AML/CTF Amendment Bill: what you need to know

Generally, the purpose of the reforms proposed in the Bill are as follows:

• simplify and improve the legislative framework;
• ensure that Australia meets gaps in the Financial Action Task Force (FATF) Standards with which it does not presently comply, in particular in relation to extending the AML/CTF regime to ‘tranche two’ entities (real estate professionals, professional service providers including lawyers, accountants and trust and company service providers, and dealers in precious stones and metals),and also bringing additional reporting entities into the regime as ‘virtual asset service providers’; and
• modernise the AML/CTF regime to reflect changing business structures, technologies and illicit financing methodologies.

We outline some of the key proposed reforms set out in the Bill below. 

The Bill is currently before Parliament. At time of writing, it has not passed the Senate, although a Senate committee has examined the Bill.

If the Bill is passed in its current form, most of the reforms take effect on 31 March 2026, so current reporting entities have until then to update their AML/CTF operations. For tranche two entities, however, while they may enrol as reporting entities with AUSTRAC from 31 March 2026, their key regulatory obligations do not apply until 1 July 2026.

Key changes for current reporting entities include:

• AML/CTF programs will need to be rewritten, to include ML/TF risk assessments and proliferation financing – a reporting entity’s ML/TF risk assessment must identify, assess, mitigate, manage and document the risk of money laundering, financing of terrorism and proliferation financing that the entity may reasonably face in providing its designated services, must be appropriate to the nature, size and complexity of the entity’s business and must have regard to matters set out in both the Bill once finalised (ie the revised AML/CTF Act) and the revised AML/CTF Rules. The reforms are designed to move away from simply having an AML/CTF program in place to requiring reporting entities to engage in active risk management. Proliferation financing has been introduced to align with the FATF Standards and relates to breaches of sanctions regarding weapons of mass destruction. AML/CTF programs must also include policies, procedures, systems and controls known collectively as ‘AML/CTF policies’. AML/CTF policies will largely include the matters that are currently dealt with in Part A and Part B of an AML/CTF program. There is no obligation to retain separate parts A and B of an AML/CTF program, but this existing structure may be retained if it remains effective.
• The responsibilities of boards and compliance officers will change materially – the Bill introduces the concept of the ‘governing body’ of a reporting entity as the body responsible for the strategic oversight of specified aspects of a reporting entity’s AML/CTF obligations. If the governing body (being – most commonly – the group of individuals with primary responsibility for the governance and executive decisions of the reporting entity) fails to carry out its obligations, the reporting entity is liable. However, an entity’s AML/CTF program is to be approved by a senior manager, rather than the governing body, where a ‘senior manager’ is an individual who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the reporting entity. Separately, reporting entities must designate an individual (who need not be an employee) as their compliance officer. The compliance officer has various functions, including to oversee and coordinate the effective operation of, and compliance with, the entity’s AML/CTF policies. The compliance officer must be a fit and proper person and have sufficient authority, independence and access to resources and information to ensure they can perform their functions effectively.
• New entity grouping arrangements will apply – the primary concept for grouping reporting entities (and other entities) for the purpose of group-wide risk management and compliance arrangements will be the ‘reporting group’. Subject to the revised AML/CTF Rules, reporting groups will be of two types, namely either a ‘business group’ (comprising a group of entities that are each controlled by one of those entities and also comprising at least one reporting entity) or a group that meets requirements set out in the revised AML/CTF Rules. This latter type of reporting group will permit grouping of partnerships and franchise arrangements, and is intended to facilitate groups of tranche two entities, in particular. Each member of a reporting group is referred to as an ‘ordinary member’ but each group will have a ‘lead entity’. The lead entity will have broad responsibility for the identification, assessment, mitigation and management of ML/TF risk across compliance of all reporting entity members in a reporting group, and compliance management to ensure all reporting entities in the business group comply with their obligations under the AML/CTF regime and the group AML/CTF program. Lead entities’ governing bodies will be required to exercise appropriate ongoing oversight across the reporting group and take reasonable steps to ensure that reporting entities in the reporting group are appropriately identifying, assessing, managing and mitigating their ML/TF risks and otherwise complying with AML/CTF obligations. The lead entity’s AML/CTF compliance officer will support the lead entity’s governing body to fulfil these requirements.
• New customer due diligence (CDD) requirements and processes will apply – new provisions set out the requirements for each of initial CDD, ongoing CDD, enhanced CDD and simplified CDD. Reporting entities are required to establish a number of matters, on reasonable grounds (an objective test), and to take various specified steps, when carrying out initial CDD. These matters include the identity of any beneficial owners (using a new definition of ‘control’) and whether any beneficial owner is a politically exposed person (PEP) or designated for targeted financial sanctions. The exemptions from the need to carry out initial due diligence, including in relation to PEPs, will be clarified in the revised AML/CTF Rules. Reporting entities must apply ongoing CDD measures proportionate to the ML/TF risk of the customer in order to detect any suspicious activities, unusual transactions, and material changes in their customer’s behaviour. These obligations apply in the scenarios newly described as a ‘business relationship’ and ‘occasional transactions’. Initial and ongoing CDD obligations may be simplified if the ML/TF risk of the customer is low (AUSTRAC will provide guidance on what this entails) and the requirements of the revised AML/CTF Rules are met. On the other hand, initial and ongoing CDD obligations must be enhanced if the ML/TF risk of the customer is high (AUSTRAC will also provide guidance on what this entails) and certain specified requirements, including those in the revised AML/CTF Rules, are met.
• New ‘tipping off’ provisions will apply – as foreshadowed in earlier consultation, the tipping off offence has been amended to make it clearer when it applies. Instead of the offence arising if any information from which inferences could reasonably be made is disclosed, specified categories of information are identified, and that information, if disclosed, must reasonably be expected to prejudice an investigation, in order for the offence to arise. Regulations will be made to disapply the offence to disclosure of information between reporting entities for the purpose of detecting, deterring, or disrupting ML, TF, proliferation financing, or other serious crimes.
• Foreign activities – the Bill seeks to deal with complications arising in circumstances where a reporting entity provides designated services in a foreign jurisdiction. Among other measures, the Bill imposes more specific obligations for designated services provided in Australia and not to those provided overseas. For example, there are additional factors to be considered in undertaking risk assessments and CDD and additional matters to be dealt with in AML/CTF policies. This is stated as being intended to minimise the chances of a conflict of laws between specific Australian requirements and those of other countries in which a reporting entity operates.

