Introduction
The Australian anti-money laundering and counter-terrorism financing (AML/CTF) landscape is undergoing a significant transformation, largely driven by the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth), which introduces Reporting Groups to replace the existing Designated Business Group (DBG) structure from 31 March 2026. This transition is of paramount importance for accounting firms, as it fundamentally reshapes their approach to AML/CTF compliance, the management of their reporting obligations, and their overall engagement with AUSTRAC’s regulatory framework.
For accounting firms, understanding the new Reporting Group framework, which categorises businesses based on money laundering and terrorism financing (ML/TF) risk and the principle of common ‘control’, is crucial for maintaining robust AML/CTF compliance and effective risk management. This guide offers essential information on these significant changes, detailing what AUSTRAC’s Reporting Groups are, how accounting firms will be classified within this new structure, and the resulting impacts on their obligations and strategic responses.
What Are AUSTRAC’s New Reporting Groups for Your Accounting Firm
Defining Reporting Groups & Their Purpose for Designated Business Compliance
AUSTRAC’s Reporting Groups are newly introduced structures under the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth) that replace the previous DBGs from 31 March 2026. A Reporting Group forms automatically when a ‘business group’ exists, defined as a collection of entities under common ‘control’, and at least one member provides a ‘designated service’ as outlined in the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth).
The concept of ‘control’ is broad and varies by entity type:
- For corporate bodies, it resembles the related companies test under the Corporations Act 2001 (Cth), where entities share a common parent company
- For non-corporate entities such as partnerships or trusts, control is based on the ability to influence financial and operational policies through practical influence and established practices, not just legal rights
This inclusive definition reflects the realities of many accounting firms operating as partnerships or networks.
The purpose of Reporting Groups is to align Australia’s AML/CTF framework with international standards set by the Financial Action Task Force (FATF). They aim to enhance information sharing and risk management across related entities by allowing broader inclusion of both reporting and certain non-reporting entities under a single group.
This approach facilitates coordination in several key areas:
- Customer due diligence (CDD)
- Transaction monitoring
- Reporting obligations
As a result, this reduces duplication and improves the detection of complex ML/TF risks.
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Key Differences From Designated Business Groups DBGs
The transition from DBGs to Reporting Groups introduces several key differences that impact accounting firms’ compliance frameworks:
| Aspect | Designated Business Groups (DBGs) | Reporting Groups |
|---|---|---|
| Basis of Formation | Primarily formed based on related corporate relationships, often requiring formal designation. | Form automatically based on the broader concept of common ‘control’, including corporate structures, partnerships, trusts, and franchises. |
| Formation Process | Required a formal designation process with written agreements between members. | Form automatically if control and designated service criteria are met, requiring proactive assessment by firms. |
| Membership Scope | Included only reporting entities. | Allows the inclusion of related non-reporting entities within categories specified by AUSTRAC Rules for broader information sharing. |
| Central Responsibility & Liability | Lacked a formally designated entity responsible for overall compliance and liability. | Introduces a mandatory Lead Entity role with central responsibility and shared liability for compliance breaches by any member. |
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The Role & Responsibilities of the Lead Entity in a Reporting Group
Within a Reporting Group, the Lead Entity plays a pivotal role in coordinating and overseeing AML/CTF compliance across all members. The Lead Entity must be nominated and meet eligibility requirements outlined in the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument (No. 1) 2007 (Cth).
Typical eligibility requirements for a Lead Entity include:
- Being a resident Australian entity
- Either providing a designated service itself or being a company registered under the Corporations Act 2001 (Cth)
- Exercising control over all other reporting entity members within the group that provide designated services, as defined in section 11 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)
The Lead Entity’s core responsibilities include:
- Developing, documenting, and maintaining a single, group-wide AML/CTF program that applies uniformly to all reporting entities within the group
- Conducting a comprehensive group-wide ML/TF risk assessment to identify and evaluate risks specific to the group’s operations
- Establishing and implementing group-wide AML/CTF policies, procedures, systems, and controls to mitigate identified ML/TF risks effectively
- Taking reasonable steps to ensure all reporting entity members comply with the group-wide AML/CTF program and fulfil their reporting obligations, including lodging transaction reports and suspicious matter reports
A critical feature of the Reporting Group framework is the shared liability model. If any reporting entity member breaches AML/CTF obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) or associated Rules, both the contravening member and the Lead Entity can be held legally responsible. This shared liability underscores the importance of robust oversight and compliance mechanisms by the Lead Entity to manage risks across the group effectively.
