Upcoming changes to Australia’s anti-money laundering and counter-terrorism financing laws

Earlier this year, AUSTRAC – Australia’s AML/CTF regulator – published its statement of 2024 regulatory priorities, which we summarised in our January article. In a speech to the National Press Club this month, Attorney-General Mark Dreyfus emphasised the importance of the incoming reforms, which are slated for release towards the end of the year.

In the meantime, the key themes which emerge from the reform process indicate that businesses that provide “tranche 2 services”, such as lawyers, accountants, trust and company service providers and real estate agents, as well as businesses who work with digital assets will be affected. This article summarises three key themes and outlines how you can best prepare your business to avoid falling foul of the new laws, amidst an increased focus by the Australian Government on business’ compliance with the developing AML/CTF regime.

1. Extension of the AML/CTF regime to “tranche two” entities

Australia’s AML/CTF regime is contained in the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the Act).

A key element of the proposed reforms to the Act is the expansion of Australia’s AML/CTF regime to “tranche two” entities, which includes lawyers, accountants, trust and company service providers, real estate professionals, and dealers in precious stones and metals.

Under the proposed legislation, tranche two entities will be required to:

• enrol with AUSTRAC, to whom they must report transactions with a client above $10,000 through a Threshold Transaction Report;
• conduct ongoing due diligence on their customers and submit a Suspicious Matter Report if they suspect on reasonable grounds that there may be criminal activity; and
• comply with additional record-keeping obligations under the Privacy Act 1988 (Cth).

In addition to this, if the proposed reforms are adopted, tranche two entities will be required to develop and maintain an AML/CTF program addressing specific risks in running their businesses. While AUSTRAC will likely release further guidance, tranche two businesses may wish to start assessing their risks now, taking into account their client-base, services provided, method of providing the services and jurisdictions involved. 

2. Extension of the AML/CTF regime to digital asset-related services

With digital asset-related services being an increasingly popular conduit to store and move wealth, the proposal to replace the term “digital currency” with “digital asset” in the Act, would capture evolving digital asset-related services, such as those involving non-fungible tokens (NFTs). In addition, the AML/CTF regime will apply more broadly to the following digital asset-related services when done on behalf of another person:

• exchanges between digital assets for fiat currency, and vice versa;
• exchanges between one or more forms of digital assets;
• transfers of digital assets;
• safekeeping and administration of digital assets; and
• participation in and provision of financial services related to an issuer’s offer and/or sale of a digital asset.

3. Other key reforms to modernise the AML/CTF regime

Ensuring integrity of remittance providers and digital asset service providers

The proposed reforms will grant the AUSTRAC CEO the power to prohibit individuals from being involved in the management of a remittance service provider or a digital asset service provider based on a demonstrated lack of suitability, fitness or propriety.

Updates to the travel rule

The proposed reforms intend to extend the application of the travel rule beyond financial institutions, to remittance providers and digital asset service providers. Therefore, the record-keeping obligations to the Financial Action Task Force (FATF) for information about a payer and payee to “travel” with a transfer of value, would apply.

Reforms to international funds transfer instruction (IFTI) reports

The obligation to report IFTIs under the proposed reforms will rest with Australian institutions, including digital asset service providers, that initiate the outgoing transaction, or make the incoming payment available, for their customers.

Takeaways

We will continue to monitor the progress of the proposed reform to the AML/CTF regime, including when the amending bill is made available. In the meantime, businesses who may be affected by the reforms should start to consider what steps they will need to take once the reforms are eventually enacted in order to minimise any regulatory risks.

Should you wish to further discuss how you and your business can prepare for these upcoming reforms, please reach out to Jonathon Ellis, Chris Clark, Henry Wrench, Aaron Chan, or Olivia Carns.

The authors also acknowledge Annabelle Lee for her contribution to this article