Are you providing financial accommodations that could create a regulatory exposure?

A financial accommodation does not need to be direct funding of a specific monetary value – it could be a supply of infrastructure, equipment, signage, or a short-term lease. 

Similarly, the 'repayment' of the financial accommodation arrangements can take various forms and is not necessarily directly linked to the items/funding provided initially. The repayment could be based on the subsequent purchase of goods to a particular value, a commission, or a percentage of profits from the business within a certain period.

What does this look like?

Consider these real-world examples:

1. Company A provides Company B with financial accommodation to facilitate the acquisition of fixed assets, with the expectation that the economic activity between Company B and Company A will generate profits for Company A overtime sufficient to offset the value of the financial accommodation.
2. Company C provides Company D with a business asset that Company D then operates for a period. Company C recognises the provision of that asset as money owed by Company D. When Company D ceases to operate the business asset, Company C recognises repayment of the money owed on their balance sheet.
3. Company E is a franchisor helping to launch Company F's franchisee business by providing equipment, stock, signage or other branding materials. Company E provides the financial accommodation with the expectation that the cost will be repaid via fees or as a percentage of the profits made by Company F once it starts operating as a franchisee.

What does this mean?

If you provide the types of financial accommodations described above or other types of financial accommodations, you may inadvertently be providing a service designated by the AML/CTF Act.  Your business may have obligations under the AML/CTF Act including needing to enrol with AUSTRAC.

Since November 2023, the financial penalties for non-enrolment with AUSTRAC have increased from a single financial penalty of $18,780 to $18,780 for each day non-enrolment continues. 

Next steps

We have worked with businesses from a number of industry sectors who have discovered they may have inadvertently been providing financial accommodation to assess whether they need to enrol with AUSTRAC and develop strategies to minimise regulatory impact and mitigate any financial penalties.

We’re here to help

Contact our experts today if you would like more information or to discuss whether the AML/CTF Act could cover your financial accommodations.

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