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

You've seen the acronym. AML/CTF. Probably in compliance documents, legal notices, or government websites.

But what does it actually mean? And more importantly: how does it affect your business?

AML/CTF stands for Anti-Money Laundering and Counter-Terrorism Financing. It's the legal framework that stops criminals from using businesses—maybe yours—to "clean" dirty money or fund terrorist activities.

In Australia, AML/CTF is regulated by AUSTRAC under the AML/CTF Act 2006. And from July 1, 2026, it applies to lawyers, accountants, and real estate agents who thought they were exempt.

Let's break it down.

What Is Money Laundering?

You commit a crime. Make $5 million from drug trafficking, fraud, tax evasion—doesn't matter. Problem: that $5 million is dirty. You can't just deposit it in a bank or buy property with it. The moment you try, red flags go up.

Solution: Money laundering. The process of making illegal money look legitimate.

The three stages criminals use:

1. Placement: Getting Dirty Money Into the System

Deposit cash into banks (in small amounts to avoid detection). Buy assets with cash. Use cash-intensive businesses (restaurants, car washes) to mix illegal cash with legitimate revenue.

Example: Drug dealer has $500,000 cash. Can't deposit it all at once ($10,000+ triggers Threshold Transaction Reports to AUSTRAC). Instead, deposits $9,000 at a time across multiple banks, multiple days. That's called smurfing.

2. Layering: Obscuring the Trail

Create complex transactions to hide where the money came from. Transfer between accounts, convert to different currencies, move offshore, use shell companies to obscure ownership.

Example: Money goes from Bank A to offshore account in Cayman Islands, converts to Euros, transfers to shell company in Luxembourg, converts back to AUD, transfers to an Australian business they secretly own. Original source? Impossible to trace.

3. Integration: Enjoying the Clean Money

Bring laundered money back into the legitimate economy. Buy property, start businesses, invest in shares. Money now looks like legitimate wealth.

Example: Buy $3 million property with laundered funds. Rent it out. Rental income is legitimate. Sell property for profit. Capital gains are legitimate. Dirty money is now clean.

Common Money Laundering Techniques

Smurfing (Structuring):
Breaking large amounts into smaller deposits to avoid $10,000 reporting thresholds. 50 deposits of $9,900 instead of one $500,000 deposit.

Shell companies:
Creating fake businesses with no real operations. Money moves through these companies to hide beneficial ownership.

Real estate:
Buying property with cash. Property ownership is legitimate. When sold, proceeds appear as investment returns.

Trade-based laundering:
Manipulating invoices. Ship $100,000 of goods, invoice them at $500,000. Pay "correct" invoice. Extra $400,000 is laundered money disguised as trade payment.

Cash-intensive businesses:
Restaurants, casinos, car washes. Mix illegal cash with real revenue. Report inflated earnings. Dirty money looks like business profit.

What Is Terrorism Financing?

Terrorism financing is providing funds to support terrorist activities. Different from money laundering in key ways:

Amounts are usually smaller
ML involves millions. TF might be $50,000 to buy weapons or fund an attack.

Funds can be from legitimate sources
Donations, salaries, family support. Not always criminal proceeds.

Goal is different
ML hides illegal origin. TF funds future illegal activity.

More international
TF often involves transfers to high-risk countries where terrorist groups operate.

Example: Supporter raises $30,000 through donations to a "charity" (really a front for a terrorist organization). Transfers money to intermediaries in multiple countries. Funds eventually reach the group, used to purchase weapons.

This is why AML and CTF are combined: the same customer due diligence and transaction monitoring catch both threats.

The AML/CTF Act 2006

Australia's Anti-Money Laundering and Counter-Terrorism Financing Act 2006 is the legal foundation. It establishes:

AUSTRAC as the regulator
Australian Transaction Reports and Analysis Centre. They're the cops of financial compliance.

Who must comply
"Reporting entities" providing "designated services" with a geographical link to Australia.

What you must do
Identify customers, verify their identity, screen for PEPs and sanctions, monitor transactions, report suspicious activity, keep records for 7 years.

Penalties for non-compliance
Up to $22.2 million per breach for corporations. AUSTRAC doesn't do warnings.

Tranche 2: The 2024 Amendments

November 2024: Parliament passed amendments expanding AML/CTF to "gatekeeper" professions. From July 1, 2026, these sectors are regulated:

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

If you're in one of these professions, July 1, 2026 is your deadline. After that date, you're subject to the same obligations as banks.

Why these sectors?

Because they're ML hotspots:

• Real estate: Easy to buy property with cash, sell through legitimate channels, clean money
• Lawyers: Trust accounts perfect for layering transactions, hiding beneficial ownership
• Accountants: Help create complex structures that obscure who really owns assets
• Trust/company services: Set up shell companies, nominee directors, hide true owners
• Precious metals/stones: High value, easy to transport, tradeable internationally

FATF (Financial Action Task Force—the global AML standard-setter) has been pushing Australia to regulate these sectors for years. Tranche 2 is Australia catching up.

