AML/CTF for AFS Licensees: A Guide to AUSTRAC Compliance

Key Takeaways

• All relevant AFS licensees have strict legal obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
• These obligations are overseen by a specialised regulator, the Australian Transaction Reports and Analysis Centre (AUSTRAC).
• You must have a tailored AML/CTF Program that addresses your specific business risks; a generic, off-the-shelf template is not compliant.
• You can outsource AML/CTF functions, but you cannot outsource your legal liability.
• You are legally required to report suspicious activity to AUSTRAC via a Suspicious Matter Report (SMR).

Beyond your core duties overseen by ASIC, there is another critical set of obligations designed to protect the very integrity of Australia’s financial system. Your Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) obligations are not just another box to tick in your general compliance framework; they are your frontline defence against serious organised crime.

Overseen by the specialist regulator AUSTRAC, these laws require a distinct and robust approach. From our experience, AUSTRAC is laser-focused on whether a licensee’s compliance is genuinely embedded in its culture or is merely “window dressing.” Getting this wrong can lead to severe penalties and reputational damage.

What Are Your Core AML/CTF Program Obligations?

Your central obligation is to develop, implement, and maintain a bespoke AML/CTF Program. This program must be based on a thorough assessment of the specific money laundering and terrorism financing risks your business faces. Its purpose is to identify, mitigate, and manage those risks effectively.

Why is compliance culture more than just a policy document?

AUSTRAC has repeatedly observed that a poor compliance culture, led by the board and senior management, is a root cause of major compliance failures. The regulator is particularly concerned with what it calls “compliance window dressing”—where a firm’s policies and procedures look good on paper but are completely ineffective in practice.

A strong AML/CTF culture means:

• Leadership takes it seriously: The board and senior managers actively oversee the AML/CTF program.
• Staff are well-trained: Everyone understands their role in identifying and escalating suspicious activity.
• It’s properly resourced: You dedicate enough time, money, and expertise to your AML/CTF functions.

Can you outsource your AML/CTF responsibilities?

No. This is a critical point of failure for many businesses. While you can outsource certain functions (like identity verification or transaction monitoring) to a third-party provider, you remain 100% legally liable for meeting your obligations.

AUSTRAC has noted that some firms adopt generic, template AML/CTF programs from third parties that are not sufficiently tailored to their specific business. Your program must be unique to your risk profile, whether you develop it in-house or with external help.

How Can You Identify Suspicious Activity?

An effective AML/CTF program depends on your ability to recognise activity that doesn’t feel right. This means understanding common criminal methods and training your staff to spot the financial and behavioural indicators that could suggest illicit activity.

What are some common money laundering techniques?

Criminals use various methods to disguise the origin of illicit funds. One common method in global trade is Trade-Based Money Laundering (TBML).

What are the money laundering risks with digital currencies?

Digital currencies present unique risks that can be exploited for financial crime. You should be alert to their potential use in:

• Money laundering: Using the anonymity of some currencies to layer and integrate illicit funds.
• Purchasing illicit goods on darknet marketplaces.
• Facilitating scams, such as investment or romance scams where victims are instructed to pay in crypto.
• Tax evasion.

What are some common behavioural red flags?

Often, it’s a customer’s behaviour, not just the transaction, that raises suspicion. A single indicator might not be definitive, but a combination of factors should trigger further due diligence. Train your staff to look for customers who:

• Provide evasive, coached, or incoherent responses to standard questions.
• Are unable to produce appropriate documentation, like invoices, to support a transaction.
• Ask questions about how to avoid reporting obligations.
• Demonstrate little knowledge of a complex product (like digital currency) but then quickly try to purchase and transfer it to another address.

When Do You Need to Report a Suspicious Matter?

You have a legal obligation to submit a Suspicious Matter Report (SMR) to AUSTRAC if you form a suspicion on reasonable grounds. This obligation is triggered if you suspect that a customer is not who they claim to be, or that a transaction or service is related to:

• Money laundering
• Terrorism financing
• The proceeds of crime
• Tax evasion

Why is the quality of your SMR so important?

Submitting an SMR is not just about ticking a box. The quality, accuracy, and timeliness of your reports are paramount. High-quality SMRs provide AUSTRAC and its law enforcement partners with the best possible financial intelligence to detect, deter, and disrupt criminal and terrorist activity. Your report could be the missing piece of a puzzle that helps to stop serious crime.

In Conclusion

Your AML/CTF obligations are a serious responsibility that positions your business as a gatekeeper of Australia’s financial system. Meeting these requirements demands a specific, risk-based program, a genuine top-down compliance culture, diligent staff training, and a commitment to providing high-quality intelligence to AUSTRAC when you spot something suspicious.