AML/CTF Amendments: Implications for Asset Protection and Digital Assets
Introduction
The Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (the Amendment Act) represents a significant overhaul of Australia's financial crime regulatory framework. Passed by Parliament on 29 November 2024 and receiving Royal Assent on 10 December 2024, this legislation marks the most substantial reform to Australia's anti-money laundering and counter-terrorism financing (AML/CTF) regime since its inception. The Amendment Act extends regulatory oversight to previously unregulated sectors, modernizes the approach to digital assets, and introduces more flexible, risk-based compliance obligations.
This article examines the key changes introduced by the Amendment Act, with a particular focus on its implications for asset protection strategies, especially those involving digital assets. As the regulatory landscape evolves, understanding these changes is crucial for businesses and individuals seeking to ensure both compliance and effective asset protection.
Background and Context
Australia's AML/CTF regime was established by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, which created a framework for detecting, deterring, and disrupting money laundering and terrorism financing. However, this framework had notable gaps, particularly in its coverage of non-financial sectors vulnerable to exploitation by financial criminals.
The Financial Action Task Force (FATF), the global financial crime watchdog, identified these gaps in its 2015 evaluation of Australia, highlighting the country's failure to regulate 'tranche two' entities—professional service providers such as lawyers, accountants, real estate professionals, and dealers in precious metals and stones. This deficiency was acknowledged in the 2016 statutory review of Australia's AML/CTF regime, setting the stage for the reforms embodied in the Amendment Act.
The development of the Amendment Act was informed by extensive consultation with affected sectors and government agencies. From April 2023 to June 2024, the Attorney-General's Department received over 270 submissions and held more than 100 stakeholder meetings, demonstrating the collaborative approach taken to balance regulatory effectiveness with practical implementation.
The Expanded Regulatory Framework
The Amendment Act introduces three key objectives that reshape Australia's AML/CTF landscape:
Expanding coverage to high-risk services: The Act extends the AML/CTF regime to additional high-risk services provided by 'tranche two' entities, including real estate professionals, dealers in precious metals and precious stones, and professional service providers such as lawyers, conveyancers, accountants, and trust and company service providers.
Modernizing regulation of digital assets: The legislation updates the regulatory approach to virtual assets and payments technology, replacing the term 'digital currency' with 'virtual asset' and broadening the definition to capture a wider range of digital representations of value.
Simplifying and clarifying the regime: The Act moves away from prescriptive requirements toward more flexible, risk-based, and outcomes-focused obligations, aiming to increase flexibility, reduce regulatory impacts, and support businesses in preventing and detecting financial crime.
The AML/CTF regime continues to use a 'designated services' model for regulation. This means that regardless of their branding or occupation, if businesses provide one or more designated services set out in the amended Act, they would be regulated and required to fulfill key obligations to protect their businesses from misuse by criminals.
Australia has been identified as an attractive destination to store and legitimize proceeds of crime. Without these reforms, the AML/CTF regime would become increasingly ineffective in combating sophisticated financial crime networks. The costs of inaction are significant, affecting not only Australia's international reputation but also the integrity of its financial system.
Digital Currency Exchanges Under the New Regime
Prior to the Amendment Act, Australia's AML/CTF regime only regulated exchanges between virtual assets and fiat currencies. The Amendment Act significantly expands this coverage to align with FATF Recommendation 15, which requires countries to apply AML/CTF regulation to five key virtual asset services:
Exchanges between virtual assets and fiat currencies
Exchanges between one or more forms of virtual assets
Transfers of virtual assets on behalf of a customer
Safekeeping or administration of virtual assets
Participation in and provision of financial services related to an issuer's offer and/or sale of a virtual asset
The Amendment Act also introduces a new definition of 'virtual asset' to replace 'digital currency'. This new definition is broader and more aligned with global terminology used by the FATF. A virtual asset is defined as a digital representation of value that can be transferred, stored, or traded electronically, and functions as:
A medium of exchange
A store of economic value
A unit of account
An investment
This expanded definition captures additional concepts like non-fungible tokens (NFTs) that function as a medium of exchange, governance tokens for decentralized autonomous organizations, and stablecoins minted on public blockchains but intended for use by a subset of the public.
