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Solicitors' Trust Accounts Exposed as Money Laundering Loophole

Strategic Insights

— 2 min read

Austrac figures show that Australian solicitors' trust accounts processed over $58 million in more than 2600 transactions involving more than $10,000 in cash from July 1990 to June 1992. This is a staggering figure, exceeding the combined cash handled by Australia's TAB agencies and bookmakers in the same period. The figures have been used to highlight the vulnerability of solicitors' trust accounts to money laundering, but a federal parliamentary committee has refused to agree to requests from the National Crime Authority and the Australian Federal Police to make solicitors report the identities of clients making large cash transactions through their trust accounts.

Key Takeaways:

  • Solicitors processed over $58 million in more than 2600 transactions involving more than $10,000 in cash from July 1990 to June 1992.
  • This figure exceeds the combined cash handled by Australia's TAB agencies and bookmakers in the same period ($52 million).
  • The most common type of large cash transaction involving solicitors was a transfer of cash to a trust account, with most of these transactions occurring in Melbourne's suburbs, Sydney, or on the Gold Coast.
  • Twenty-three of the 57 large Victorian legal firms employing 10 solicitors or more made at least one cash transaction involving $10,000 or more.
  • A total of 308 suspect transaction reports were made about central Melbourne and suburban solicitors involving transactions totaling $7,428,000.
  • Solicitors' trust accounts held an estimated $233 million in April 1993, with Victorian solicitors and legal firms holding an estimated $750 million in clients' funds at any one time.
  • The Attorney-General's Department initially opposed the move to make solicitors report cash transactions of over $10,000 but changed its stance after seeing the Austrac study.
  • The parliamentary committee recommended solicitors should not be made cash dealers, citing the public interest in preserving client confidentiality as greater than the benefit gained from making solicitors report significant cash transactions.
  • The National Crime Authority chairman, Mr Tom Sherman, QC, warned that the situation would worsen as long as solicitors remained outside anti-money laundering legislation.

Statistics:

  • $58,700,000: The total amount of cash processed by solicitors from July 1990 to June 1992.
  • 2625: The number of transactions involving over $10,000 in cash handled by solicitors from July 1990 to June 1992.
  • 360: The number of cash transactions of $10,000 or more made by solicitors in Victoria from July 1990 to June 1992.
  • $11 million: The total amount of cash involved in these transactions in Victoria.
  • 308: The number of suspect transaction reports made about central Melbourne and suburban solicitors involving transactions totaling $7,428,000.
  • $233 million: The amount held in solicitors' trust accounts in April 1993.
  • $750 million: The estimated amount held in clients' funds by Victorian solicitors and legal firms at any one time.

Sources:

  • Senate Standing Committee on Legal and Constitutional Affairs Report
  • "Taken to the Cleaners: Money Laundering in Australia" (NCA's 1991 report)
  • "Checking the Cash" (parliamentary committee report)
  • Newspaper articles from "The Age" featuring quotes from Mr Tom Sherman, QC, and Mr Bill Coad, Austrac director.

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