What is an AML/CTF Compliance Officer (AMLCO)?
An AML/CTF Compliance Officer is the designated person responsible for managing your business's AML/CTF compliance. This role carries significant responsibilities and specific requirements:
Requirements:
Must be a "fit and proper person"
Need not be an employee (can be external)
Cannot be domiciled outside Australia
Key Responsibilities:
Acting as the primary contact for AUSTRAC
Providing day-to-day oversight of your AML/CTF policy and procedures
Ensuring reports are submitted to AUSTRAC
Coordinating staff training
Conducting and updating risk assessments
Reporting to the Committee and senior management
Addressing AUSTRAC feedback
For Tranche 2 entities, this may be a senior partner, director, or dedicated compliance professional with appropriate authority and expertise.
What is Customer Due Diligence (CDD)?
Customer Due Diligence is the cornerstone of your AML/CTF obligations. It's the process of identifying and verifying your customer's identity and understanding the nature of your business relationship.
Standard CDD involves:
Collecting Information: Gathering customer details including full name, date of birth, address, and supporting documents (passport, driver's license)
Verifying Information: Confirming accuracy through reliable, independent sources
Beneficial Ownership Identification: For corporate customers, identifying individuals who ultimately own or control the entity:
Directors and company secretaries
Shareholders or partners with greater than 25% ownership
Trust beneficiaries, settlors, appointers, guardians, or protectors
Understanding complex ownership structures
Document Checks: Ensuring identification documents haven't expired (Australian passports expired within the preceding 2 years are acceptable)
Important: Your AML/CTF policy must include risk-based procedures for handling discrepancies, such as suspected forged documentation or identity mismatches.
What is Enhanced Customer Due Diligence (ECDD)?
Enhanced Customer Due Diligence applies heightened scrutiny when higher risks are present. ECDD is mandatory in certain circumstances and discretionary based on your risk assessment.
When ECDD is Required:
Customer is a foreign Politically Exposed Person (PEP)
Customer is classified as high risk in your risk assessment
Customer is from a high-risk jurisdiction
Complex ownership structures are involved
Enhanced Measures Include:
Additional checks and analysis of customer information
Senior management approval
More detailed source of funds verification
Understanding the purpose of transactions
More frequent reviews of the relationship
Enhanced ongoing monitoring
For complex legal structures, you must gather detailed information on ownership, control, and management structures, including constitutions, partnership agreements, or trust deeds.
What is a Customer Risk Assessment?
Customer risk assessment evaluates the money laundering and terrorism financing risk that providing a designated service to a specific customer may pose. Your AML/CTF policy must define how you assess and classify customers based on risk factors.
Risk Factors to Consider:
Customer occupation or business activity
Transaction patterns and amounts
Geographic connections (customer location, transaction destinations)
Ownership and control structures
Use of third parties or intermediaries
Whether the customer falls into higher-risk categories
Risk-Based Approach: The assessment determines the level of due diligence required - higher-risk customers receive enhanced scrutiny (ECDD), while lower-risk customers may receive standard measures (CDD). Your policy must document how these risk levels translate into specific procedures.
What are KYC and KYB?
Know Your Customer (KYC) applies to individual customers:
Collecting personal information (name, date of birth, address)
Verifying identity through reliable documents
Understanding the customer's background and intended use of services
Know Your Business (KYB) applies to corporate customers:
Entity identification and verification through company registration searches
Understanding corporate structure and ownership
Identifying beneficial owners (those with >25% ownership or control)
Verifying authorized representatives
Understanding how the entity is regulated
KYB is typically more complex due to layered ownership structures, multiple jurisdictions, and the need to understand ultimate beneficial ownership.
What are Politically Exposed Persons (PEPs)?
A Politically Exposed Person holds or has held a prominent public position that could potentially be abused for money laundering, corruption, or bribery.
Three Categories of PEPs:
Australian PEPs: Australian government officials
Foreign PEPs: Government officials from other countries
International Organization PEPs: Officials from international bodies (UN, WHO, etc.)
PEP Positions Include:
Heads of state or government
Senior politicians and government officials
Senior judicial or military officials
Senior executives of state enterprises
Important political party officials
PEP Family and Associates: Immediate family members and known close associates may also require enhanced scrutiny.
Your Obligations:
Implement procedures to identify PEPs (through databases or searches)
Foreign PEPs and high-risk domestic/international PEPs require ECDD
Obtain senior management approval before establishing or continuing relationships with high-risk PEPs
Apply enhanced ongoing monitoring
What are Sanctions and Sanctioned Individuals?
Sanctions are restrictive measures imposed by the Australian government or UN Security Council against specific individuals, entities, or countries. You are legally prohibited from dealing with sanctioned parties.
Your Obligations:
Screen customers against current sanctions lists maintained by the Department of Foreign Affairs and Trade (DFAT)
Screen beneficial owners and controllers
Conduct screening before establishing relationships and periodically thereafter
Immediately report any matches to AUSTRAC
Cease transactions with sanctioned parties
Sanctions lists are updated regularly - your screening procedures must account for these changes.
What is Proliferation Financing?
Proliferation financing involves providing funds or services that contribute to the development, production, or acquisition of weapons of mass destruction (WMD):
Nuclear weapons
Chemical weapons
Biological weapons
Their delivery systems and related materials
Your Obligations:
Implement systems to identify potential proliferation financing
Be alert to customers connected to countries subject to UN proliferation sanctions
Watch for customers in industries potentially linked to weapons development
Report suspicious activities to AUSTRAC
While proliferation financing is less common than money laundering or terrorism financing, the consequences of facilitating WMD development are severe.
What is Transaction Monitoring?
Transaction monitoring is the ongoing process of reviewing customer transactions to identify suspicious activity. Your AML/CTF policy must document your monitoring approach based on your business risk assessment.
Monitor For:
Complex transactions (unusual structures or patterns)
Unusual large transactions (relative to the customer's profile)
Unusual patterns of transactions (frequency, timing, amounts)
Transaction monitoring helps identify suspicious matters that must be reported to AUSTRAC. However, avoid seeking additional information that would "tip off" the customer if you suspect illegal activity.
Getting Started
With the July 1, 2026 compliance deadline, understanding these core concepts now will help you:
Develop appropriate policies and procedures
Implement effective systems and controls
Train your staff adequately
Begin collecting customer information gradually
Prepare for AUSTRAC enrollment
Next Steps:
Review AUSTRAC's guidance for your specific industry sector
Conduct a risk assessment of your business
Enrol with AUSTRAC from 31 March 2026
Begin developing your AML/CTF policy
Consider engaging RegTech solutions to support compliance
Start collecting customer information using a structured register
Disclaimer: This document provides general information and is not legal advice. Consult legal advisors and AUSTRAC guidance when developing your compliance framework.
For comprehensive guidance, visit: www.austrac.gov.au