Notably, central bank digital currencies are explicitly excluded from the definition of virtual assets and are instead considered 'money' for the purposes of the AML/CTF Act. Digital representations of value used exclusively within electronic games and customer loyalty or reward points are also excluded.
AUSTRAC's Money Laundering in Australia National Risk Assessment 2024 identified digital currency exchanges and digital currencies as an increasing money laundering vulnerability, highlighting the timeliness of these regulatory changes.
Professional Services Under the New Regime
The Amendment Act extends Australia's AML/CTF regime to certain high-risk services provided by professional service providers, including lawyers, conveyancers, accountants, and trust and company service providers. This expansion closes critical regulatory gaps and brings Australia in line with international standards.
For legal professionals, the Amendment Act specifies several services that are classified as "designated services," triggering AML obligations:
Assisting clients in buying, selling, or transferring real estate
Assisting clients in buying, selling, or transferring legal entities such as companies or trusts
Receiving, holding, controlling, or managing clients' funds and/or property (with some exceptions, such as payments solely for legal fees)
Facilitating the sale or transfer of shelf companies
Creating, operating, or managing legal entities or arrangements for clients
Professional service providers offering designated services will need to:
Enroll with AUSTRAC
Develop and maintain an AML/CTF program tailored to their practice
Conduct initial customer due diligence
Conduct ongoing customer due diligence
Report certain transactions and suspicious activities
Make and keep records
The key commencement date for these new obligations is July 1, 2026, with professional service providers able to enroll with AUSTRAC from March 31, 2026. The extended timeframe between passage of the Act and implementation provides a preparation window for affected businesses.
The Amendment Act also clarifies the treatment of Legal Professional Privilege (LPP) within the AML/CTF framework, and law firms must be mindful of their obligations under the Privacy Act when handling personal information for AML compliance.
Implications for Asset Protection
The Amendment Act has significant implications for asset protection strategies, particularly those involving digital assets. These implications can be categorized into several key areas:
1. Enhanced Due Diligence Requirements
The new regime introduces more rigorous customer identification and verification procedures, ongoing monitoring of transactions and customer relationships, and risk-based assessment of customers and transactions. This increased scrutiny means that asset protection structures will face greater transparency requirements, potentially affecting privacy considerations that were previously part of asset protection planning.
For example, the establishment of trusts, companies, or other legal structures for asset protection purposes will now trigger AML/CTF obligations for the professional service providers involved. This includes verifying the identity of beneficial owners and understanding the nature and purpose of these structures, which may limit the effectiveness of certain asset protection strategies that rely on anonymity or complex ownership arrangements.
2. Increased Transparency in Digital Asset Transactions
A key new obligation for Virtual Asset Service Providers (VASPs) is compliance with the 'travel rule,' which requires them to transmit certain information about both the payer and payee with virtual asset transfers. Before acting as an ordering or beneficiary institution, VASPs must conduct due diligence to determine whether relevant wallets are custodial or self-hosted. This reduces anonymity in digital asset transactions and increases the traceability of asset movements.
The travel rule has particular significance for digital asset protection strategies. Previously, the pseudonymous nature of many blockchain transactions provided a degree of privacy that could be leveraged for asset protection. Under the new regime, this privacy is significantly reduced, as VASPs must collect, verify, and transmit identifying information along the value transfer chain.
3. Impact on Traditional Asset Protection Structures
Professional service providers involved in establishing and maintaining asset protection structures—such as trusts, companies, and self-managed superannuation funds—will now be subject to AML/CTF obligations when providing designated services. This means that the creation and operation of these structures will involve additional compliance requirements, potentially affecting their utility and cost-effectiveness for asset protection purposes.
The increased regulatory oversight may also lead to greater scrutiny of the purpose and operation of these structures, potentially challenging arrangements that appear designed primarily to conceal ownership or avoid legitimate obligations. This does not mean that legitimate asset protection planning is no longer viable, but rather that it must be conducted with greater transparency and clear legitimate purposes.
