Fasten your seat belts – a wave of transformative changes is soon to surge through the financial advice sector. The catalyst? Australia’s impending modifications to the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) legislation.
The AML/CTF reforms, including changes to Item 54, will come into effect 31 March 2026 and aim to strengthen Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) framework.
While advice firms have, until now, found comfort in the sanctuary of the item 54 exemption, this protective cover has experienced a transformation.
Additionally, accountants, trust and company service providers, and other professional service providers form part of the ‘tranche 2 entities’ which are now captured by the AML/ CTF regime.
Designated Business Groups are changing too, and multi-disciplinary professional services businesses will need to consider whether they are captured and how they will report under these reforms.
Below, we analyse the impacts of these reforms on advice businesses which are already enrolled with AUSTRAC, and how multi-disciplinary professional services firms (comprised of both advice and accounting businesses) may be impacted by these changes.
Changes to the Item 54 designated service
| Previous position | New position | Impact |
| A holder of an Australian financial services licence that arranges for a person to receive a designated service (designated service item 54) must adopt and maintain a ‘special anti-money laundering and counter-terrorism financing program’.
Colloquially referred to as a ‘Part B AML/CTF Program’, the special anti-money laundering and counter-terrorism financing program only needs to set out the applicable customer identification procedures.
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A holder of an Australian financial services licence which arranges for a person to receive a designated service (designated service item 54) must develop and maintain policies, procedures, systems and controls (AML/CTF policies) that:
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| A holder of an Australian financial services licence that provides designated service item 54 does not have to undertake an ML/TF risk assessment.
There is no obligation to assess proliferation financing (PF) risk. |
All reporting entities must undertake an initial ML/TF/PF risk assessment.
PF refers to the provision of financial services, or dealing with funds or other assets, in contravention of an Australian law aimed at combating weapons of mass destruction proliferation.
Exposure to proliferation financing risk will vary significantly between sectors and businesses. The AML/CTF regime recognises that many businesses do not have material proliferation financing exposure.
Businesses that reasonably assess that their proliferation financing exposure may be mitigated by existing measures which address money laundering or terrorism financing risks, or that the proliferation financing risk is immaterial, will not be required to implement additional policies, procedures, systems or controls. |
Entities will need to undertake a ML/TF/PF risk assessment appropriate to the nature, size and complexity of their business, having regard to:
· the kinds of designated services provided; · the kinds of customers to which their services are provided; · the delivery channels used by the licensee; · the countries in which the licensee deals in providing its designated services; and · guidance from AUSTRAC. Whilst an entity’s exposure to proliferation financing risk is low, this will need to be acknowledged within the documentation. |
Reporting Group considerations
| Previous position | New position | Impact |
| A ‘Designated Business Group’ is a group of two or more reporting entities who join together to share the administration of some or all of their anti-money laundering and counter-terrorism financing obligations (such as an AML/CTF program or record-keeping).
Each member of the designated business group must be: · related to each other member of the group; or · providing a designated service pursuant to a joint venture agreement, to which each member of the group is a party
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A ‘Reporting Group’ replaces the previous ‘Designated Business Group’ concept and can consist of entities (including non-reporting entities) with shared risk management and compliance arrangements pursuant to a group AML/CTF Policy.
Members of a Reporting Group need not be related companies and can be formed by entities under common “control”.
“Control” is defined broadly to include holding more than half the issued share capital of the entity, or having the capacity to: · control the cast of more than half of the maximum number of votes; or · control the composition of the board or governing body; or · determine the outcome of decisions about the body corporate’s financial and operating policies, taking into account: o the practical influence that can be exerted (rather than the rights that can be enforced); and o any practice or pattern of behaviour affecting the company’s financial or operating policies (whether or not it involves a breach of an agreement or a breach of trust) Importantly, under the new regime, if a reporting entity is a member of a Reporting Group, and that reporting entity is not the lead entity of the Reporting Group, the reporting entity must comply with the AML/CTF Policies of the lead entity of the Reporting Group. |
Depending on its corporate business structure, multi-disciplinary professional services firms may also wish to investigate the feasibility of forming a ‘Reporting Group’.
If a reporting entity that only provides designated service item 54 (i.e. an advice licensee) wanted to form a Reporting Group as part of a multi-disciplinary business that includes accounting firms, the advice licensee would need to comply with a higher standard.
The concept of ‘lead entity’ of a Reporting Group is subject to additional consultation, as the new AML/CTF rules have not been finalised. Industry stakeholders have recommended that: · Flexibility to choose an appropriate lead entity of the Reporting Group should be factored into the regulations; or · The new AML/CTF Rules should make it clear that the item 54 exemptions continue to apply to an AFSL entity within a Reporting Group where the AFSL entity provides item 54 designated services only.
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Timing
- The AML/CTF Rules will be finalised in July or August 2025, at which time public consultation will begin on draft core guidance.
- Core guidance will be finalised in September 2025, with sector-specific guidance for tranche 2 entities to be finalised in January 2026.
- Changes to the obligations for current reporting entities (such as ASFL holders) come into effect 31 March 2026.
- AML/CTF obligations commence for tranche 2 entities on 1 July 2026.
How can you prepare?
We recommend all multi-disciplinary professional services groups should conduct an AML/CTF mapping exercise to identify which (if any) designated services are being provided, or may future be provided, by the entities within the group.
If you would like assistance with your mapping exercise or have questions about the AML/CTF reforms, please contact:
Simon Carrodus at simon.carrodus@hamiltonlocke.com.au or 0402 905 252
Jessica Smith at jessica.smith@hamiltonlocke.com.au or 0448 318 480
