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The Australian Transaction Reports and Analysis Centre (AUSTRAC) has launched a new consultation to refine and enhance the country’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) rules. This follows the AML/CTF Amendment Act 2024, which aims to align Australia’s financial crime compliance framework with global Financial Action Task Force (FATF) standards.
The newly proposed changes introduce outcomes-based compliance, expanded obligations for new sectors, and modernised customer due diligence (CDD) requirements. These developments will impact financial institutions, requiring more flexible and scalable compliance strategies to manage risk effectively across diverse business structures.
Read Napier AI’s response to the broader reforms to simplify, clarify and and modernise the Australian AML regime.
What is the new proposal?
Restructured AML/CTF Rules
To ‘simplify and rationalise’ the current AML/CTF Rules, the consultation proposes two distinct rule sets/instruments: General Rules, covering core AML/CTF obligations, and Exemption Rules, which retain necessary exemptions. The framework will be simplified to enhance clarity and ease of implementation.
Expansion of regulated sectors
AML/CTF regulations will extend to include lawyers, accountants, real estate agents, virtual asset service providers (VASPs), and precious metals dealers, enhancing oversight of digital payments and virtual currencies.
Risk-based compliance and the ‘travel rule’
The new framework will introduce a risk-based CDD approach, allowing greater flexibility in verifying individuals, businesses, and high-risk entities like politically exposed persons (PEPs).
The travel rule will require enhanced transparency in value transfers, ensuring detailed payer and payee information is included in transactions. It states that information about the parties to a transaction must travel with the transfer of value. This provides payment transparency and aids preventative measures.
Stronger AML/CTF compliance officer requirements
AUSTRAC will introduce stricter compliance officer requirements, formalising a “fit and proper” criteria and increasing senior management oversight and board accountability. The requirements include that the individual be an Australian resident and meet obligations consistent with other commonwealth regulatory regime interpretations of ‘fit and proper’. This for example, includes considerations of competence, prior misconduct convictions, bankruptcies, conflicts of interests etc,.
New reporting group framework
The consultation proposes replacing existing concept of designated business groups with ‘reporting groups’, where a lead entity will be responsible for AML/CTF compliance across all affiliated organisations.
Keep open notices
A ‘keep open notice’ allows a reporting entity to refrain from undertaking certain CDD obligations if they reasonably believe it could alert the customer to the existence of a criminal investigation. AUSTRAC will no longer be the issuing agency but will retain an oversight function in relation to keep open notices and require a copy be sent to them.
What does this mean for financial institutions?
The proposed changes will require financial institutions to strengthen their risk-based AML programmes by reassessing existing compliance frameworks. Firms must conduct comprehensive ML/TF risk assessments, ensuring they align with the new regulatory expectations. Updating AML/CTF policies will be critical, focusing on enhancing transaction monitoring efforts to target high-risk behaviours rather than relying on blanket rules.
With expanded customer due diligence and travel rule compliance, institutions must refine their Know Your Customer (KYC) verification processes for both individuals and businesses. Enhanced monitoring will be necessary for high-risk PEPs and nested service relationships, while ensuring value transfer compliance through the secure transmission of payer and payee information. These measures will increase transparency and reduce the risk of illicit financial activity.
The introduction of reporting groups means financial institutions will need to establish clear AML oversight at the group level while ensuring compliance across all subsidiaries. Efficient inter-company information sharing will be essential, necessitating the adoption of robust data privacy safeguards. Multi-entity AML solutions, like Napier AI Continuum can help centralise compliance management while accommodating different risk profiles within a corporate group.
As the role of AML/CTF compliance officers is formalised, financial institutions must ensure these officers meet the required fit and proper standards. Boards and senior management will also have to take a more active role in overseeing AML/CTF strategy. Strengthening internal training and policy updates will be crucial to maintaining compliance across different levels of an organisation.
Why multi-org AML compliance solutions are key
Given the increasing complexity of group-wide AML compliance, financial institutions must adopt flexible, scalable, and technology-driven solutions. A multi-org deployment of an AML compliance platform allows centralised oversight while maintaining localised risk controls, ensuring that each entity within a group meets regulatory requirements without adopting a rigid, one-size-fits-all approach.
This approach enables seamless customer risk assessment and transaction monitoring across different jurisdictions and risk profiles. Moreover, scalable compliance frameworks that evolve with regulatory changes and business expansion will be essential in managing future risks in providing the flexibility, scalability, and automation needed to navigate regulatory complexity while maintaining robust compliance and risk management.
Read more about Napier AI Continuum
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