4. Strategic Considerations for Digital Asset Protection
Businesses and individuals utilizing digital assets as part of their asset protection strategy should consider:
Conducting ML/TF/PF risk assessments specific to their digital asset operations
Implementing systems to comply with the travel rule for virtual asset transfers
Developing wallet screening capabilities to identify custodial vs. self-hosted wallets
Enhancing transaction monitoring systems to detect suspicious activities
Reviewing and potentially restructuring asset holdings to align with new regulatory requirements
The shift to a risk-based approach under the Amendment Act does provide some flexibility in how these obligations are met. Businesses can implement measures proportionate to their specific risks, which may allow for more efficient compliance while still achieving effective asset protection.
Expert Perspectives
Legal and financial experts have provided valuable insights into the implications of the Amendment Act:
Norton Rose Fulbright notes that the reforms will significantly increase the reporting entity population from approximately 17,000 entities to approximately 90,000 entities. They highlight that real estate transactions are an established method of laundering money, professional service providers are sought out for specialist skills, and virtual assets allow criminal groups to move funds across borders quickly and pseudo-anonymously.
According to Norton Rose Fulbright, "The changes for existing reporting entities are vast and will significantly impact business processes." Key changes include enhanced oversight and governance requirements, explicit requirements to undertake ML/TF risk assessments, redesigned obligations for customer due diligence, and significant reworking of the framework for electronic funds transfer instructions.
MinterEllison emphasizes that most changes do not take effect until March 2026, giving businesses time to prepare. They advise that existing reporting entities will need to review and update their programs and related processes, with greater emphasis on bespoke risk assessment. They note that "The addition of new categories of designated service will bring tens of thousands of businesses within the scope of the legislation for the first time."
HWL Ebsworth Lawyers provides detailed analysis of the impact on virtual asset service providers, noting that the new definition of 'virtual asset' expands to include various types of NFTs, governance tokens, and stablecoins. They highlight that VASPs will become subject to the 'travel rule' and must conduct due diligence on wallets before facilitating transfers.
Baker McKenzie observes that prior to the Amendment Act, Australia was one of five jurisdictions that did not regulate 'tranche two' entities. They note that the FATF scrutinized Australia's failure to adhere to international AML/CTF standards in 2015, calling out the lack of regulation for 'high-risk' services.
Conclusion
The Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 represents a significant evolution in Australia's approach to combating financial crime. By extending regulatory coverage to previously unregulated sectors, modernizing the treatment of digital assets, and introducing more flexible, risk-based compliance obligations, the Amendment Act aims to strengthen Australia's defenses against money laundering and terrorism financing.
For those concerned with asset protection, particularly involving digital assets, the new regulatory landscape presents both challenges and opportunities. While increased transparency and compliance requirements may affect traditional asset protection strategies, the clearer regulatory framework provides greater certainty for legitimate asset protection planning.
As the implementation date of March 2026 approaches, businesses and individuals should take proactive steps to understand their obligations under the new regime and adapt their asset protection strategies accordingly. This may involve reviewing existing structures, enhancing due diligence processes, and implementing new systems to comply with the travel rule and other requirements.
By staying informed and prepared, stakeholders can navigate the new regulatory environment effectively, ensuring both compliance with the law and the continued protection of legitimate assets.
References
Attorney-General's Department: Anti-Money Laundering and Counter-Terrorism Financing Amendment Act
AUSTRAC: AML/CTF Amendment Bill announcement
Norton Rose Fulbright: AML/CTF Amendment Bill: Implications for new and existing reporting entities
MinterEllison: A new dawn: AML/CTF reforms finally see the light of day
HWL Ebsworth Lawyers: AML/CTF Redefined: Crypto under Australia's New Regulatory Framework
Baker McKenzie: Australia: AML/CTF Amendment Act overhauls AML/CTF legislative landscape
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For more information, please contact Gavin McInnes on 07 3367 8681 or gmcinnes@grmlaw.com.au.
The information contained in this article is general in nature and cannot be regarded as anything more than general comment. Readers of this article should not act on the basis of this comment without consulting one of GRM LAW 's legal practitioners who will consider their particular circumstances.
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