What is AML/CTF? Understanding Anti-Money Laundering in Australia

AML/CTF stands for Anti-Money Laundering and Counter-Terrorism Financing. These are the laws, regulations, and procedures that businesses must follow to prevent criminals from disguising illegally obtained funds as legitimate income and to stop the financing of terrorist activities.

In Australia, AML/CTF is regulated by AUSTRAC (Australian Transaction Reports and Analysis Centre) under the AML/CTF Act 2006. This guide explains what AML/CTF means, why it matters, and what obligations apply to Australian businesses.

What is Money Laundering?

Money laundering is the process of making illegally-obtained money appear legitimate. Criminals use various methods to "clean" dirty money so it can be used without attracting attention from authorities.

The Three Stages of Money Laundering

Money laundering typically occurs in three stages:

1. Placement
The initial entry of illegal funds into the financial system. This might involve depositing cash into bank accounts, purchasing assets, or using cash-intensive businesses.

2. Layering
Creating complex layers of financial transactions to disguise the audit trail and source of funds. This can include transferring money between accounts, converting cash to assets, or moving funds internationally.

3. Integration
Reintroducing the "cleaned" money into the legitimate economy through investments, property purchases, or business operations.

Common Money Laundering Techniques

• Smurfing: Breaking large amounts into smaller deposits to avoid reporting thresholds
• Shell companies: Using fake businesses to move and hide funds
• Real estate: Purchasing property with illicit funds
• Trade-based laundering: Manipulating invoices to move value across borders

What is Terrorism Financing?

Terrorism financing involves providing funds or financial support to terrorist organisations or activities. Unlike money laundering (which typically involves large sums from criminal activity), terrorism financing can involve relatively small amounts from both legal and illegal sources.

Key Differences from Money Laundering

• Funds may come from legitimate sources (donations, employment income)
• Amounts can be relatively small
• The goal is to fund activities, not just hide the source
• More likely to involve international transfers

This is why AML and CTF are combined — the same customer due diligence and monitoring processes help detect both threats.

The AML/CTF Act 2006 (Australia)

The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 is Australia's primary AML/CTF legislation. It establishes:

• AUSTRAC as the regulator and financial intelligence unit
• Obligations for "reporting entities" that provide designated services
• Requirements for customer identification and due diligence
• Reporting obligations for suspicious matters and large transactions
• Record-keeping requirements
• Penalties for non-compliance

2024 Amendments and Tranche 2

In November 2024, Parliament passed significant amendments to the AML/CTF Act, expanding its scope to include "gatekeeper" professions (Tranche 2):

• Real estate agents and property developers
• Lawyers and conveyancers
• Accountants
• Trust and company service providers
• Dealers in precious metals and stones

These changes take effect on 1 July 2026.

What is AUSTRAC?

AUSTRAC (Australian Transaction Reports and Analysis Centre) serves two critical functions:

1. Financial Intelligence Unit

AUSTRAC collects and analyses financial transaction reports from reporting entities. This intelligence helps law enforcement agencies detect and investigate:

• Money laundering
• Terrorism financing
• Tax evasion
• Fraud
• Organised crime

2. AML/CTF Regulator

AUSTRAC regulates reporting entities to ensure they comply with AML/CTF obligations. This includes:

• Registering and enrolling reporting entities
• Publishing guidance and rules
• Conducting compliance assessments
• Taking enforcement action when necessary

AML/CTF Obligations for Reporting Entities

If your business provides designated services, you're a reporting entity with the following obligations:

Enrolment and Registration

Register with AUSTRAC and maintain current enrolment details.

AML/CTF Program

Develop and maintain a written, risk-based program that includes:

• ML/TF risk assessment
• Policies and procedures
• Customer due diligence processes
• Transaction monitoring
• Staff training
• Independent review (at least every 3 years)

Customer Due Diligence (CDD)

• Know Your Customer (KYC): Verify customer identity
• Know Your Business (KYB): Verify business customers
• Beneficial Ownership: Identify who controls the customer
• PEP Screening: Check for politically exposed persons
• Sanctions Screening: Check against sanctions lists
• Ongoing CDD: Monitor the customer relationship
• Enhanced CDD: Apply additional measures for high-risk customers

Reporting

• Suspicious Matter Reports (SMR): Report suspicious activity to AUSTRAC
• Threshold Transaction Reports (TTR): Report cash transactions of $10,000+
• International Funds Transfer Instructions (IFTI): Report international transfers

Record Keeping

Maintain records for at least 7 years.

Why AML/CTF Compliance Matters

Protect Your Business

Effective AML/CTF controls protect your business from being exploited by criminals. Without proper safeguards, your business could unknowingly facilitate money laundering or terrorism financing.

Avoid Significant Penalties

Non-compliance can result in penalties up to $31.3 million for corporations and $6.26 million for individuals, plus reputational damage and potential criminal prosecution.

Meet International Standards

Australia is a member of the Financial Action Task Force (FATF), the global standard-setter for AML/CTF. Strong compliance helps maintain Australia's reputation as a trusted financial centre.

Support Law Enforcement

Your reporting helps AUSTRAC and law enforcement agencies detect and disrupt criminal activity, protecting the broader community.