Australia's proposed Bill expands AML regime to include more service providers

The Financial Action Task Force (FATF) warned Australia almost ten years ago that refusing to include these 'gatekeeper' entities, also known as designated non-financial businesses and professions (DNFBPs), did not comply with a number of its recommendations.

The country is due for another FATF mutual evaluation in 2024 or 2025. The government has warned that FATF grey-listing 'would not only be damaging to our international reputation but could result in significant economic harm to Australians and businesses'.

The new draft legislation follows two rounds of previous consultation with regulated industries, in April 2023 and May 2024. It will bring high-risk DNFBPs under regulation by the Australian Transaction Reports and Analysis Centre (AUSTRAC), the country's principal financial regulator. A recent AML national risk assessment by AUSTRAC noted criminals are increasingly exploiting these sectors to conceal illicit wealth and launder money. In future, DNFBPs will have to register with AUSTRAC and implement compliance obligations under the Bill.

The Bill also takes the opportunity to streamline Australia’s AML regime and reduce the regulatory burden on businesses, which will be encouraged to take a risk-based approach to prioritise their resources.

It also tightens the regulation of virtual assets and payments technology to cover a wider range of virtual asset-related services, such as businesses involving the exchange of virtual assets, custody transfer facilitation and participation in the initial offerings of virtual assets. There will also be an overhaul of the international funds transfer instruction (IFTI) reporting regime.

Amendments may be introduced as the Bill progresses through the Australian parliament. Additional details surrounding the introduction of FATF's 'travel rule' regarding the transfer of virtual assets may also be added.

The Bill marks a ‘major shift in regulatory obligations’ for tranche 2 businesses, says law firm Piper Alderman. The deadline for full implementation of the new rules is expected to be 1 July 2026, but several of the changes are expected to take effect earlier. The new rules for virtual assets, as well as introduction of the travel rule and its respective obligations, are expected to take effect from 31 March 2026.

Sources

• Piper Alderman
• Australian Attorney-General
• Australian government (draft Bill)
• Australian parliament (explanatory memo)
• AUSTRAC (2024 national risk assessment, PDF)
• Ashurst