AML/CTF Changes: KYO – Know your Obligations!

On the 11 September 2024, the Anti-Money Laundering and Counter-Terrorism Financing (“AML/CTF”) Amendment Bill was introduced into Parliament, with the aim of extending the AML/CTF regime to certain higher risk services that are provided by:-

• Lawyers
• accountants,
• real estate professionals;and  
• trust and company service providers.

(“tranche two entities”)

The tranche two entities have been deemed as operating a ““designated service” that is considered high-risk for money laundering.

Under the proposed changes, tranche two entities operating a designated service, will be required to establish a compliance framework implemented by March 2026, specifically targeting and ensuring AML/CTF obligations are stringently followed and adapted.

The underlying objective of these changes is to augment and expand on the existing professional and ethical obligations of professions, such as lawyers and accountants, and are not intended to duplicate existing duties, but rather to build on current obligations.

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The Long Story Short

Australia is one of only five jurisdiction that do not impose AML/CTF obligations on tranche two entities, and as a result, are not meeting international standards, leaving our economy vulnerable to exploitation by organised crime and money launderers.

The Financial Action Task Force (“FATF”) is the global body responsible for governing, setting international recommendations and providing a framework for nations to combat money laundering and terrorist financing.  

Australia will be subject to a mutual evaluation by FATF in 2026, in which the effectiveness and overall implementation of their AML/CTF measures will be assessed. The consequence of failing this evaluation, may result in Australia being “grey-listed”, causing negative impacts on our economy, import/export opportunities and GDP.

Designated Services and Tranche Two Entities

The AML/CTF Act compiles a list of ‘designated services’, which are deemed high-risk and are vulnerable to money laundering activities, these include:

• Real property transactions;  
• Transfers of legal entities (M&A);  
• Receiving, holding, controlling or disbursing money, accounts, securities, digital assets property; and  
• Transactions for the creation, operation or management of legal entities.

Tranche two entities that are operating or providing a ‘designated service’, will be captured under the reform and as such, will need to ensure they are compliant by 2026.

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What does this mean for businesses?

If you are a tranche two entity providing a ‘designated service’, you will need to develop a AML/CTF compliance framework, which at a minimum:-

• Establishes, strengthens or maintains customer identification and verification procedures, ensuring these are robust and consistently applied across all transactions;  
• Enrol with the Australian Transaction Reports and Analysis Centre (“AUSTRAC”) and report certain transactions and suspicious matters;
• Maintain records in compliance with AML/CTF obligations;
• Appoint an Anti-Money Laundering and Counter-Terrorism Financing compliance officer, responsible for overseeing AML/CTF operations.

What’s next?  

Whilst there is still a reasonable amount of time until any proposed changes are to take effect and entities to be compliant, there is significant work to be undertaken by businesses and Parliament alike, to refine the Bill and ensure policies, processes and governance is implemented appropriately to ensure compliance.  

Further information and reading is available from the Australian Government’s Attorney General Department here.

Disclaimer: This article is intended for informational purposes only and should not be interpreted as legal or financial advice. Lextech strongly recommends seeking professional advice to ensure that any actions taken are tailored to your specific business needs and circumstances. Lextech shall not be held liable for the accuracy or completeness of the information provided herein, particularly when accessed at a later date, as the content reflects the state of knowledge at the time of publication.

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