What Is AUSTRAC?

AUSTRAC (Australian Transaction Reports and Analysis Centre) wears two hats:

Hat 1: Financial Intelligence Unit

They collect reports from businesses: Suspicious Matter Reports, Threshold Transaction Reports, International Funds Transfer Instructions. Analyze them. Share intelligence with AFP, state police, ATO, ASIC.

AUSTRAC's intelligence helps investigate:

• Money laundering
• Terrorism financing
• Tax evasion
• Fraud and cybercrime
• Organized crime
• Human trafficking

Hat 2: AML/CTF Regulator

They regulate reporting entities. Make sure you're compliant. Publish guidance, conduct audits, issue enforcement notices, impose penalties.

Recent enforcement actions:

• Westpac: $1.3 billion penalty (2020) for 23 million breaches
• Commonwealth Bank: $700 million penalty (2018) for thousands of late reports
• Crown Resorts: $450 million penalty (2023) for ML through casinos

AUSTRAC isn't theoretical. They enforce. Hard.

Your AML/CTF Obligations (If You're a Reporting Entity)

1. Enrol with AUSTRAC

Register online. Tell them what services you provide, where you operate, who your Compliance Officer is.

2. Develop an AML/CTF Program

Written document covering:

• Your ML/TF risk assessment
• How you'll identify and verify customers (CDD)
• How you'll monitor transactions
• How you'll report suspicious activity
• Employee training program
• Independent review schedule (every 3 years minimum)

Must be approved by senior management before you provide designated services.

3. Conduct Customer Due Diligence (CDD)

KYC (Know Your Customer): Verify individual identity using government-issued ID

KYB (Know Your Business): Verify business registration, directors, structure

Beneficial Ownership: Identify who ultimately owns or controls the entity (25%+ ownership threshold)

PEP Screening: Check if customer is a Politically Exposed Person (government officials, their family, associates)

Sanctions Screening: Check against DFAT Consolidated List, UN sanctions, other watchlists

Ongoing CDD: Monitor customers throughout relationship, update info when needed, reassess risk

Enhanced CDD: For high-risk customers (foreign PEPs, high-risk countries, suspicious patterns): verify source of funds, get senior management approval, monitor more closely

4. Monitor Transactions

Watch for:

• Unusual activity (inconsistent with customer profile)
• Large transactions (above normal patterns)
• Complex transactions (layered, hard to trace)
• Structuring (multiple just-under-threshold transactions)
• Red-flag countries (high-risk jurisdictions)

When you spot something, investigate. If it's suspicious, report it.

5. Report to AUSTRAC

Suspicious Matter Reports (SMR): When you form reasonable grounds to suspect ML/TF or other serious crimes. Due within 3 business days (24 hours for terrorism).

Threshold Transaction Reports (TTR): Cash transactions of $10,000+. Due within 10 business days.

International Funds Transfer Instructions (IFTI): Instructions to transfer money into/out of Australia. Reported electronically.

Annual Compliance Report: Summary of your compliance activities for the year. Due mid-March.

6. Keep Records for 7 Years

Everything:

• Identity verification documents
• Transaction records
• Risk assessments
• Reports you submitted
• Training records
• Your AML/CTF program and updates

When AUSTRAC audits (and they will), you need proof you've been compliant from day one.

Why AML/CTF Compliance Matters

Avoid massive penalties

Up to $22.2 million per breach for corporations. $4.44 million per breach for individuals. Plus criminal prosecution for serious failures.

Protect your business

Without AML controls, criminals use your services to launder money. When authorities discover it, your business is implicated. Reputation destroyed. Banking relationships severed.

Meet international standards

Australia is a FATF member. Strong AML compliance maintains Australia's credibility in global finance. Weak compliance gets countries grey-listed (restricted international banking access).

Support law enforcement

Your SMRs help catch drug traffickers, fraud rings, terrorist financiers. AUSTRAC's intelligence leads to arrests, asset seizures, and prevention of serious crimes.

The Bottom Line

AML/CTF isn't optional. It's law. And from July 1, 2026, it applies to professions that thought they were exempt.

If you're a lawyer, accountant, or real estate agent:

• Enrol with AUSTRAC now
• Develop your AML/CTF program
• Set up CDD processes
• Train your staff
• Get systems in place

"We'll figure it out in July 2026" is not a plan. AUSTRAC expects compliance from day one. No grace period. No excuses.

Platforms like ARCaml help by automating the heavy lifting: KYC verification, PEP screening, transaction monitoring, audit trails. But the responsibility is yours.

Because when AUSTRAC audits, and finds you didn't have proper controls, the penalties are severe. And very, very real.