Are you providing financial accommodations that may be covered by the AML/CTF Act?

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 etc.

Similarly, the 'repayment' of the financial accommodation arrangements can take various forms and are not necessarily directly linked to the items/funding provided initially.

The financial accommodation repayment could be based on the subsequent purchase of goods to a particular value, a commission or percentage on profits from the business within a certain time period.

What does this look like?

Consider these real-world examples: 

1. Company A provides Company B with a financial accommodation to facilitate the acquiring of fixed assets with the expectation that the economic activity between Company B and Company A will generate profits for Company A overtime which will be sufficient to cover the value of the financial accommodation.
2. Company A provides Company B with a business asset that Company B then operates for a period. Company A recognises the provision as that asset as money owed by Company B. When Company B ceases to operate the business asset, Company A recognises repayment of the money owed on their balance sheet.
3. Company A is a franchisor helping to launch Company B's franchisee business by providing equipment, stock, signage, or other branding materials. Company A 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 B 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 be providing a designated service and your business needs to comply with the AML/CTF Act including needing to enrol with AUSTRAC.

If you need to enrol with AUSTRAC, you will need to comply with the obligations set out in the AML/CTF Act and the requirements contained within the AML/CTF Rules.

Financial penalties for not being enrolled with AUSTRAC when you are required, has increased from 9 November 2023, from a single financial penalty of $18,780 to $18,780 for each day non-enrolment continues.

Next steps

We have worked with various businesses providing financial accommodation to assess whether they need to enrol with AUSTRAC and develop strategies to minimise regulatory impact and mitigate the financial penalties.

Get in touch with our experts if you would like more information or discuss whether your financial accommodations could be covered by the AML/CTF Act.  

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