislation and regulations.
The Kimberley Process certification can be an effective mechanism to identify the country of origin. It does not, however, prevent purchasing diamonds with the proceeds of crime or for any illicit purpose. The certificate process does not include a chain of custody (World Diamond Council nd).
There are other international initiatives (such as the Council for Responsible Jewellery Practices, the Madison Dialogue and No Dirty Gold) that seek to engage industry members, civil society groups and governments to implement and maintain industry practices that are more socially, ethically and environmentally responsible. Australian industry members are involved in some of these organisations and they have contributed to proposals aimed at improving sector regulation such as the Worldwide Jewellery Ethical Trading Scheme. With the exception of the Kimberley Process, however, no initiatives have been established in a way that obliges compliance by industry members.
Trust and company service providers
Trust and company service providers are not regulated as a single industry in Australia, reflecting the diversity of the services provided.
Company formation agents
Company formation services are provided by casual lodging parties or registered agents. Registered agents are registered with ASIC. Registered agents are able to submit the company formation documentation required by the Corporations Act 2001 (Cth) electronically to ASIC. Casual lodging agents cannot (ASIC 2008a).
The Corporations Act (s 1308) criminalises making false or misleading statements in documents submitted to ASIC in accordance with the Act. Individuals who fail to take reasonable steps to ensure information submitted to ASIC is correct are also guilty of an offence. ASIC may cancel the registration of a company formation agent if they are found guilty of an offence under s 1308 of the Corporations Act.
The Committee of Business Incorporators Australia Inc is the industry body for company formation agents. Members can make complaints against each other for violating the stated rules, or acting in a manner prejudicial to the organisation and the committee will give the member 14 days to respond. The sanctions available in response to complaints are to expel or suspend the member from the organisation.
Company secretary and company director services
The Corporations Act requires companies to lodge the identification details of directors and company secretaries with ASIC within 28 days of appointment.
Individuals may not offer company director and secretary services without specific court approval if they are undischarged bankrupts, subject to a personal insolvency agreement or subject to a composition under the Bankruptcy Act 1966 (Cth), or have been convicted of a fraud offence or an offence under company law, or imprisoned for one of these offences, in the last five years (ASIC 2008b).
ASIC has the authority to ban individuals from becoming a company director or secretary under other circumstances. Individuals may be disqualified from managing corporations (including acting as a director or secretary) if they have managed two companies that have been wound up while under their control or within 12 months of holding the office. The Corporations Act does not make a distinction between secretaries directly employed by a company and those offering the service on another basis.
Chartered Secretaries Australia (CSA) is an industry body for company secretaries. Membership to CSA is restricted to those who have completed specific tertiary education requirements. CSA has guidelines on ethical and professional conduct for its members, although the mechanisms available for enforcement are not clear.
The Australian Institute of Company Directors has less restrictive membership requirements and as with CSA, membership is voluntary. They will expel or suspend members if they are convicted of an offence under the Corporations Act, become disqualified from managing a corporation, or display conduct that disadvantages the organisation.
Auditors, liquidators and insolvency practitioners
The Corporations Act requires auditors to register with ASIC and outlines the requirements needed to be eligible for registration. Auditors must meet educational requirements or gain experience in the field and be a fit and proper person. Those disqualified from managing corporations are unable to be registered auditors.
Receivers, administrators and company liquidators are also registered by ASIC. Registration for liquidators, also contained in the Corporations Act, has similar requirements as those for auditors. Liquidators must meet educational and expertise requirements and be a fit and proper person. Those prohibited from managing corporations are also ineligible for registration as a liquidator.
Insolvency and Trustee Service Australia (ITSA) administers the registration of bankruptcy trustees and debt agreement administrators. ITSA investigates complaints made against practitioners and the Inspector General in Bankruptcy may cancel a person’s registration.
