Tranche 2 and AML/CTF Reforms Hub

The Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024

The Australian Government has introduced transformative legislation that will reshape and expand the regulation of those services at risk of financial crime. The new laws are intended to commence in 2026 and apply to services provided both in Australia and overseas. The reforms reinforce the focus on risk-based measures to manage financial crime risks.

On 11 September, the Commonwealth Attorney-General tabled a bill in Parliament to amend the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Act). The Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (Bill) will impact both existing and new reporting entities, and has three key objectives:

1. To extend the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regime to certain higher-risk services provided by real estate professionals, professional service providers including lawyers, accountants and trust and company service providers, and dealers in precious stones and metals (Tranche 2 entities);
2. To improve the effectiveness of the AML/CTF regime by making it simpler and clearer for businesses to comply with their obligations; and
3. To modernise the regime to reflect changing business structures, technologies and illicit financing methodologies. Modernise and clarify the regime in line with international standards and best practice.

The amendments aim to close regulatory gaps and bring Australian law in line with the international standards set by the Financial Action Task Force (FATF). These reforms are anticipated to increase the reporting entity population – currently at approximately 17,000 entities – to approximately 90,000 entities.

Changes impacting existing reporting entities

The changes for existing reporting entities are vast and will significantly impact business processes. If passed, some of the material changes include (we have paraphrased these for brevity):

• Oversight and Governance – Governing bodies (e.g. Boards and senior management) will be required to take reasonable steps to ensure the business is appropriately identifying, assessing, managing and mitigating ML/TF risks.
• Risk Assessment – To clarify this requirement, reporting entities will be expressly obliged to undertake and update ML/TF risk assessments.
• Customer Due Diligence (CDD) – As noted above, there will be substantially redesigned obligations for initial customer due diligence (before designated services are provided) as well as for ongoing due diligence during the course of a business relationship.
• Transfers of value and international value transfer services – The Bill will result in a significant re-working of the framework for electronic funds transfer instruction obligations, designated remittance arrangements and international funds transfer instruction (IFTI) reporting purposes. The amendments in Schedule 8 replace the previous funds transfer chain concept with an updated and simplified value transfer chain.
• Information Sharing and Tipping Off – Changes to the tipping off offence intended to facilitate better information sharing to manage financial crime risks, unless disclosure would or could reasonably be expected to prejudice a law enforcement investigation.
• Reporting Group –The current concept of a ‘designated business group’ will be replaced with a ‘reporting group’ concept, imposing obligations and expanded liability on the ‘lead entity’ of a reporting group.

Timing and next steps

As currently drafted, reporting entities will need to be compliant by 2026. This will permit existing reporting entities to modify, and new reporting entities to create, their AML/CTF compliance programs. Of particular importance will be the AML/CTF Rules, which will be substantively redrafted by AUSTRAC, given the proposed legislative changes.

You can subscribe for more updates on Tranche 2 and the reforms from our risk advisory team here.

Useful links

FATF Guidance

• Risk-based Approach Guidance for the Real Estate Sector (2022)
• Risk-Based Approach for the Accounting Profession (2019)
• Risk-Based Approach Guidance for Legal Professionals (2019)
• Risk-Based Approach for Trust and Company Service Providers (2019)
• Risk-Based Approach for Dealers in Precious Metals and Stones (2008)
• https://www.fatf-gafi.org/en/publications/Mutualevaluations/Australia-fur-2024.html

Background Information

• Senate Inquiry Report: The adequacy and efficacy of Australia’s anti-money laundering and counterterrorism financing (AML/CTF) regime (2022)
• Attorney General’s Department: Report on the Statutory Review of the AML/CTF Act and associated Rules and Regulations (2016)
• Australia’s FATF Mutual Evaluation (2015)
• Australian Institute of Criminology - Estimating the costs of serious and organised crime in Australia (2020–21)
• Law Council of Australia: Vulnerabilities Analysis

Second Consultation

• Reforming Australia's anti-money laundering and counter-terrorism financing regime - Overview 
• Paper 1: Further information for real estate professionals 
• Paper 2: Further information for professional service providers
• Paper 3: Further information for dealers in precious metals and precious stones
• Paper 4: Further information for digital currency exchange providers (DCEPs), remittance service providers and financial institutions 
• Paper 5: Broader reforms to simplify, clarify and modernise the regime (which will apply to current and new proposed reporting entities)