New anti-money laundering rules take effect in Australia on 1 July and small businesses in legal, accounting, real estate and conveyancing are directly in scope.
On 1 July 2026, the Tranche 2 amendments to Australia’s existing Anti-Money Laundering and Counter-Terrorism Financing (“AML/CTF”) regime will be enacted, as part of Australia’s ability to deter, detect and disrupt money-laundering and terrorist-financing activities.
This will affect Australian businesses of all sizes, from sole traders to corporate entities, across the legal, accounting, professional services, metal dealer and real estate industries, that provide a designated service and operate in Australia.
Under the updated amendments, enforced by AUSTRAC, businesses will need to adopt a risk-based approach, develop and maintain an AML/CTF program, and ensure adequate governance, among other requirements.
Why is this regulation so important?
At a national level, it’s important to protect the safety and well-being of Australian communities and businesses, with the Australian Institute of Criminology (“AIC”) estimating that serious and organised crime cost the Australian community up to A$60.1 billion in 2020-21, with illicit financing at the centre of most types of crime.
Australia is already a laggard on the global stage in terms of AML/CTF compliance as it is one of the last major members of the Financial Action Task Force (FATF) to extend AML/CTF obligations to Tranche 2 entities. If Australia fails to uplift and extend the AML/CTF regulations to tranche 2 entities, they risk joining the ranks of Kenya, Lebanon and Haiti (among others) and being grey listed. A grey listed country is subject to increased monitoring, making it commercially challenging to conduct business on a global scale. This would have severe commercial, social and economic consequences to all Australians as it would make it more onerous and complex to conduct business with Australia.
What happens to businesses that are not compliant?
AUSTRAC notes that businesses found in breach of the regulation may face severe penalties. This could range from financial penalties to criminal sentences, with the severity of non-compliance likely determined on a case-by-case basis.
Across the pond, the New Zealand case of R v Daniels & Simpson [2020] NZHC 275, serves as a cautionary tale, in which solicitor Andrew Neill Simpson was convicted of money laundering for using his trust accounts to launder roughly $1.2 million in Comanchero-linked drug proceeds. Mr Simpson was criminally convicted for his blinkered approach and failure to act on AML/CTF red flags, providing a pointed reminder that compliance failures are not always flagrant or intentional, but that ignoring your obligations equally amounts to a breach.
With authorities openly supporting the enforcement of penalties for regulatory breaches, AML/CTF compliance is no longer a nice-to-have; it is a business imperative.
So, what can Aussie Businesses operating across real estate, accounting, conveyancing and precious stones & metals do to ensure compliance?
There are several things business owners and executives should do to support the business’s compliance obligations, including:
- Understanding what percentage of your business makes up a designated service – for your business to be governed under AUSTRAC’s AML/CTF regulation, you need to provide a ‘designated service’. Table 6 of subsection 6(5B) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the Act) sets out what constitutes a new designated service for professional services firms. It has been defined as;
- assisting in the planning or execution of a transaction to sell, buy or transfer real estate (item 1)
- assisting in the planning or execution of a transaction to sell, buy or transfer a body corporate or legal arrangement (item 2)
- receiving, holding, controlling or managing a person’s property to help in the planning or execution of a transaction (item 3)
- assisting in organising, planning or executing a transaction for equity or debt financing relating to a body corporate or legal arrangement (item 4)
- selling or transferring a shelf company (item 5)
- assisting in the planning or execution of the creation or restructuring of a body corporate or legal arrangement (item 6)
- acting, or arranging for someone to act, on behalf of a person in particular positions in a body corporate or legal arrangement (items 7–8)
- providing a registered office address or principal place of business address of a body corporate or legal arrangement (item 9).
A crucial point that is easily missed: the regime does not regulate professions; it regulates a defined set of activities. You are not captured because you are a law firm or an accountancy practice; you are captured when, and to the extent that, you provide one of these services in the course of carrying on a business. Understanding what percentage of your business is made up by a designated service is essential to understanding your risk profile.
- Appointing a compliance officer whose role is to oversee and coordinate the day-to-day AML/CTF compliance and communicate with AUSTRAC on your behalf. This way, you can ensure your time is better spent on what moves the needle for your business, such as managing teams and pursuing growth opportunities. Under the AML/CTF Rules, the Compliance Officer must be a fit and proper person and an Australian resident. The role should be filled by someone with appropriate seniority and management authority.
- Regular training on AML/CTF to ensure all staff are aware of the risks and understand the importance of compliance. Under the AML/CTF Rules, training must be provided to all new employees at the commencement of their employment with regular ongoing training provided, as necessary, to ensure employees understand new and emerging money laundering and terrorism financing risks and any changes or updates to AML/CTF policies and laws.
- Ensuring all administrative and contractual documentation is up to date as of 1 July. Any small business, regardless of the vertical in which it operates, seeking legal advice will be required to provide documentation to prove compliance when seeking legal services, especially if the advice pertains to a designated service listed above. Do not be surprised to be asked for documentation from your lawyers that you have not previously been asked to provide.
There is no doubt that any Australian SMB affected by the new AML/CTF regulations faces a significant compliance uplift. However, it is not expected that anyone should tackle it unaided or without support. There is a growing body of practical, free support designed precisely for small, low-complexity businesses, such as AUSTRAC’s Program Starter Kits, The Law Society of NSW AML/CTF Resource Hub or our own series of AML/CTF webinars, which cover everything from background and key terms through to solutions to help you manage compliance.
Madeleine Porter is Global Legal Vertical Lead at iManage, a legal technology company. This article represents her independent analysis of the AML/CTF regulatory changes and should not be construed as legal advice.
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