AML/CTF reforms: Is your program fit for the new framework?
Reforms to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Act) and the Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 (Rules) commence on:
- 31 March 2026 for current reporting entities; and
- 1 July 2026 for tranche 2 entities, including legal and accounting professions, real estate professionals and dealers in precious metals and stones.
Although the reforms are described as modernising and simplifying the regime, they introduce a structural redesign of the AML/CTF framework. Existing reporting entities will need to redevelop their AML/CTF programs to align with the amended Act and Rules.
New AML/CTF program
The amended Act replaces the previous Part A and Part B construct with a consolidated framework built on:
- a documented money laundering, terrorism financing and proliferation financing risk assessment; and
- AML/CTF policies designed to manage and mitigate the risks identified.
The AML/CTF program must be in place before designated services are provided, clearly documented in writing, approved by a senior manager and complied with. It must also be reviewed and independently evaluated on a periodic basis.
The risk assessment must inform and drive the design of the reporting entity’s policies, procedures, systems and controls. It must be reviewed and updated where circumstances change, with updates approved by a senior manager and subject to appropriate governance oversight.
Reporting entities that rely on existing AML/CTF programs without substantive redesign are unlikely to align with the reformed framework.
Governance and accountability
The reforms embed AML/CTF governance within the program itself. The governing body, senior managers and the AML/CTF compliance officer now have defined and non-delegable responsibilities that must be reflected in the AML/CTF program.
The governing body must exercise ongoing oversight of the ML/TF risk assessment and compliance with the AML/CTF policies. Senior managers must approve the risk assessment and AML/CTF policies, including updates, and certain high-risk relationships, and an AML/CTF compliance officer must be appointed to oversee day-to-day compliance and report to the governing body.
Customer due diligence
Customer due diligence (CDD) is reframed around risk and outcomes. Initial CDD must establish specified matters on reasonable grounds before designated services are provided.
While transitional rules allow existing reporting entities up to three years to transition their initial CDD framework, this does not defer broader program redesign or ongoing due diligence obligations. Ongoing CDD applies from 31 March 2026 with no transitional relief.
Pre-commencement customers are not exempt. Where risk escalates or a suspicious matter reporting obligation arises, appropriate due diligence must be undertaken. Onboarding documentation, risk rating methodologies and monitoring processes should be reassessed against the amended Act and Rules.
Reporting groups and structural review
Designated business groups cease on 31 March 2026. Entities wishing to operate on a group basis must establish a reporting group under the amended Act and Rules, designate an eligible lead entity and formally allocate AML/CTF obligations across members.
Existing arrangements will not automatically transition and require reassessment.
Practical steps
Reporting entities should undertake a structured gap analysis focused on:
- redesign of the ML/TF risk assessment;
- uplift of AML/CTF policies and CDD procedures;
- formalisation of governance and approval processes;
- review of reporting group eligibility; and
- alignment of independent evaluation cycles with the new framework.
Early redevelopment will reduce regulatory risk, allow sufficient time for implementation and support informed oversight by the governing body ahead of commencement.
For further information regarding the AML/CTF reforms and redevelopment of AML/CTF programs, please contact cmee@cnmlegal.com.au or amcaliece@cnmlegal.com.au, or call 07 3211 4010.