Australia is moving to overhaul its anti-money laundering and counter-terrorism financing (AML/CTF) framework with a comprehensive new proposal aimed at aligning the country with global standards set by the Financial Action Task Force (FATF).
AUSTRAC, the nation’s financial intelligence agency, has opened a consultation following the AML/CTF Amendment Act 2024, signalling a shift toward a more streamlined and outcomes-based approach to financial crime compliance.
Napier AI, a next generation compliance platform, recently delved into the changes.
The proposal introduces significant changes across multiple areas, including the restructuring of existing AML/CTF rules into two simplified instruments: General Rules and Exemption Rules. This effort seeks to reduce regulatory complexity and make it easier for reporting entities to understand and implement their compliance obligations.
One of the most notable elements of the reform is the expansion of regulated entities. Lawyers, accountants, real estate agents, virtual asset service providers (VASPs), and precious metals dealers are set to fall under the AML/CTF regime.
The framework also embraces risk-based compliance. It will permit financial institutions to tailor customer due diligence (CDD) according to the level of risk presented by individuals, businesses, and high-risk entities such as politically exposed persons (PEPs). A key feature is the introduction of the travel rule, which mandates that information on both payer and payee must accompany value transfers, thereby enhancing transparency and traceability in financial transactions.
To reinforce oversight, AUSTRAC plans to strengthen requirements for AML/CTF compliance officers. The proposal outlines a formal “fit and proper” standard, requiring officers to be Australian residents and meet conditions similar to other commonwealth regulatory bodies. Factors such as competence, past misconduct, bankruptcies, and conflicts of interest will now be critical considerations.
In addition, the proposal would replace the existing designated business group structure with a new concept called ‘reporting groups’. Under this model, a lead entity would be accountable for AML/CTF compliance across its group, ensuring more centralised and consistent application of compliance standards across affiliated organisations.
Another change involves ‘keep open notices’. These allow entities to temporarily bypass certain CDD checks if doing so might alert a suspect to an investigation. While AUSTRAC will no longer issue these notices, it will retain oversight, requiring that a copy be sent to the regulator for review.
For financial institutions, these changes signal the need for a thorough reassessment of their compliance strategies. Firms will need to adopt a more targeted approach to transaction monitoring and customer verification, with a focus on high-risk behaviours rather than blanket screening.
The shift towards reporting groups will also require institutions to improve coordination across subsidiaries, ensuring robust AML oversight at both the entity and group levels.
Finally, with increased accountability for compliance officers and boards, organisations must ensure their staff are adequately trained and that governance frameworks are equipped to manage regulatory expectations. Senior management involvement in AML strategy will be critical for embedding compliance throughout the enterprise.
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