CHANGES TO ANTI-MONEY LAUNDERING AND COUNTER TERRORISM FINANCING REGIME – WHAT DO YOU NEED TO KNOW?

Written by Sarah Jones

The changes to Australia’s anti-money laundering and counter terrorism financing (AML/CTF) regime have begun, with some of the amendments coming into effect from March 2025 (notably, the changes to the tipping off offence) and the remainder from March 2026.   

Background

On 10 December 2024, the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth) (the Amendment Act) received royal assent after extensive rounds of consultation, over 100 stakeholder meetings and consideration of the international standards set by the Financial Action Task Force (of which Australia is a founding member).

The Amendment Act amends the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (the AML/CTF Act). The Attorney-General’s second reading speech[1] argues that the amendments effected by the Amendment Act were required because Australia is an attractive destination to store, launder and legitimize proceeds of crime and the Amendment Act seeks to address some of the potential regulatory gaps that could allow this to continue.

The AML/CTF Act is overseen by the Australian Transaction Reports and Analysis Centre (AUSTRAC). AUSTRAC is currently undertaking consultation in respect of updating the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No 1) (the Rules) which assist in the governance of the AML/CTF Act.

Why might it affect you?

Designated Service Providers

There are a lot of businesses who are bound by the requirements of the AML/CTF Act, and this group is to be extended further by the Amendment Act.

As AUSTRAC says: if you provide one or more designated services that have a geographical link to Australia, you are a reporting entity (Reporting Entity)and have AML/CTF obligations under the AML/CTF Act.

‘Designated Services’ is reasonably extensive.[2] It includes businesses like motor vehicle dealers, money transfer services, deposit taking institutions like banks, financial service providers who hold Australia financial service licenses, and gambling services, with a geographical link to Australia, being:

• You provide services in Australia through business premises, a branch or an office (including a mobile office);
• You are an Australian business or organisation but provide services through a foreign branch or foreign subsidiary;
• You are the subsidiary of an Australian business or organisation and you provide services in a foreign country.[3]

The Amendment Act adds a further group of service providers known as “tranche 2 entities”[4] or “gate-keeper professions”[5] namely: real estate professionals, dealers in precious metals and stones, and professional service providers like solicitors, accountants, conveyancers and trust and company service providers (the Tranche 2 Entities).

Users of Service Providers

As a borrower or client using one of these services, you may be on the receiving end of extra questions or requirements from a Reporting Entity (eg: your service provider, lender, lawyer, etc) who is making sure they comply with their obligations under the AML/CTF Act and the Rules.

What are the broad expectations of the regime?

In order to deter, detect and disrupt money laundering and terrorism financing, Australia has implemented the AML/CTF Act and the Rules. It requires providers of designated services to meet obligations by:

• Enrolment with AUSTRAC;
• Development and maintenance of an AML program. This must be tailored to the particular business of the Reporting Entity;
• Proper conduct of “know your customer” as part of the AML program. This must be initial and ongoing;
• Reporting of certain transactions/matters;
• Submission of compliance reports;
• Maintenance of records;
• Keeping AUSTRAC informed of changes; and
• In some cases for particularly large companies, payment of an annual levy.

As an overarching position, the Australian government (by the AML/ATF Act) also expects and requires that each business assess the risks of potential money laundering or terrorism financing when providing a designated service to a customer.

What are the changes?

The Amendment Act seeks to make changes to meet three key objectives:

• To extend the AML/CTF regime to higher risk service providers (the Tranche 2 Entities);
• To improve the effectiveness of the AML/CTF regime by making it simpler and clearer for Reporting Entities to comply; and
• To modernise the regime to reflect changing business structures, technologies and illicit ideologies.[6]

Extension of the regime to Tranche 2 Entities

As set out above, the Amendment Act will require Tranche 2 Entities (where they fit within the renewed definitions[7]) to comply with the AML/CTF Act and the Rules moving forward.

The AML/CTF Act will apply to the Tranche 2 Entities from 1 July 2026, with an ability to enrol with AUSTRAC from 31 March 2026.

Simpler and Clearer

The Amendment Act makes some changes to the current program requirements. The intention is to be a more flexible approach rather than a “tick box” compliance approach.[8] The updated program requirements include:

• An overarching risk assessment to be made by the Reporting Entity;
• Proportionate risk mitigation measures to be taken (to respond to that risk);
  • It will no longer be enough to simply have a policy in place. A Reporting Entity must engage in risk management appropriate to the nature, size and complexity of the entity’s business.
• A change to reporting groups;
  • 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’. Each member of a reporting group is referred to as an ‘ordinary member’ but each group will have a ‘lead entity’ which will have a broad responsibility for a variety of matters.
• A designated service provider having a “governing body” and compliance officer;
• Simplified obligations for Australian companies operating overseas through a foreign branch.

The Amendment Act also makes changes to requirements for customer due diligence (CDD). 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 risk of the customer is low[9] and the requirements of the revised Rules are met. On the other hand, initial and ongoing CDD obligations must be enhanced if the risk of the customer is high[10] and certain specified requirements, including those in the revised Rules, are met.

Finally, there are also some changes to the tipping off offence so that the offence is now focused on stopping Reporting Entities disclosing information which could prejudice an investigation by AUSTRAC.

Modernisation

There have also been changes to matters in the AML/CTF Act to allow for a modernised approach and references. For instance:

• A streamlining of funds transfers to a single value transfer chain to facilitate the passage of key information about the transfer (regardless of the technology that was used to facilitate the transfer);
• A new definition of “virtual asset” has been inserted by the Amendment Act to replace “digital currency” throughout the AML/CTF Act to encompass things like non fungible tokens and other asset types which had not originally been expressly included;
• Further designated services have been added within the scope of virtual assets like the safekeeping or administration of virtual assets or exchanged between one or more other forms of virtual assets.

Further Information

If you would like advice on your obligations under the AML/CTF Act and the Rules, whether as a result of the Amendment Act or generally, please get in touch with JHK Legal on 02 8239 9600 or book an appointment through our website Contact.

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[1] Australia, Parliamentary Debates, House of Representatives, 11 September 2024 (Mark Dreyfus, Attorney-General and Cabinet Secretary) (‘Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 – Second Reading’).

[2] Section 6 of the AML/CTF Act.

[3] AUSTRAC enrolment website.

[4] Note 1.

[5] Supplementary Explanatory Memorandum, Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (Cth) cl 7.

[6] Explanatory Memorandum, Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (Cth) cl 7.

[7] For example, some barristers are excluded and there are specific exclusions that apply to legal professional privilege.

[8] Note 1.

[9] AUSTRAC is to provide guidance on what this entails.

[10] Again, AUSTRAC is to provide guidance on what this entails.