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By: Neil Jeans, Katherine Shamai, Martin Stone, Annelies Homersham
11 Mar 2025 8 min read
The amended Australian AML/CTF Act 2024 introduces the concept of value transfer chains to enhance transparency and traceability in value transfers, including money, virtual assets, and property.
This shift enhances transaction traceability, aids in detecting and preventing illicit activities, and aligns Australia's AML/CTF measures with international standards set by the Financial Action Task Force (FATF).
While implementing these changes presents challenges, the overall impact is a more robust and adaptable AML/CTF regime that better addresses the evolving nature of financial transactions.
The concept of value transfer chains originates from the FATF Recommendation 16, which addresses the need for transparency and traceability in wire transfers to prevent money laundering and terrorist financing. The FATF's guidance on a risk-based approach for money or value transfer services (MVTS) emphasises the importance of identifying and mitigating risks associated with value transfers.
The introduction of the value transfer chain ensures uniform requirements for all types of value transfers, enhancing regulatory clarity and compliance. It also improves the traceability of value transfers and aids in the detection and prevention of money laundering and terrorist financing. It accommodates the growing use of virtual assets and other non-traditional forms of value transfer.
The new requirements aim to improve the traceability of value transfers, aiding in the detection and prevention of money laundering and terrorist financing.
The introduction of the value transfer chain concept brings several changes to the current Australian AML/CTF requirements:
Some of the changes in designated services under the amended AML/CTF Act 2024 are linked to the introduction of the value transfer chain concept. The AML/CTF Act now includes new streamlined value transfer designated services:
These changes ensure that all entities involved in value transfers, whether financial institutions, remittance service providers, or payment service providers, adhere to consistent AML/CTF requirements. This alignment aims to enhance the overall effectiveness of the AML/CTF regime and ensures that all types of value transfers are adequately monitored and regulated.
Under the revised AML/CTF Act, a value transfer chain includes three (3) types of institutions: ordering institutions, intermediary institutions, and beneficiary institutions. The following is a description of their roles in the value chain:
Each role in the value chain is discrete which ensures clear responsibilities and accountabilities. More complex organisations may undertake separate roles for different transaction types and thereby need to adapt their functions to meet the specific requirements of each type of transfer.
Introducing the value transfer chain concept under the amended AML/CTF Act 2024 significantly impacts remittance service providers who are currently subject to specific obligations related to international funds transfer instructions (IFTIs), soon to be renamed ‘international value transfer services’ (IVTS), as part of a designated remittance arrangement.
The new concept removes the distinction between transfers of value for financial institutions and those for remittance service providers, ensuring consistent requirements for all reporting entities performing similar designated services.
Remittance service providers will now follow the same requirements as financial institutions for domestic and international value transfers, the impacts of which will include:
Payment service providers will also be affected by the amended AML/CTF Act 2024, particularly with the introduction of the value transfer chain concept. Like remittance service providers, payment service providers will need to adhere to unified requirements for value transfers. The following are the key impacts:
Virtual asset service providers are also affected by the amended AML/CTF Act 2024, particularly with the introduction of the value transfer chain concept. Similar to remittance service providers and payment service providers, virtual asset service providers will need to adhere to unified requirements for value transfers.
Integrating the value transfer chain concept into existing systems and processes can be complex, especially for reporting entities with diverse operations and multiple transaction types.
Those reporting entities involved in value transfer chains should conduct a thorough review of current systems and processes to identify areas that need modification and then implement a phased approach to integration, starting with high-priority areas.
The amended AML/CTF Act introduces new civil penalty provisions in relation to value transfer chains, including an intermediary or beneficiary institution who fails to monitor whether they have received the information specified in the AML/CTF Rules in relation to the transfer of value.
Although the new AML/CTF requirements won't be enforced until April 2026 for existing entities and July 2026 for new entities, it is vital to start planning and preparing for compliance with the revised 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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