Preparing for the 2026 Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Obligations

Background

The Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth) (Amendment Act) passed the Parliament on 29 November 2024. The Amendment Act amends the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) with the objective to:

  • extend the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regime to additional high-risk services;
  • modernise the regulation of digital currency and of virtual asset and payments technology; and
  • simplify and clarify the AML/CTF regime to increase flexibility, reduce regulatory impacts and support businesses to better prevent and detect financial crime.
AML/CTF Regime

The AML/CTF regime uses a ‘designated services’ model for regulation.

If businesses provide one or more designated services, they will have to put in place measures to protect their business from exploitation by criminals, including measures to allow for early identification of criminality or potential criminal activity. The business has to fulfil the following key AML/CTF obligations to protect the business from misuse by criminals:

  • Enrol with AUSTRAC.
  • Develop and maintain an AML/CTF program tailored to their business.
  • Conduct initial customer due diligence.
  • Conduct ongoing customer due diligence.
  • Report certain transactions and suspicious activities.
  • Make and keep records.
Major Changes of the Amendment Act

Some of the major changes made by the Amendment Act are as follows:

Regulating additional high-risk services

Extends the AML/CTF regime to certain high-risk services provided by:

  • real estate professionals;
  • dealers in precious metals and precious stones; and
  • professional service providers such as lawyers, conveyancers, accountants, and trust and company service providers.

If businesses provide one or more designated services set out in the amended  AML/CTF Act, they would be regulated under the AML/CTF regime, and would be required to fulfil the key obligations.

Businesses that provide these services will be regulated by AUSTRAC from 1 July 2026. These business can enrol as reporting entities with AUSTRAC from 31 March 2026.

AML/CTF program

The Amendment Act will update the existing requirement for an AML/CTF program. The changes require reporting entities to undertake appropriate measures that focus on identifying, assessing and mitigating money laundering, terrorism financing and proliferation financing risk. The new requirements shifts the focus from a compliance-based approach to a risk-based, outcomes-oriented approach.

The revised AML/CTF program obligations includes the following:

  • An overarching risk assessment to consider the money laundering, terrorism financing and proliferation financing risks the reporting entity may reasonably face.
  • Reporting entities will be required to implement commensurate risk mitigation measures in response to its risk assessment, including creating and maintaining appropriate policies to manage and mitigate the risks.
  • Clarifying the roles and responsibilities of a reporting entity’s board or equivalent senior management and its AML/CTF compliance officer. The role of the AML/CTF compliance officer is clarified to be that of an individual in management who oversees the operational implementation of the AML/CTF program.

These reforms will commence on 31 March 2026.

Customer due diligence (CDD) 

Customer due diligence (CDD) is one of the primary ways in which reporting entities identify, assess, mitigate and manage the money laundering, terrorism financing and proliferation financing risk associated with their customers or clients.

The Amendment Act establishes an improved, outcomes-based framework for the CDD requirements under the AML/CTF Act. In particular, the measures in the Amendment Act seek to:

  • reframe and clarify the core requirements for reporting entities to carry out initial and ongoing CDD;
  • clarify when enhanced CDD must be applied; and
  • streamline the circumstances when simplified CDD may be applied.

CDD changes will commence on 31 March 2026.
AML/CTF Rules

While the Amendment Act sets out the high-level obligations, the AML/CTF Rules (issued under the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (Cth)) will provide the operational and practical details needed for ongoing day-to-day compliance.

A second exposure draft of the AML/CTF Rules is currently under development by AUSTRAC and will be subject to public consultation shortly. This second draft will include updates that AUSTRAC may have made in response to public consultation on the first exposure draft issued in late 2024.

What should businesses start doing?

New and existing reporting entities under the AML/CTF regime should begin preparing for the reforms taking effect in 2026 by:

  • considering how their business will be affected and which parts of their business provide a ‘designated service’;
  • considering their AML/CTF program, risk assessment of their money laundering, proliferation financing and terrorism financing risk and what new or amended policies and processes are required in order to maintain compliance;
  • establish or review customer due diligence processes and procedures;
  • undertaking staff education and training with respect to the changes; and
  • appoint a suitably trained AML/CTF Compliance Officer, and assess that they are a ‘fit and proper’ person.

 

If you would like advice or assistance in relation to the AML/CTF regime, please contact our Accredited Business Law Specialists and Partners Justin Thornton on jthornton@marsdens.net.au and Rahul Lachman on rlachman@marsdens.net.au or otherwise by calling them on (02) 4626 5077.

The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.

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