The Companies Auditors and Liquidators Disciplinary Board (CALDB) receives applications from ASIC and the Australian Prudential Regulation Authority to conduct disciplinary hearings for auditors and liquidators. CALDB determines if an auditor or liquidator has failed to undertake their duties correctly or is otherwise ineligible to remain registered. CALDB is able to cancel or suspend memberships, admonish or reprimand, or issue directives for specific undertakings.
Insolvency Practitioners Association (IPA) is an industry body for bankruptcy trustees and liquidators. Membership to the IPA is restricted by educational requirements, existing membership of CPA Australia, ICAA, or Law Society and completion of further education in insolvency practise. Membership to the IPA is voluntary.
Public trustees provide services including:
- making wills;
- acting as an executor for a deceased estate;
- managing trusts; and
- attorney services.
Each Australian state and territory has a public trustee. With the exception of Victoria, where the public trustee is a state-owned company, these remain government agencies. The Office of the Public Trustee in the Northern Territory also manages property restrained by proceeds of crime laws.
Corporate trustees are currently regulated at the state and territory level. The state attorneys-general supervise trustee companies, receive financial reports and are authorised to impose sanctions for non-compliance. Trustee companies are required to maintain customer information records and records of all transactions (TCA 2006a).
The Trustee Companies Act 1964 (NSW), for example, authorises the Attorney-General to inspect any records of estates managed or administrated, audit all books and accounts, and review the operations of the company. Like mortgage broking, corporate trustee regulation became a Commonwealth responsibility in 2009 (COAG 2008b).
The Trustee Corporations Association of Australia (TCA) is the industry body for public and corporate trustees. The TCA’s membership base includes all of the public trustees and a majority of the corporate trustees in Australia (TCA 2006b). The TCA’s objectives are primarily advocacy and education for employees in the industry.
Third party providers of a registered address
The Corporations Act requires companies to supply ASIC with the address of a registered office. Registered offices need not be physically occupied by a company. Companies that obtain a registered office through a third party must be able to provide ASIC written consent to use the premises as a registered office.
There is no evidence of state and territory or federal legislation or regulation with identification, auditing, or other requirements for third-party providers of registered addresses.
Commercial, industrial and retail property leasing is regulated at the state and territory level. Commercial property leases permit businesses and companies to occupy the property and to use the address for the purpose of their business. The initial term of a commercial lease is usually five years. Commercial tenants are not obliged to provide proof of their identification or of the existence and legitimacy of their business in order to complete a lease agreement.
Leases in New South Wales that exceed three years should be registered in an abbreviated memorandum with the Land Titles Office. The Retail Leases Act 1994 (NSW) does not cover retail leases for less than six months or those that exceed 25 years.
Post office box and locked bag providers
Post boxes and locked bag services are available through Australia Post outlets and businesses licensed with Australia Post to provide these services. Other businesses, such as service stations or newsagents, may provide private post boxes using the address of the principal business.
The Australian Postal Corporation Act 1989 (Cth) sets out the obligations, financial arrangements and monitoring requirements of Australia Post but does not contain identification requirements for obtaining services.
Australia Post policies require personal and business customers to provide photo identification with their application for a post office box or locked bag. Persons applying for post office boxes for use by a business must produce a copy of the company letterhead stating their Australian Business Number so that Australia Post can verify that the company exists.
Australia Post will supply a locked bag for business purposes on the receipt of the company letterhead with the business’ Australian Business Number on it, which also states that the services will be used for the purposes of the company. The applicant must also submit certified copies of the business registration documents. The character of the individual, past criminal offences and financial stability are considered by Australia Post when it approves applications. These requirements are also company policies and not statutory requirements.
Businesses unaffiliated with Australia Post are able to rent post boxes to customers and provide a legitimate address based on the box number and the business’ address. Private post boxes are not regulated in any way by state and territory or federal instruments and are not self-regulated by industry bodies.
Post Office Agents Association Limited is an industry association for licensees and mail contractors of Australia Post. It is primarily a representative organisation and does not have additional business conduct requirements for members.