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The elements of an AML/CTF Program

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Australia has commenced reforming its Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) regime including the ‘Tranche 2’ reforms, which expand AML/CTF compliance to apply to additional professions including lawyers, accountants, real estate agents, property developers, and precious stone dealers. 

An Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) program is essential to support organisations complying with AML/CTF obligations and requirements.  

Under the AML/CTF Act 2024, all reporting entities must have (before providing designated services) and maintain (throughout the time they are providing designated services) an AML/CTF Program that appropriately identifies, mitigates, and manages their ML/TF risk and addresses the AML/CTF system and control requirements set out in the AML/CTF Rules. 

Under the AML/CTF Act, an AML/CTF program comprises several key documents, each crucial in ensuring compliance with revised AML/CTF obligations. 

Risk assessment  

This document sets out the systematic and structured identification of ML/TF risks, an assessment of the likelihood and impact of those risks, and the documentation of the risk assessment process. 

Forms the foundation of the AML/CTF program by identifying and evaluating the specific risks faced by the reporting entity and guiding the development of tailored AML/CTF policies and procedures. 

The risk assessment informs all other documents, ensuring the AML/CTF program is risk-based and focused on the most significant threats. 

AML/CTF policy 

This document outlines the reporting entity's approach to managing and mitigating identified ML/TF risks and ensuring compliance with the general requirements in the AML/CTF Act and AML/CTF Rules. 

The AML/CTF policies must be developed based on the risk assessment and provide the framework for the procedures manual. 

Procedures manual 

This document provides detailed instructions on implementing AML/CTF policies, ensuring consistency and effectiveness in applying AML/CTF measures. 

The procedures manual operationalises the policies and is informed by the risk assessment by providing detailed procedural guidance to ensure consistency and effectiveness in applying AML/CTF measures.  

The procedures manual provides practical guidance for staff on how to comply with AML/CTF obligations. 

To address the AML/CTF program requirements under the AML/CTF Act, new reporting entities should follow a structured, step-by-step approach: 

1 - Conduct a comprehensive risk assessment 

Develop a detailed risk assessment document that evaluates the specific ML and TF risks faced, including consideration of proliferation financing (PF) risks.  

2 - Develop AML/CTF policy 

AML/CTF policies are required to address the identified risks and comply with the AML/CTF Act requirements. The policies must align with the outcomes-based framework and adequately cover ML/TF/PF risks. 

3 - Create a detailed procedures manual 

Establish procedures that provide detailed instructions on implementing the AML/CTF policies set out in the AML/CTF policy, ensuring the manual promotes consistency and effectiveness in applying AML/CTF measures. 

4 - Stay informed 

Monitor for additional AML/CTF Rule requirements and guidance AUSTRAC provides. It is understood the AML/CTF Rules will be published around June 2025, with core Guidance published by AUSTRAC in August 2025 and Tranche 2 specific Guidance by December 2025. 

Civil penalty provisions

The AML/CTF Act introduces new civil penalty provisions related to the development and maintenance of an AML/CTF program, increasing the regulatory risk related to non-compliance. These include civil penalty provisions for failure to document an AML/CTF program, failure of the AML/CTF Program to cover mandated requirements, and failure to notify the governing body of AML/CTF program changes. 

We are here to help 

Although the new AML/CTF requirements won't be enforced until 2026, it is vital to start planning and preparing for compliance with AML/CTF requirements now. With a short lead time to compliance and limited AML/CTF experts across Australia, demand will only continue to increase as the compliance date approaches. If you would like to discuss any of the above with one of our AML/CTF specialists, please reach out.  

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