ASIC and AUSTRAC expect an AFS licensee using MDAs to have specific authorisations, supervision, governance, and AML/CTF controls in place. Full AML/CTF obligations generally apply when advisers exercise discretion to transact, manage, or control client money or property, rather than only recommending or arranging access to an MDA.
Expanded Answer
The regulatory position is that an AFS licensee remains responsible for the MDA services provided under its licence. ASIC expects the licensee to hold appropriate MDA authorisations, supervise advisers, maintain suitable compliance systems, and ensure MDA arrangements operate within the client mandate, investment program, and disclosure framework.
AUSTRAC obligations depend on the service provided. An adviser who only recommends an MDA or arranges access to an external MDA provider is generally performing an Item 54 activity. An adviser who exercises discretion to transact, manage, control, or disburse client money or property may trigger Item 3. Item 54-only concessions do not apply where another designated service is provided.
Key obligations:
- Maintain clear MDA authorisations, adviser permissions, client mandates, and investment program controls.
- Monitor discretionary transactions against mandate limits, risk profiles, and agreed portfolio settings.
- Implement AML/CTF governance, customer due diligence, transaction monitoring, training, independent review, and reporting where Item 3 applies.
Licensees should also ensure board or senior management oversight, breach escalation, adviser training, and documented surveillance are operating in practice.
Why it matters
MDA services increase regulatory scrutiny because discretion shifts decision-making from the client to the adviser or licensee. Weak supervision can create Corporations Act, ASIC, AML/CTF, breach reporting, and client detriment risks.
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Practical guidance
- Confirm your AFSL authorisations and adviser permissions cover the MDA services being provided.
- Test each MDA mandate, investment program, and transaction process against your supervision framework.
- Update AML/CTF controls where advisers exercise discretion over client money or property.
Further reading
Do I Really Need Discretion? MDA vs ROA Advice Models
How an Investment Policy Statement Makes Your MDA Defensible