Risk Reading — Judicial Disqualification Exception, AML News and Views

New York Judicial Ethics Opinion 25-01: “A judge need not disqualify in matters involving the judge’s former election opponent, provided the judge can be fair and impartial” —

• “Digest: A judge need not disqualify in matters involving the judge’s former election opponent, provided the judge can be fair and impartial.”
  Rules: Judiciary Law § 14; 22 NYCRR 100.2; 100.2(A); 100.3(E)(1); Opinions 19-78; 90-136; People v. Moreno, 70 NY2d 403 (1987).”
• “Opinion: The inquiring judge was opposed during his/her recent election campaign by a practicing attorney who may appear before the judge in the future. The judge describes the campaign as uneventful, without ‘debates or any acrimonious interactions.’ The judge asks if he/she must disqualify when the former election opponent appears.”
• “A judge must always avoid even the appearance of impropriety and act to promote public confidence in the judiciary’s integrity and impartiality (see 22 NYCRR 100.2; 100.2[A]). A judge must disqualify in any proceeding where the judge’s impartiality ‘might reasonably be questioned,’ including where required by rule or law (22 NYCRR 100.3[E][1]; Judiciary Law § 14). Where disqualification is not mandatory, however, the judge is the sole arbiter of recusal, a discretionary decision within the personal conscience of the court (see People v. Moreno, 70 NY2d 403, 405 [1987]).”
• “A judge need not disqualify merely because an attorney appearing before the judge on behalf of a client is the judge’s former election opponent (see Opinions 19-78; 90-136). As we explained in Opinion 90-136:”
• “Whether the judge’s impartiality might reasonably be questioned in this case depends on the facts and circumstances, including the time elapsed, the bitterness of the campaign, and the personal quality of the campaign. This Committee is not in a position to pass on such factual issues and the judge must decide for himself or herself whether his or her impartiality might reasonably be questioned. Of course, if the judge doubts his or her ability to be impartial, the judge must disqualify himself or herself.”
• “Indeed, considering these factors, we have advised that a former opponent’s legal challenge to the judge’s nominating petition does not, by itself, mandate disqualification (see Opinion 19-78). We reasoned that the filing of litigation challenging nominating petitions is a ‘common circumstance in contested election campaigns’ that does not by itself establish a level of ‘bitterness’ mandating disqualification (id.).”
• “Here, as the judge indicates the campaign was neither controversial nor acrimonious, the judge need not disqualify in matters involving the judge’s former election opponent, provided the judge can be fair and impartial.”

“Consultation into the second exposure draft of the [Australian] Anti-Money Laundering and Counter-Terrorism Rules” —

• “The Australian Transaction Reports and Analysis Centre (AUSTRAC) has initiated consultation (Consultation) on its second exposure draft of the Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 (Cth) (Draft Rules) and the AML/CTF (Class Exemptions and Other Matters) Rules 2007 (Cth) (Class Exemption Rules). These Rules, read with the amended Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (Act), will implement the most transformational changes to the anti-money laundering and counter-terrorism financing (AML/CTF) framework since the Act commenced in 2006.”
• “These changes under the Act and Rules will apply to existing reporting entities by 31 March 2026 and for new reporting entities by 1 July 2026.”
• The Draft Rules contain significant updates to the first exposure draft rules which were released for consultation in December 2024. The updates include:
  • AML/CTF policies, procedures, systems and controls to comply with AML/CTF obligations, including requiring designated entities to have financial sanctions compliance policies
  • New rules relating to groups of regulated businesses
  • Changes to the proposed customer due diligence rules
  • Correspondent banking and nested services relationships
  • The travel rule, being the requirement for information about the payer and payee to be included with telegraphic transfers, remittances, transfers of virtual assets and other value transfers
  • Cross-border movement reports and compliance reporting
  • Keep open notices and the form of these notices
  • Disclosure of AUSTRAC information to foreign counterparts”
• “In addition to the above, the exposure Draft Rules now propose:
  • Reportable details for ‘suspicious matter reports’ must be given to AUSTRAC by reporting entities under section 41 of the amended AML/CTF Act.
  • Reportable details for ‘threshold transaction reports’ must be given to AUSTRAC under section 43 of the amended AML/CTF Act.”
    Updated and modernised enrolment applications for all reporting entities.
  • “Registration application and administrative decision-making processes for ‘remittance service providers’ and ‘virtual asset service providers’.”

