New draft AML/CTF rules: what fund managers need to know

Insights1 July 2025

Fund managers, product issuers, and trustees of funds have been regulated by the Australian anti-money laundering and counter-terrorism financing (AML/CTF) framework since its introduction in 2006. Now, sweeping reforms to this regime are set to shake-up the way fund managers comply with AML/CTF laws, which will likely require existing reporting entities to adopt new or amend existing AML/CTF programs, implement new Know Your Customer (KYC) procedures and revisit existing procedures for making reports to the Australian Transaction Reports and Analysis Centre (AUSTRAC). 

This article highlights key changes proposed in the AML/CTF Rules which will affect entities within the funds management industry.  

Background

AUSTRAC has published the second exposure draft of the Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 (Cth) (Draft Rules), alongside a consultation paper explaining how amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) will affect existing reporting entities – including existing fund managers, product issuers and trustees of managed investment schemes. The Draft Rules will replace the current Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (Cth). 

For a general update on changes to the Draft Rules following the first consultation, read our article New Draft Rules shake up AML/CTF regimeFor an update on how the changes to the Draft Rules will affect virtual asset service providers, read our article What the new AML/CTF draft rules mean for virtual asset service providers

Recap of Draft Rules

The Draft Rules support obligations imposed on reporting entities under the AML/CTF Act. These include:

  • Obligations to conduct initial and ongoing customer due diligence.
  • What reporting entities will need to have in their AML/CTF Programs, including new rules regarding customer due diligence, independent evaluations of programs, and the requirement to include an ML/TF risk assessment (which will require existing reporting entities to replace, or at least amend, their existing AML/CTF Programs).
  • How groups of reporting entities are to be organised or formed for the purpose of compliance with the AML/CTF Act (to replace the existing concept of ‘designated business groups’).
  • Details to be provided to AUSTRAC upon application for enrolment under the AML/CTF Act.
  • Details to be provided to AUSTRAC as part of the lodgement of a suspicious matter report.

Funds industry: rules amended following first consultation

Some of the guidance AUSTRAC has published as part of this consultation process is of particular concern to existing reporting entities within the funds management industry. Areas of concern include:

Customer due diligence 

Updates to the 'lead entity' definition

A new home for AML/CTF exemptions

What should fund managers do now?

With these reforms approaching, fund managers should:

  • Review current AML/CTF programs.
  • Assess where delayed verification or beneficial ownership exemptions may apply.
  • Prepare for operational changes to customer onboarding.
  • Monitor AUSTRAC’s evolving guidance. 

The HW Funds team can support you in reviewing your current practices and preparing for implementation. For tailored advice, contact us directly or explore our broader expertise in AML/CTF compliance here

This article was prepared with the assistance of Roger Miyumo, Law Graduate.

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