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What money laundering and terrorism financing are, why professional services firms are targeted, and the legal obligations that now apply to you under AUSTRAC Tranche 2.
Money laundering is the process by which criminals disguise the illegal origins of funds so they appear to come from a legitimate source. It typically occurs in three stages: placement (introducing criminal proceeds into the financial system), layering (moving funds through multiple transactions to distance them from the source), and integration (reintroducing funds into the legitimate economy as apparently lawful assets).
Terrorism financing involves providing funds or financial services to support terrorist acts or organisations. Unlike money laundering, the funds may originate from legitimate sources — the criminality lies in their intended use.
AUSTRAC estimates A$5–10 billion is laundered through Australia annually. Professional services firms are consistently identified as high-risk channels because they handle trust funds, facilitate property transactions, and create corporate structures that can be exploited for layering and integration.
Professional services firms are attractive to money launderers for reasons inherent to the services they provide:
The Financial Action Task Force (FATF) designates lawyers, accountants, conveyancers, and real estate agents as Designated Non-Financial Businesses and Professions (DNFBPs). Australia's Tranche 2 reforms bring Australian DNFBPs into line with standards the UK, EU, Canada, and New Zealand implemented years ago.
The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act), as amended by the AML/CTF Amendment Act 2024, brings professional services firms into the regime as reporting entities from 1 July 2026.
Your obligations as a staff member include:
The maximum civil penalty under the AML/CTF Act is A$33 million per breach for a body corporate. Individual practitioners also face personal liability. Westpac was fined A$1.3 billion and CommBank A$700 million for systemic AML/CTF failures.
AML/CTF obligations are triggered when your firm provides a designated service under Schedule 1 of the AML/CTF Act. For law firms, designated services include receiving funds into trust for property or business transactions, acting as nominee director or trustee, and creating or managing legal persons on behalf of clients. For accounting firms, they include company or trust administration, business advisory in connection with acquisitions, and preparation of financial statements for designated transactions.
If you are unsure whether a specific matter involves a designated service, ask your AML/CTF Compliance Officer before proceeding. The obligations attach from the moment a designated service is provided.
Which of the following best describes the "layering" stage of money laundering?