“Accounting firms should build AML/CTF program ‘sooner rather than later’” —

• “Ahead of the ACE25 Accounting Conference and Expo, Jessica Tsiakis, partner at Holding Redlich discusses how businesses can prepare for the upcoming AML/CTF regulations.”
• “‘The AML/CTF Act has been amended to ensure the AML/CTF regime can effectively deter, detect and disrupt money laundering and terrorism financing,’ said Tsiakis.”
  “‘There have been a number of changes to the legislation, but key for accountants are the changes to expand the regime to capture certain high-risk services provided by accountants,’ she added.”
• “There are three key objectives of the Amendment Act including expanding the AML/CTF regime to high-risk services provided by tranche two entities; modernising the regulation of digital currency, virtual assets, and payments technology; and simplifying the AML/CTF regime to better prevent and detect financial crime.”
• “‘The regime is expanded by including new definitions of what are referred to as designated services,’ she said.”
• “‘If you provide a designated service, you are regulated by the regime in respect of those services (and referred to as a ‘Reporting Entity’).’”
• “‘Professionals such as accountants, lawyers, and real estate agents are impacted by the expansion of the regime.’”
• “The updated AML/CTF obligations will come into effect on 1 July 2026 for tranche two entities, with enrollment with AUSTRAC available from 31 March 2026.”
• “This timeline provides newly regulated entities the chance to understand and prepare for the new obligations before they come into effect next year.”
• “‘Accounting firms need to ensure that they have developed an appropriate AML/CTF Program, which is in place well prior to the deadline, so that they are in a place to comply by July 2026,’ Tsiakis said.”
• “‘Accounting firms must also develop appropriate policies, procedures, systems and controls to properly manage these risks.’”
• “‘Accounting firms will need to ensure all professional services staff have a broad understanding of what is required by the regime, including how to properly identify and monitor their customers, and who within the business to alert if they notice suspicious transactions or conduct by their clients,’ she added.”
• “Tsiakis urges organisations to start the preparations sooner rather than later, stating that ‘some key challenges in complying will be ensuring that the organisation’s AML/CTF program is up and running before the new regime commences, so that any issues, such as the appropriate monitoring of transactions, or proper customer due diligence, can be ironed out prior to that time,’ she concluded.”

