Impacts of the AML/CTF Amendment Bill on new and existing entities

September 22, 2024

Summary

On 11 September 2024, the Commonwealth Attorney-General introduced the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (Bill). The amending Bill enacts the Australian Government's priorities and initiatives to modernise the existing AML/CTF regime, reduce the regulatory gap and move Australia in line with international standards set by the Financial Action Task Force (FATF).

The introduction of the Bill follows two stages of consultation on reforming Australia's AML/CTF regime with affected sectors, law enforcement and regulatory agencies.

The Bill has three stated key objectives:

1. expand the list of designated services to include higher risk service providers (known as 'tranche two' entities),
2. modernise the regulation of virtual assets and payments technology, and
3. simplify and clarify the AML/CTF regime to reduce regulatory burden on the industry and otherwise better prevent and detect financial crime.

If the Bill passes without change, the new requirements are set to commence on 31 March 2026.

Proposed changes impacting reporting entities

A high-level overview of some of the proposed changes that are likely to impact new and existing reporting entities:

• High-risk services: Additional designated services are identified bringing real estate professionals, dealers in precious stones and precious metals and certain professional service providers under the AML/CTF. This expansion, however, will not trigger AML/CTF obligations for all designated services, only certain service providers who are providing the relevant designated services.
• Changes to AML/CTF program requirements: Organisations AML/CTF programs will need to be reviewed and updated for new requirements. These include requiring governing bodies (e.g. boards and senior management) to take reasonable steps to ensure the business is appropriately identifying, assessing, managing and mitigating ML/TF risks, ML/TF risk assessments will need to be updated for the appropriate identification, assessment and mitigation of ML/TF risks (including having regards to the proliferation of financing risks) and better define the roles and responsibilities of a reporting entity's AML/CTF compliance officer.
• Customer due diligence (CDD): Reporting entities will be required to assess and assign a risk rating to all clients (including pre-commencement). The amendments specify where simplified or enhanced CDD is required and reframe which requirements (or enhanced measures) apply to initial and/or ongoing CDD.
• Virtual assets: The Bill extends AML/CTF regulation to additional virtual asset-related services such as exchanges between one or more forms of virtual assets, transfers of virtual assets, safekeeping of virtual assets and provision of virtual assets. The Bill would also replace 'digital currency' in the AML/CTF Act with the broader term 'virtual asset' (which includes asset types such as stablecoins and non-fungible tokens).
• Tipping off offence: There are proposed changes to the tipping off offence are proposed to promote the disclosure of information for a legitimate purpose (such as sharing information within reporting entities to effectively identify, mitigate and manage their collective risks), unless the disclosure of information could or would prejudice an investigation. The intention is to shift to an outcomes based approach based on the particular context of each circumstance.
• Transfers of value and international value transfer services: The Bill proposes to consolidate funds transfer chain concepts into a single value transfer chain. This also updates the concept of 'international funds transfer instruction' with the aim of ensuring consistency with the changes to transfers of value and value transfer chain to 'international value transfer services' (IVTS).
• Reporting Group: The concept of a 'designated business group' under the current AML/CTF regime will be replaced with a concept of a 'reporting group', placing obligations and expanded liability on the 'lead entity' of a reporting group.

Next steps

There remains substantial uncertainty on the details of some of the changes which will be included in amendments to the AML/CTF Rules, which we expect before the end of 2024.

We expect further consultation and debate will occur between now and the proposed commencement date in 2026. This lead time will provide new and existing reporting entities an opportunity to modify or establish their AML/CTF compliance programs.

We recommend adopting a proactive approach to understanding how the Bill affects your business and to identify what changes you will be required to undertake before 31 March 2026.

Please contact our team if you have any queries regarding any of the above.