The details of the designated services that will bring tranche two entities under the AML/CTF regime are set out in the Bill. Those designated services are grouped in three categories and are summarised below. It is important for professional services providers, such as lawyers, to appreciate that only parts of professional practice would be regarded a designated service.

Professional services

• Assisting a person in the planning or execution of a transaction, or otherwise acting for or on behalf of a person (assisting or acting) in a transaction to buy, sell or transfer real estate.
• Assisting or acting for or on behalf of a person in a transaction to buy, sell or transfer a body corporate or legal arrangement.
• Receiving, holding and controlling or managing a customer’s money or other property as part of assisting or acting in a transaction (subject to specified exemptions).
• Assisting a person in organising, planning or executing a transaction, or otherwise acting for or on behalf of a person in a transaction for equity or debt financing relating to a body corporate or legal arrangement.
• Selling or transferring a shelf company.
• Assisting or acting in the creation or restructuring of a body corporate or legal arrangement.
• Acting as, or arranging for another person to act as, any of the following, on behalf of a person (the nominator):
  • a director or secretary of a company;
  • a power of attorney of a body corporate or legal arrangement;
  • a partner in a partnership;
  • a trustee of an express trust; or
  • a position in any other legal arrangement that is functionally equivalent to a position mentioned in any of the above paragraphs, other than in specified circumstances.
• Acting as, or arranging for another person to act as, a nominee shareholder of a body corporate or legal arrangement, on behalf of a person (the nominator).
• Providing a registered office address or principal place of business address for a body corporate or legal arrangement.

Professional service providers include lawyers, accountants, conveyancers and trust and company service providers.

Real estate services

• Brokering the sale, purchase or transfer of real estate on behalf of a buyer, seller, transferee or transferor.
• Selling or transferring real estate, where the sale or transfer is not brokered by an independent real estate agent.

Dealers in precious metals and stones

• Buying or selling precious metals, precious stones or precious products where the buyer or seller makes payment or receives payment in physical currency, virtual assets or a combination of physical currency and virtual assets of $10,000 or more.

A complex raft of new definitions accompany the above new designated services, together with exclusions and updates to the AML/CTF Rules.

The Bill contains a number of other amendments, which we have not summarised, including new legal professional privilege provisions, new AUSTRAC powers of examination and legislated exemptions from the requirements of the regime.

In addition, the Bill would extend the AML/CTF regime to additional services provided by ‘virtual asset service providers’. For more information on the proposed regulation of virtual asset service providers, see our earlier article.

Repealing the FTR Act will remove unnecessary complexities in existing legislation and will require existing cash dealers under the FTR Act (such as motor vehicle dealers, sellers of traveller’s cheques, and offshore online remitters) to consider their obligations under the consolidated and reformed regime.

With the proposed extension of the AML/CTF regime to tranche two entities and virtual asset service providers, it is anticipated that AUSTRAC’s reporting population will increase from approximately 17,000 by approximately 90,000 entities. Clearly, this will expand the amount of financial intelligence AUSTRAC will receive, but it will also put pressure on AUSTRAC’s effectiveness as a regulator.