To illustrate, consider a hypothetical scenario where an accounting firm operating multiple offices forms a Reporting Group. The Lead Entity, typically the head office, implements a centralised AML/CTF program and risk assessment. If one office fails to report suspicious transactions adequately, both that office and the Lead Entity may face regulatory consequences, incentivising strong group-wide compliance governance.
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How AUSTRAC Classifies Your Accounting Firm into Reporting Groups & Risk Tiers
Criteria for Forming an AUSTRAC Reporting Group for Your Business or Organisation
An AUSTRAC Reporting Group is formed automatically if a ‘business group’ includes at least one member that provides a ‘designated service’. A business group exists when one person, which can be an individual, company, trust, or partnership, ‘controls’ every other person within that group. This framework is established under the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth).
The concept of ‘control’ is crucial and is defined in section 11 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth). The definition varies based on the type of entity:
| Entity Type | Definition of ‘Control’ |
|---|---|
| Bodies Corporate | Control is determined if potential group members share a common parent company, similar to the related companies test under the Corporations Act 2001 (Cth). |
| Non-Corporate Entities (e.g., Trusts, Partnerships) | Control exists if a person can control the entity’s board or governing body, or determine the outcomes of its financial and operating policy decisions through practical influence and established practices. |
If these ‘control’ criteria are met within a business group providing a designated service, a Reporting Group automatically forms from 31 March 2026. This automatic formation requires accounting firms to proactively assess their structures to understand their obligations.
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Factors Influencing Your Accounting Firm’s AUSTRAC Risk Classification
AUSTRAC will assess your accounting firm’s ML/TF risk profile using several key criteria. This classification into a lower or higher-risk group is based on a multifaceted assessment of your business activities and compliance maturity, influencing the intensity of AUSTRAC’s supervision.
The primary factors AUSTRAC considers include:
| Factor Category | Specific Considerations & Indicators |
|---|---|
| Size, Nature, & Complexity | The volume and value of transactions (TTRs), types of designated services offered (e.g., complex structuring), and the overall scale and geographic reach of the business. |
| Client Risk Profile | The composition of the client base, including the presence of Politically Exposed Persons (PEPs), high-net-worth individuals, cash-intensive businesses, or clients in high-risk jurisdictions. |
| Compliance History & Reporting Quality | The quality, timeliness, and proactivity of Suspicious Matter Reports (SMRs), and the outcomes of previous AUSTRAC compliance assessments or enforcement actions. |
Understanding these factors is crucial for reporting entities to manage their risk profile and prepare for AUSTRAC’s supervisory approach. A robust AML/CTF program is essential for all firms that provide designated services.
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Impact of Reporting Group Status & Risk Tier on Your Accounting Firm’s Obligations
Changes to Reporting Obligations Frequency & Detail for Transaction Reports
When AUSTRAC classifies an accounting firm into a higher-risk group, reporting obligations become more stringent. These heightened expectations affect several aspects of compliance:
| Area of Obligation | Impact on Higher-Risk Firms |
|---|---|
| Suspicious Matter Reports (SMRs) | Increased expectation for proactive reporting on complex or emerging threats, not just obvious suspicious activities. |
| Reporting Timeframes | Deadlines can be compressed, requiring reporting of terrorism financing suspicions within 24 hours (compared to three days for other matters). |
| Transaction Reports (TTRs) | May be required to lodge more frequent or detailed TTRs. |
| Report Types & Data Fields | May face the introduction of new report types (e.g., IVTS reports for virtual assets) and requirements for additional data fields (e.g., beneficial ownership details). |
As a result, reporting entities in higher-risk categories must prepare for increased scrutiny and more demanding reporting schedules to maintain compliance.
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Increased Compliance Burden & Operational Expenses for Your Business
The operational implications for accounting firms designated as higher-risk or part of complex Reporting Groups are significant and multifaceted. These implications directly impact both compliance burden and operational expenses in several key areas:
| Area of Impact | Description & Examples |
|---|---|
| System Upgrades | Investment in technology such as sophisticated transaction monitoring systems, automated risk-scoring engines, and case management platforms. Potential costs can range from $50,000 to $150,000 AUD. |
| Increased Skilled Manpower | Requirement for additional compliance personnel or dedicated AML officers to manage AUSTRAC scrutiny, handle information requests, conduct thorough CDD, and oversee the AML/CTF program. |
| Greater Governance Overhead | Increased time commitment from senior leadership for AML/CTF governance, regular risk assessment reviews, and direct engagement with AUSTRAC. |
| AUSTRAC Levies | A higher-risk profile and greater supervisory intensity can result in tangibly higher annual levies, directly impacting profitability. |
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Mitigation Strategies for Your Accounting Firm to Manage Reporting Group Compliance & Risk
Strengthening Customer Due Diligence & Transaction Monitoring Systems
Accounting firms can proactively manage their risk profile and compliance obligations by strengthening their CDD processes. This involves implementing a thorough risk-based approach to CDD and ensuring enhanced due diligence (EDD) procedures for high-risk clients.
