Overview of Australian AML/CTF Regulatory Regime
The first AML/CTF Act was passed in December 2006 and was phased in over two years. The regulation targeted financial institutions and gambling service providers, mandate these entities to implement risk-based measures to detect, manage and mitigate financial crime risks. Financial institutions and gambling service providers are also known as Tranche 1 reporting entities under the AML/CTF regulation.
On 29 November 2024, the Australian Parliament passed the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (Cth) – marking the most significant reforms to Australia’s AML/CTF regime in over 18 years. This legislative update is commonly referred to as the AML/CTF Reform.
Key Objectives of the AML/CTF Reform
Expansion to New Industries
The Reform extends AML/CTF obligations to new sectors that are recognised—both domestically and internationally—as vulnerable to criminal exploitation and money laundering. Under the revised legislation, certain services offered by the following professionals will be classified as Designated Services:
- Real estate professionals
- Legal professionals
- Accounting professionals
- Trust and company service providers (TCSPs)
- Dealers in precious metals and stones (DPMS)
These sectors are collectively referred to as Tranche 2 entities.
Modernisation and Simplification
The Reform also aims to streamline and modernise the existing AML/CTF framework to enhance its effectiveness in today’s dynamic risk environment. This includes updates to accommodate technological advancements and to better align Australia’s regulatory requirements with international standards.
The revised legislation is expected to introduce more than 80,000 new reporting entities—in addition to the approximately 17,500 existing Tranche 1 entities operating across the financial services, gaming, and bullion dealing sectors.
All Tranche 2 entities providing designated services will be required to enrol with AUSTRAC and begin complying with the updated AML/CTF Act and Rules by 1 July 2026.
Such misuse of legal services not only undermines the integrity of the profession but also presents significant risks to the broader financial system.
Industries
Legal Professionals
Criminals may exploit the legal sector to launder illicit funds by leveraging legal services that obscure the origin and ownership of money. This often involves the creation of trusts, companies, or other complex legal structures designed to conceal the true beneficial owners.
In some cases, criminals may collude with legal professionals to:
Hold funds in client accounts to mask ownership
Facilitate property or financial transactions
Perform inadequate due diligence
Ignore financial crime red flags
Additionally, attorney–client privilege may be misused to shield criminal activity from law enforcement scrutiny. Criminals may also engage legal professionals to draft complex contract clauses intended to complicate the tracing of illicit funds.
Industries
Accounting Professionals
The accounting sector is frequently targeted by criminals seeking to launder illicit funds. This often involves collusion with accountants to create complex ownership structures or execute intricate financial transactions designed to obscure the source of funds and conceal the true beneficial ownership.
Criminals may also attempt to coerce or engage accountants to:
Prepare false financial statements
Manipulate invoices or transaction records
Assist with fraudulent tax filings to give illicit income the appearance of legitimacy
By misusing professional accounting services, criminals can effectively disguise the flow of illegal funds and integrate them into the legitimate financial system.
Industries
Trust and Company Service Providers
Criminals may exploit Trust and Company Service Providers (TCSPs) to facilitate money laundering by establishing complex corporate structures designed to obscure the origin and ownership of illicit funds.
This can include:
Creating trusts, multi-layered ownership chains, or using foreign entities registered in tax havens or high-risk jurisdictions
Setting up multiple shell companies or nominee arrangements to disguise the true beneficial owners
These structures are often used to support the “layering” stage of money laundering—where illicit funds are moved through a series of transactions to make them harder to trace. Such arrangements present significant challenges for regulators and law enforcement agencies attempting to track the flow of illegal funds.
Industries
Dealers in Precious Metals and Stones
The trade of precious metals and stones (excluding bullion) is internationally recognised as a high-risk channel for money laundering. This is largely due to their high value, portability, and the ease with which certain assets—such as gold—can be melted down, reshaped, and resold, making them extremely difficult to trace.
Criminals often exploit this sector by:
Using large cash payments to avoid detection and conceal the source of funds
Purchasing items that can be quickly resold or transported across borders
Structuring transactions to evade regulatory thresholds and reporting requirements
As a result, dealers must implement robust customer due diligence (CDD) measures to assess the customer’s profile, verify the source of funds, and understand the purpose of the transaction to mitigate the risk of financial crime.
In Australia, the real estate sector is considered one of the most vulnerable to money laundering. Criminals often exploit property transactions as a means to legitimise illicit funds. Common tactics include purchasing high-value properties using illegal proceeds—often through shell companies or complex corporate structures—to obscure the true beneficial owner.
Other methods used by criminals may include:
- Manipulating property prices to facilitate value transfers
- Rapid resale of properties (commonly known as “property flipping”) to create the illusion of legitimate income
- Using cash for deposits and settlements to conceal the origin of funds
In some cases, criminals may also collude with real estate professionals who either deliberately ignore or fail to report suspicious behaviours to the relevant authorities. This weakens financial crime controls and enables illicit funds to be laundered through the property market—effectively allowing them to enter the financial system as “clean money.”
Criminals may exploit the legal sector to launder illicit funds by leveraging legal services that obscure the origin and ownership of money. This often involves the creation of trusts, companies, or other complex legal structures designed to conceal the true beneficial owners.
In some cases, criminals may collude with legal professionals to:
- Hold funds in client accounts to mask ownership
- Facilitate property or financial transactions
- Perform inadequate due diligence
- Ignore financial crime red flags
Additionally, attorney–client privilege may be misused to shield criminal activity from law enforcement scrutiny. Criminals may also engage legal professionals to draft complex contract clauses intended to complicate the tracing of illicit funds.
Such misuse of legal services not only undermines the integrity of the profession but also presents significant risks to the broader financial system.
The accounting sector is frequently targeted by criminals seeking to launder illicit funds. This often involves collusion with accountants to create complex ownership structures or execute intricate financial transactions designed to obscure the source of funds and conceal the true beneficial ownership.
Criminals may also attempt to coerce or engage accountants to:
- Prepare false financial statements
- Manipulate invoices or transaction records
- Assist with fraudulent tax filings to give illicit income the appearance of legitimacy
By misusing professional accounting services, criminals can effectively disguise the flow of illegal funds and integrate them into the legitimate financial system.
Criminals may exploit Trust and Company Service Providers (TCSPs) to facilitate money laundering by establishing complex corporate structures designed to obscure the origin and ownership of illicit funds. This can include:
- Creating trusts, multi-layered ownership chains, or using foreign entities registered in tax havens or high-risk jurisdictions
- Setting up multiple shell companies or nominee arrangements to disguise the true beneficial owners
These structures are often used to support the “layering” stage of money laundering where illicit funds are moved through a series of transactions to make them harder to trace. Such arrangements present significant challenges for regulators and law enforcement agencies attempting to track the flow of illegal funds.
The trade of precious metals and stones (excluding bullion) is internationally recognised as a high-risk channel for money laundering. This is largely due to their high value, portability, and the ease with which certain assets—such as gold—can be melted down, reshaped, and resold, making them extremely difficult to trace.
Criminals often exploit this sector by:
- Using large cash payments to avoid detection and conceal the source of funds
- Purchasing items that can be quickly resold or transported across borders
- Structuring transactions to evade regulatory thresholds and reporting requirements
As a result, dealers must implement robust customer due diligence (CDD) measures to assess the customer’s profile, verify the source of funds, and understand the purpose of the transaction to mitigate the risk of financial crime.