What you need to know now about Australia’s AML/CTF reforms
It’s increasingly likely that reforms to Australia’s AML/CTF Act (Tranche 2) will be implemented early 2025 and with the new laws likely to take force by 2026. It’s (finally) time for businesses to get ready .
Australia has lagged the world in anti-money-laundering/counter-terrorism financing (AML/CTF) legislation for decades – and it shows. According to the Australian Federal Police (AFP) billions of dollars are funnelled through the country’s economy, with the real estate and gambling sectors leading the charge. The fact that the country’s AML regime was not aligned with international standards recommended by the global anti-money laundering watchdog, the Financial Action Task Force (FATF), was seen as a major reason for the scourge of financial crime in the country.
Australia began the process of implementing Tranche 2 reforms of its AML/CTF legislation a few years ago to bring Australia’s AML/CTF legislation in line with the FATF. The reforms have far-reaching implications for lawyers, accountants, real estate professionals and dealers, who will be required to take a more active role in deterring money laundering and terrorist financing.
Australia is actually one of only five countries to exempt those sectors from anti-money laundering rules. The Australian government’s commitment to change this means that AML/CTF obligations will increase the number of regulated entities under this legislation from around 17,000 to an estimated 130,000 businesses while modernising the AML regime.
All those real estate agents, lawyers, accountants and dealers who were not required to report suspicious transactions or conduct due diligence checks on customers will now have to. Anyone involved in activities like forming companies, buying and selling real estate, managing client assets – and more – will be required to comply with the AML/CTF Act in some form or other.
A long history
Tranche 2 of the AML regime has a long history. It was actually first proposed in 2007 after tranche 1 was introduced in 2006. It took until 2022 for additional limited reforms to be introduced across Australia. These became known as tranche 1.5. These changes included improvements to customer due diligence (CDD) and information sharing.
The tranche 2 reforms now extend the existing AML/CTF legislation to what is termed high-risk services, also known as tranche 2 services. This includes services provided by lawyers, accountants, trust and company service providers, real estate agents, and dealers in precious metals and stones.
The reforms are likely to require these professionals to implement risk management programs and to conduct due diligence on clients. This will include verifying the identity of clients, assessing the risk of money laundering or terrorist financing, and monitoring transactions for suspicious activity. Failure to comply with these requirements could result in significant civil penalties.
The reforms aim to:
- simplify and modernise the regime in line with international standards and best practices
- reduce complexity and regulatory burden
- make sure the regime responds to the constantly evolving threat environment
- harden Australian businesses and sectors against exploitation by serious organised criminals
How to get ready for tranche 2
Many businesses in Australia will be impacted by tranche 2 AML reforms. Here are some things to think about as you start to get your organisation ready.
- Think about your customers. Consider whether they could be high-risk for money laundering. Are they politically exposed persons (PEPs)? Are they from high-risk areas?
- What do you do for those customers that could be non-compliant? (The legislation is based on designated services.)
- Decide whether those customers are worth keeping.
- Understand what types of information you get on your customer and how you record that information
- Determine how you can monitor transactions.
How VinciWorks can help with AML compliance
VinciWorks is global leader in AML systems for some of the world’s leading law firms, accountants, real estate firms and other businesses. Its training courses are interactive and customisable for any business, any user, anywhere.
Founded by British-Australian lawyers, VinciWorks has decades of experience in end-to-end AML compliance, from policies to risk assessments, training and CDD.
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AML training suite – relevant training for all staff
VinciWorks strives to make its AML training more than simply a tick-box exercise.
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