What’s Changing in 2026 Under the AML/CTF Reforms?

Australia is preparing to implement the most significant overhaul of its Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regime since the Act was introduced in 2006.

These reforms scheduled to commence from 2026 aim to simplify the framework, expand coverage to new sectors, and reduce unnecessary compliance burdens, particularly for financial advisers and small Australian Financial Services Licensees (AFSLs).

This article summarises the major changes and their implications for advisers, product issuers, platforms, and other reporting entities.

Note: Some reforms have already commenced. For example, the changes to the tipping-off offence took effect on 31 March 2025. Previously, the offence had very strict wording, meaning advisers could unintentionally breach the law simply by asking routine follow-up questions or delaying a transaction.

Under the new harm-based test, a disclosure is only an offence if it creates a real and discernible risk of harm—such as jeopardising an AUSTRAC investigation or allowing a suspect to avoid detection.

This aligns Australia with international practice and removes unnecessary friction in day-to-day client interactions, while still protecting the integrity of investigations.

When Will the Reforms Begin?

The reforms under the Amended AML/CTF Act will commence for existing reporting entities from 31 March 2026 and for newly regulated (Tranche 2) entities from 1 July 2026., with transitional arrangements expected to continue through 2026–2027. Further guidance, including detailed implementation dates, was published by AUSTRAC in late 2025, including:

• Updated Reforms Guidance (24 October 2025)
• Regulatory expectations and commencement timelines confirming obligations from 31 March 2026 (existing reporting entities) and 1 July 2026 (new Tranche 2 entities)
• The new AML/CTF Rules, tabled on 29 August 2025, outline transitional obligations and phased implementation requirements

1. A Simpler AML/CTF Program Structure

One of the most sweeping changes is the removal of the long-standing Part A / Part B AML/CTF Program structure.

What’s changing?

The reforms introduce an outcomes-focused, risk-based AML/CTF Program structure that replaces the prescriptive two-part (Part A/Part B) model.

What this means for reporting entities:

• No more artificial split between “risk” and “customer due diligence (CDD)”
• More streamlined documentation and governance
• Reduced duplication
• Easier implementation for smaller licensees
• Greater consistency with international FATF standards

For many businesses, particularly smaller AFSLs, this will create a more intuitive, practical approach to AML/CTF compliance.

Note: The concept of “designated business group” is being replaced by “reporting group”, with a lead entity responsible for AML/CTF compliance across the group

2. Reduced Obligations for Financial Advisers

If the licensee provides only the item 54 arranging service and no other designated or Tranche 2 services, the licensee may retain the adviser-exemption (special program). But if any additional designated services are provided, the full program obligations apply.

Key changes for advisers who only arrange designated services:

• No requirement for a standalone AML/CTF Program
• No governance obligations equivalent to today’s Part A
• Reduced CDD and monitoring requirements
• Focus shifts to following the product issuer’s KYC and onboarding processes
• Reporting obligations become primarily internal escalations, rather than direct reporting to AUSTRAC

This brings Australia closer into alignment with global practice, where financial advice and distribution are typically not treated as full AML-regulated activities.

3. Expanded Obligations for Platforms, Product Issuers & “Controllers”

For advisers who only arrange ‘designated services’ under item 54, the reforms reduce standalone program obligations; however, licencees should verify how the designated service definition translates in the amended law and regulator guidance.

Entities taking on more responsibility include:

• Wrap platforms
• Managed account operators
• Superannuation trustees
• Life insurers
• Fund managers
• Banks and payment service providers

New or expanded obligations for these “controller” entities:

• Full AML/CTF Program under the new unified model
• End-to-end Customer Due Diligence
• Ongoing monitoring obligations
• Suspicious Matter Reporting (SMRs)
• Clear accountability for AML/CTF risk management

Policy intent:

The entity offering the product (and holding the customer relationship) must own the AML/CTF risk.

4. Expansion to High-Risk Professional Sectors (Tranche 2)

The reforms also extend AML/CTF coverage to several sectors that pose elevated money-laundering risks but have historically been exempt.

Newly regulated professions (Tranche 2 entities):

• Lawyers
• Accountants
• Real estate agents
• Trust and company service providers

While this change does not directly alter AFSL obligations, it will shape the broader compliance environment and may influence adviser workflows and referral partners.

5. Streamlined Customer Due Diligence (CDD)

CDD is being modernised and simplified. Expect more flexibility and fewer prescriptive steps.

Key improvements include:

• More flexible and technology-neutral KYC options
• Stronger recognition of electronic verification
• Simplified requirements for low-risk clients
• Greater reliance on accredited third parties for CDD
• Less burdensome monitoring obligations
• Permitted electronic identification verification and removal of requirement to keep certified copies of ID documentation.

This shift signals a move toward a risk-based approach rather than a box-ticking exercise.

Entities should note that the new rules place greater reliance on accredited third-party CDD and electronic identity verification, and that the threshold transaction/reporting obligations remain unchanged until March 2029 for some categories.

6. Clearer Outsourcing and Reliance Rules

The reforms modernise Australia’s outsourcing and reliance framework to better reflect how financial service providers actually operate.

Key updates include:

• Clear rules for relying on third-party CDD
• Requirements for third-party onboarding arrangements
• Defined responsibilities when multiple parties share onboarding
• Updated conditions for using external identity service providers

These changes support the increasingly interconnected nature of advice groups, platforms, fintechs, and issuers.

7. Transitional Period & Phased Implementation

The Government has committed to a phased roll-out across 2026–2027, giving businesses time to transition systems, training, and documentation.

During transition, licensees will need to:

• Update AML/CTF Programs into the new single-program model
• Review and redesign CDD and onboarding processes
• Refresh staff training and competency
• Renegotiate responsibilities between advisers, licensees, issuers, and outsourced providers

Note that under the new regime, the regulator emphasises sustained progress rather than perfect compliance from day one. Entities should document implementation plans aligned with their ML/TF risk profile and maintain effective controls throughout the transition.

What Advisers and Small AFSLs Need to Know

Below is a simplified view of how the reforms will affect small licensees and advisory groups.

Further Reading

For more details on the reforms and current AML/CTF requirements, refer to the official AUSTRAC resources:

• Reforms Guidance (2025 update): https://www.austrac.gov.au/about-us/amlctf-reform/reforms-guidance
• Regulatory Expectations & Timelines 2025–26: https://www.austrac.gov.au/about-us/amlctf-reform/austrac-regulatory-expectations-and-priorities-2025-26
• New AML/CTF Rules (tabled August 2025): https://www.austrac.gov.au/about-us/amlctf-reform/new-amlctf-rules
• Overview of the AML/CTF Regime: https://www.austrac.gov.au/business/how-comply-and-report-guidance-and-resources/amlctf-overview

These links provide the most current, authoritative information available and are recommended for deeper technical review or compliance planning.

Frequently Asked Questions