What happens if your business fails to comply with AML laws?

Failure to comply with Australia’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) laws can result in serious consequence, legally, operationally, financially and reputationally.

When does tranche 2 take effect?

Tranche 2 of Australia’s AML/CTF laws is set to become enforceable on July 1 2026. However, it is recommended by regulator AUSTRAC that impacted businesses take action to comply with AML/CTF laws before this date.

Who needs to comply with AML/CTF laws?

The first tranche of Australia’s AML/CTF legislation applied to banks and large financial institutions such as credit unions, money remitters, foreign exchange providers, superannuation funds, gambling services, securities and derivatives dealers. Business in these categories will remain under scrutiny for AML/CTF laws and will continue to be regulated.

Tranche 2 will expand the impacted businesses to Conveyancers, lawyers, accountants, real estate agents and precious metals/stones dealers (Jewelers). These changes are set to create an estimate 90 000 new reporting entities.

Find out more about how each industry is impacted by tranche 2 in our blog ‘Who must comply with AML/CTF Tranche 2 reforms?’

Consequences of failing to comply with AML/CTF laws

When businesses ignore or fall short of their AML/CTF obligations, AUSTRAC and other regulators can impose significant consequences.

• Financial Penalties: Civil penalties for breaches of AML/CTF can run into the billions. AUSTRAC has issued record fines against banks in recent years for failures in their AML/CTF obligations. There have also been fines issued to gambling and gaming businesses that were proportional to the incidents. All fines that are dealt are proportional to the breach, not the size of the business – meaning that fines can be financially devastating
• Reputational damage: Non-compliance can cause irreparable harm to brand and stakeholder trust. Once a business is publicly linked to money laundering or terrorism financing failures, it can lose clients, investors and future business opportunities overnight
• Increased regulatory scrutiny: Businesses that fail to comply can be subject to ongoing monitoring, audits and enforceable undertakings. This creates ongoing tiresome and financially burdening administrative tasks for a long time after the original breach
• Criminal liability: In the most serios cases, individuals such as the directors and senior executives can face criminal charges. This may result in personal fine or even imprisonment if deliberate or reckless non-compliance is proven

Key AML/CTF obligations businesses must meet

To avoid risk, businesses must implement and maintain an effective AML/CTF program. Some of the core obligations include:

• Customer due diligence: Verifying customer identity before providing services
• Transactions monitoring: Putting systems in place to detect suspicious or unusual activity
• Suspicious matter reporting: Promptly notifying AUSTRAC of suspicious transactions or attempted transactions
• Record keeping: Retaining relevant documents for at least seven years
• Independent reviews :Periodically testing your AML/CTF program for effectiveness
• Staff training: Ensuring employees understand AML/CTF risks and their reporting obligations

Why compliance should be a priority

Taking the view that compliance is a “box-ticking” exercise is all too common with some legislation. But with AML/CTF laws regulators expect proactive risk-based approaches. So, businesses that act early and with rigor will have a competitive advantage.

How to protect your business

For businesses that are preparing to meet their AML/CTF obligations for tranche 2 the following steps is a great place to begin preparing.

1. Conduct a risk assessment: Identify your products, services and customers that may pose a higher AML risk.
2.  Establish an AML/CTF action plan: Establish policies, procedures and controls tailored to your business.
3.  Train your staff: Ensure all employees understand how to spot and properly deal with suspicious activity.
4. Use technology: Automate customer verification, transaction monitoring and reporting wherever possible.
5. Stay up to date: AML/CTF laws and enforcement evolve, monitoring changes is critical.

Failing to comply with AML/CTF law is going to lead to hefty fines, significant reputational fallout and even criminal liability. Therefore, the consequences can threaten your organisation’s survival.

AUSTRAC is intensifying its enforcement and tranche 2 reforms expanding the net of businesses that are impacted, now is the time for businesses to get ahead.

Compliance isn’t just about avoiding penalties. It’s about protecting your business, your customers, and the broader community. Prepare for Tranche 2 AML/CTF reforms: update policies, train staff, improve checks, and strengthen risk management.

Start your AML/CTF compliance training with Safetrac today.