AUSTRAC expects an AFS licensee using discretionary MDA arrangements to have full AML/CTF controls where advisers provide Item 3 services. This generally applies when advisers transact, manage, control, or direct client money or property, not when they only recommend or arrange access to an external MDA.
Expanded Answer
AUSTRAC’s position is that Item 54 concessions only apply where Item 54 is the only designated service provided. A licensee operating MDAs must assess whether adviser discretion creates an Item 3 designated service. Item 3 is relevant where the adviser or licensee manages, controls, disburses, or directs client money or property as part of executing transactions.
Specific AML/CTF arrangements should include
- a documented AML/CTF program,
- an appointed AML/CTF Compliance Officer,
- customer due diligence,
- ongoing customer due diligence,
- transaction monitoring,
- periodic review of customer information,
- personnel due diligence,
- role-based AML/CTF training,
- suspicious matter reporting processes,
- annual compliance reporting, and
- independent review at least every three years where required.
Key obligations:
- Appoint accountable AML/CTF governance roles and define board or senior management oversight.
- Monitor discretionary MDA transactions for unusual activity and changes in client risk.
- Document how each MDA service is classified as Item 54-only or Item 3.
The licensee should align AML/CTF controls with MDA permissions, adviser authorities, client mandates, and transaction workflows.
Why it matters
Discretionary MDA services increase AML/CTF exposure because the adviser or licensee is no longer only arranging a service. Poor classification can leave the licensee without required governance, monitoring, training, reporting, and review arrangements.
Unsure how this applies to you?
Get a clear answer in a 15-minute call with a compliance specialist. Book your call
Practical guidance
- Map each MDA process to Item 54-only activity or Item 3 discretionary control.
- Implement AML/CTF governance, customer monitoring, personnel due diligence, training, reporting, and independent review controls.
- Test adviser transaction authority against client mandates, AML/CTF risk ratings, and monitoring alerts.
Further reading
AML/CTF Financial Planners Australia