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