What Do the New Anti-Money Laundering (AML) Changes Mean for My Business?

In Short

• New anti-money laundering laws will apply to a wider range of businesses.
• Increased obligations mean more stringent compliance requirements.
• Non-compliance could lead to severe penalties.

Tips for Businesses

Ensure your business complies with the latest anti-money laundering laws by reviewing your processes. Train staff on the new regulations, and seek legal advice if necessary to avoid penalties. Maintaining up-to-date records and implementing regular compliance checks will help safeguard your business.

On 11 September 2024, Parliament introduced a new draft legislation to reform Australia's existing approach to anti-money laundering and counter-terrorism financing (AML/CTF). In this article, we explore:

• what the existing laws around AML/CTF look like;
• why the need for reform in this space; and
• what might the draft legislation mean for your business?

What is the Current Legal Framework for Preventing Money Laundering and Terrorism Financing?

Under Australian law, a business that provides certain 'designated services' must meet several obligations, including:

• enrolling their business with the regulator, which is the Australian Transactions Reports and Analysis Centre (AUSTRAC);
• developing and maintaining an AML/CTF program tailored to their business;
• conducting customer due diligence (also known as 'know your client' checks) at the beginning of the customer relationship and on an ongoing basis;
• reporting certain transactions and suspicious activities; and
• making and keeping records.

Examples of 'designated services' under the existing legal framework include:

• banking services;
• lending services;
• dealing in Australian Carbon Credit Units; and
• digital currency exchange services.

Why the Need for Reform?

The current framework has several gaps, particularly in high-risk sectors where AML/CTF obligations are missing. These gaps give criminals the chance to take advantage of the system. For your business, addressing these weaknesses is essential to reducing risks. The draft legislation aims to close those gaps and modernise the framework to make it more risk-based rather than the current 'check-box' approach.

Australia is also due for a mutual evaluation in 2026 by the Financial Action Task Force (a global policy-making body of which Australia is a member), which will assess the implementation and effectiveness of Australia's approach to AML/CTF. This draft legislation aims to address issues identified before this evaluation.

What are the Changes and What Does This Mean for Your Business?

The draft legislation has three main objectives:

1. Expand the AML/CTF regime to additional high-risk services, including:
   • real estate professionals;
   • precious stone and metal dealers;
   • lawyers;
   • conveyancers;
   • accountants; and
   • trust and company service providers, among other professional service providers.
2. Modernise the regulatory approach to digital currency, virtual assets (including stablecoins and NFTs) and payment technology.
3. Simplify the AML/CTF regime focusing on increasing flexibility and reducing regulatory impacts.

In addition to the changes highlighted above, the draft legislation would:

• change the requirements for AML/CTF programs so that they include an overarching risk assessment and proportionate risk mitigation measures, rather than just a 'check-box' exercise of having a program (which is the current requirement);
• modify customer due diligence practices by establishing an outcomes-based framework that clarifies when simplified or enhanced identification measures should be used;
• modify the criminal offence of 'tipping off' by allowing greater flexibility in how related companies required to be compliant with the AML/CTF regime can share information;
• repeal the Financial Transactions Reports Act 1988 to deregulate cash dealers such as lawyers, motor vehicle dealers, sellers of traveller's cheques, and offshore online remitters, although most lawyers will likely be recaptured under the new AML/CTF framework; and
• introduce new information-gathering powers for AUSTRAC to enable it to fulfil its role as Australia's Financial Intelligence Unit, such as the ability to request the production of information or documents needed to make enforcement decisions or to use in court proceedings.

When Will the Changes Take Effect?

Businesses newly captured by the changes will have until 1 July 2026 to comply, with the ability to enrol with AUSTRAC from 31 March 2026. For businesses already subject to AML/CTF obligations, the reforms come into effect on 31 March 2026.

The draft legislation still needs to progress through Parliament before it becomes law and may undergo changes along the way. You will not see the full extent of the new framework until an updated version of the AML/CTF Rules is published. These rules sit underneath the governing legislation and provide further elaboration and guidance for businesses required to comply with the AML/CTF regime. AUSTRAC expects to begin consultation on the draft rules before the end of 2024.

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Key Takeaways

The 11 September 2024 draft legislation reforms Australia's AML/CTF framework, expanding it to high-risk sectors and updating rules for digital currencies. It introduces a risk-based approach and enhances AUSTRAC's powers. Businesses must comply by 31 March 2026, with enrollments starting on 31 March 2026.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.