A reminder that AML/CTF reform is on its way - 31 March 2026
Introduction
31 March 2026 marks the most significant overhaul of Australia’s Anti-Money Laundering and Counter-Terrorism Financing (‘AML/CTF’) regime in two decades. For Australian Financial Services Licence (‘AFSL’) holders, this is a fundamental shift toward a more outcomes-focused, risk-based AML/CTF diligence and reporting model.
If your Board requires assistance to navigate these impending changes, please don’t hesitate to contact me. I can also direct you to experienced AML/CTF lawyers from our legal panel to provide advice if required.
Below is a brief guide on what AFSL holder Company Boards may want to consider regarding updating their AML/CTF policies and programs before the 31 March deadline.
1. Unified program architecture
The traditional separation of AML/CTF Programs into Part A (general) and Part B (customer identification) has changed. You no longer need to separate your program into Part A and Part B.
Action: Edit your documentation program into a single, unified AML/CTF Program. This new structure should link your specific business risks directly to the controls you have in place.
Tip: AUSTRAC has released Program Starter Kits to help businesses build these new frameworks. The kits are designed specifically to help small businesses, particularly in newly regulated sectors to meet their compliance obligations and manage AML/CTF risks, while also seeking to reduce the time and cost of compliance.
2. New governance and senior management accountability
The AML/CTF reforms introduce a ‘reasonable steps’ standard for governing bodies (Boards) and to senior management. Under the reforms, ‘reasonable steps’ is not a static list of actions but more of a dynamic obligation to ensure that the Company is:
Identifying and assessing risks: Continuously updating the Board’s AML/CTF risks as circumstances change.
Tailoring programs: Developing and maintaining an AML/CTF Program that reflects the Company’s business's size, nature, and complexity.
Ensuring oversight: The governing body (Board/Senior Management) must take active responsibility for ensuring the business complies with its own policies and legal obligations.
New Roles: You should appoint a Senior Manager to make key AML/CTF decisions such as approving high-risk relationships, as the key manager will oversee the overall operational implementation of the AML/CTF program.
Compliance Officer: Verify that your AML/CTF Compliance Officer is ‘fit and proper’ and has sufficient independence. Existing entities have an extended window until 30 May 2026 to notify AUSTRAC of their appointed officer.
‘Fit and proper’ characteristics that should be considered include:
Integrity and Character: The individual must possess good character, honesty, and integrity. This includes assessing any history of serious criminal offences, regulatory misconduct, or adverse findings by professional bodies.
Competence and Sound Judgment: They must have the skills, knowledge, and expertise to perform their duties effectively, tailored to the size and complexity of the Company.
Financial Standing: The officer should not be an undischarged bankrupt or have executed a personal insolvency agreement.
Conflicts of Interest: There must be no material conflicts of interest that could impede their ability to act independently and objectively.
3. Modernising risk assessments
Your risk assessment must transition from a static document to a dynamic component of your governance.
Expanded Scope: For example, you are now required to explicitly assess Proliferation Financing (‘PF’) risks alongside money laundering and terrorism financing. Proliferation Financing is the act of providing funds or financial services used for the manufacture, acquisition, possession, export, or trans-shipment of nuclear, chemical, or biological weapons and their means of delivery. Unlike money laundering, which hides the origin of funds, PF often involves legitimate funds used for illicit purposes.
Review Triggers: Update your assessment to reflect current business reality, including new potential delivery channels and types of customers.
4. Transitioning to ‘reporting groups’
Designated Business Groups (DBGs) will no longer be valid on 31 March 2026.
Action: If you rely on shared group compliance, you must proactively form a Reporting Group and designate a ‘lead entity’.
Benefit: Under the new Reporting Group rules, non-reporting entities (like a parent company) can now join the group to perform certain reporting functions.
5. Navigating Customer Due Diligence (‘CDD’)
Under the new AML/CTF regime, initial CDD obligations are less prescriptive to allow businesses greater flexibility in designing risk-based CDD procedures that are tailored and appropriate for their business and AML/CTF risk profile. While many reforms start in March, AUSTRAC has provided a 3-year transition period (until 30 March 2029) for initial CDD obligations.
In the interim, current reporting entities may elect to either operate under the current Applicable Customer Identification Procedures (‘ACIP’) framework or transition to the reformed initial CDD obligations (including the new deemed compliance and delayed CDD provisions).
The transition applies to initial onboarding. Ongoing CDD requirements including monitoring for suspicious activity and updating risk profiles should be fully implemented by 31 March 2026.
Simplified versus Enhanced: Ensure your policies clearly define triggers for Simplified CDD (low-risk) and Enhanced CDD (high-risk, such as foreign PEPs).
6. Value transfers and the ‘Travel Rule’
If your AFSL activities involve transferring money or assets, you must prepare for the Travel Rule.
If you accept an instruction to transfer value, you’ll have obligations. These obligations will depend on the type of transfer, and in some cases include collecting and verifying information about the payer and collecting the payee’s full name.
Requirement: From 31 March 2026, you must collect, verify, and pass on specific payer and payee information throughout the transfer chain.
For certain virtual asset services, this obligation is deferred until 1 July 2026. The deferral will apply to value transfer services involving virtual assets (only). This means that both existing and newly regulated virtual asset service providers must implement the 'travel rule' for virtual asset transfers from 1 July 2026.
Conclusion
AML/CTF reform is on its way and board-level leadership is essential to navigating these important anti-money laundering reforms. The next month will be critical for organisations to implement the appropriate changes regarding their AML/CTF policies.
Boards must act now by reviewing their AML/CTF programs, understanding the practical implications of the updated rules, and seek external advice where needed. AUSTRAC will expect not just policy documents, but clear evidence that boards and senior management understand and are accountable for their updated AML/CTF obligations - these updated changes have been clearly and progressively announced since late 2024.
If your board does not yet have a compliance expert or governance professional who is experienced with AML/CTF compliance, I would like to offer your organisation guidance or support, whether by reviewing your current AML/CTF Program, advising or joining your Risk/Governance or Compliance Committee, or by joining your board sub-committee to help your board navigate these significant AML/CTF compliance changes.
If you are a private company board or a company holding an AFSL and would like to discuss how I can assist your company with enhancing your governance so that you can better manage your compliance risks and protect your investors, please contact me for an obligation-free discussion. I can assist your company with:
Responsible manager;
Compliance committee;
Company director;
Advisory board services;
Compliance reviews; and
Governance committee services.
I’d be excited to assist your company meet its ongoing governance and compliance obligations relating to your company, your AFSL, and to give your customers and investors/shareholders comfort that you can manage your business with institutional grade corporate governance.
Our new marketing tagline for 2026
Our team has worked on introducing a new tagline for our marketing material in 2026 relating to AndrewSMcNeil.com:
Governance + Strategy = High Performance
We will write a post on this in in the coming weeks.
Disclaimer
This contents of this blog post is not legal advice. The information provided is opinion and for general purposes only and is not a substitute for personalised legal counsel.
https://www.andrewsmcneil.com/