“9 AML compliance myths and how law firms can fix them” —

• “In the current climate, no law firm can afford complacency about AML compliance. Yet certain myths persist – misconceptions that can lull firms into a false sense of security. These myths often stem from outdated assumptions or a misunderstanding of SRA requirements.”
• “Unfortunately, reliance on such misinformation can have serious consequences. The SRA has ramped up its enforcement of rules in recent years. Firms that once flew under the radar are now finding themselves subject to audits, fines, and disciplinary action.”
• “COLPs, COFAs, law firm partners, and risk managers should take note: even well-intentioned myths can land a firm in trouble. By dispelling these myths, your firm can shift from a reactive stance to a proactive compliance culture that anticipates regulators’ expectations.”
• “1. ‘We’re too small to need all these formal AML documents.’
  • The Myth: Small firms sometimes believe that comprehensive anti-money laundering controls – like a firm-wide AML policy or risk assessment – only apply to higher risk firms or those handling large financial transactions. A two-partner high-street practice might think, ‘Money laundering won’t happen here – we know our clients, and regulators only focus on large firms.’ This myth implies that limited size or simple client bases exempt a firm from formal AML compliance.”
• 2. ‘As long as we do really thorough ID checks, we’re covered for AML.’”
  • “The Myth: Many solicitors equate ‘AML compliance’ with performing ID checks on clients at onboarding – copying passports, driver’s licenses, utility bills, etc. This myth is the belief that identity verification alone satisfies anti-money laundering due diligence. Once you’ve verified your client is who they say they are, the thinking goes, your anti-money laundering obligations are done. In reality, this is a dangerous oversimplification, based on outdated AML rules.”
• 3. ‘We can’t possibly have to check the other side’s client for sanctions.’”
  • “The Myth: Lawyers often focus AML and sanctions checks on their own client, under the assumption that you are only responsible for vetting those you directly represent. This myth holds that due diligence on opposing parties or the other side’s client is not necessary, since ‘they’re not our client.’ For example, in a transaction between A (your client) and B (opposing party), a solicitor might screen A against sanctions lists but not consider B. The misconception is that sanctions compliance is satisfied as long as you aren’t directly advising a sanctioned individual.”
• 4. ‘The SRA doesn’t really expect us to see our own employees as an AML risk.’”
  • “The Myth: This misconception assumes that anti-money laundering compliance is solely outward-facing – focused on clients and external parties – and that a law firm’s staff are implicitly trusted. Some firms might think employee due diligence isn’t a regulatory requirement, perhaps reasoning that ‘we hired qualified solicitors, we don’t need to screen or monitor them for AML issues.’ Similarly, there might be an assumption that as long as staff are hired in good faith, the firm won’t be held responsible for a ‘rogue employee’ engaging in misconduct.”
• 5. ‘If we report an AML breach, we’ll face harsh consequences.’”
  • “The Myth: Law firm leaders sometimes believe that reporting AML compliance breaches – whether to the National Crime Agency (NCA) or the SRA – is like inviting trouble. The assumption is that disclosing AML issues will inevitably lead to severe penalties or regulatory action, and therefore it’s better to quietly fix any problems internally, turn a blind eye to red flags, and hope regulators don’t notice.”
• 6. ‘The regulators are only really interested in the risk assessment for our firm. Individual matter risk assessments aren’t as important.’”
  • “The Myth: Some firms mistakenly believe that doing a one-time Practice-Wide Risk Assessment (aka Firm-Wide Risk Assessment) is sufficient, and that they do not need to conduct risk assessments for each client or matter. They might have a generic firm AML risk assessment document and assume that covers everything. The myth is essentially ignoring the requirement for matter-specific risk evaluation, perhaps due to misunderstanding the regulations or viewing it as unnecessary form-filling. “
• 7. ‘We’ve never had a regulatory inspection, so we must be a low AML risk.’”
  • “The Myth: This is a complacency-driven myth – the notion that silence implies everything is fine. Many firms have not yet been subject to an SRA AML inspection or any kind of in-depth compliance audit, but the SRA is thought to be planning around 800 per year. It’s easy to assume that since the regulator hasn’t knocked on the door, your policies and procedures must be acceptable. Some might even think the SRA only audits firms it suspects of issues, so being un-audited means you’re low-risk or off their radar.”
• 8. ‘We’ve known the client for years – they’re not a risk.’”
  • “The Myth: A common assumption in legal practices is that long-term or well-known clients pose little to no money laundering risk. Firms often think, ‘We’ve acted for this client for over a decade, we know their business inside out,’ or ‘They’re a local business owner we’ve seen grow from day one – surely there’s no risk here.’ “
• 9. ‘We onboarded this client in a low-risk area, so we don’t need to do AML checks again.’”
  • “The Myth: A frequent assumption is that if a client initially instructs the firm in a low-risk area like employment law, they pose minimal or no money laundering risk across the board. The reasoning often goes: ‘We onboarded them for straightforward redundancy advice,’ or ‘They’ve only needed us for staff contracts – there’s no complexity here.’ This myth creates a ‘passporting’ effect – where a client is allowed to access other, potentially riskier services without updated checks, just because they originally entered through a low-risk door.”