Effective CDD implementation includes:
- Deploying AI-driven identity verification for high-risk clients
- Ensuring daily screening against relevant sanctions lists, such as those provided by the Department of Foreign Affairs and Trade (DFAT)
Robust transaction monitoring systems are also crucial for detecting and managing potential ML/TF risks. When developing these systems, firms should:
- Invest in technology capable of effectively monitoring transactions against client profiles and known risk typologies
- Tailor monitoring rules to the firm’s specific risks rather than relying on generic defaults
- Deploy anomaly detection algorithms to identify unusual patterns, such as rapid fund movements or other suspicious activities
Additionally, conducting pre-commencement reviews of existing clients for “significant change” triggers, like new PEP associations, before new obligations take effect is a prudent preparatory step.
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Enhancing anti-money laundering and counter-terrorism financing Governance Training & Reporting Quality for Reporting Entities
Strong AML/CTF governance, including active oversight from the board and senior management, is fundamental for effective compliance. Reporting entities should ensure that their AML/CTF program receives attention at the highest levels of the organisation.
To build a robust compliance culture, firms should focus on:
- Providing comprehensive and regular training for all relevant staff
- Conducting quarterly workshops for partners on aspects like “tipping off” reforms
- Enabling staff to write clear, detailed, and actionable SMRs
Improving the quality of SMRs is a key mitigation strategy. A culture of proactive reporting, where staff are encouraged and equipped to identify and report suspicious matters effectively, serves as a strong defence against compliance failures.
Furthermore, commissioning an annual independent review of the AML/CTF program by an external expert can provide an objective assessment of its effectiveness and identify potential gaps before they are flagged by AUSTRAC. Actively engaging with AUSTRAC’s guidance, educational resources, and Frequently Asked Questions (FAQs) will also help ensure your firm fully understands regulatory expectations.
Strategic Choices for Your Firm’s AML Compliance Model within a Reporting Group
The AUSTRAC Reporting Group structure naturally lends itself to a centralised AML compliance model, where a Lead Entity often manages AML/CTF responsibilities centrally. This approach can offer greater control and consistency in applying policies across the business group.
When deciding on the most effective operational model for group compliance, accounting firms should assess:
- Their specific organisational structure—whether it’s a multi-office partnership, a network, or a corporate group
- Available financial and human resources for AML compliance
- The firm’s willingness to accept compliance risk
While a centralised model, aligning with the Reporting Group concept, can leverage specialised compliance knowledge and potentially reduce aggregate costs, it also places significant shared liability on the Lead Entity. Therefore, a careful evaluation of these elements is necessary to choose a model that best fits the firm’s context and ensures effective management of its AML/CTF obligations.
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Timeline & Preparing Your Accounting Firm for AUSTRAC Reporting Group Changes
Key AUSTRAC Deadlines for Reporting Group Implementation & Tranche 2 Obligations
Accounting firms need to be aware of several critical dates as AUSTRAC implements the new Reporting Group framework. The timeline includes:
| Date | Key Milestone or Deadline |
|---|---|
| 31 March 2026 | Existing DBGs automatically transition to Reporting Groups. New rules for virtual asset service reporting begin. |
| 1 July 2026 | Tranche 2 obligations under the AML/CTF regime commence, affecting accounting firms providing designated services. |
| 29 July 2026 | Deadline for enrolment with AUSTRAC for Tranche 2 obligations. |
| 31 December 2026 | Potential deadline for independent evaluations of AML/CTF programs. |
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Suggested Milestones for Your Accounting Firm’s Transition Plan to Register with AUSTRAC
To effectively prepare for these changes and ensure timely compliance, accounting firms should consider a structured transition plan with clear milestones. This proactive approach will help your business navigate the new regulatory landscape.
Key milestones for your firm’s transition plan should include:
| Milestone | Recommended Action |
|---|---|
| Conduct Internal Assessments | Review your firm’s current structure to determine if it will form a Reporting Group under the new ‘control’ definitions. |
| Engage Leadership | Brief senior partners and leadership early on the implications, including Lead Entity responsibilities and shared liability. |
| Perform Detailed ML/TF Risk Assessment | Undertake a comprehensive risk assessment specific to your firm’s clients, services, delivery channels, and geographical exposure. |
| Conduct a Gap Analysis | Compare your current AML/CTF programs and practices against the new requirements to identify areas for enhancement. |
| Develop & Execute Remediation Roadmap | Create a detailed, budgeted plan to address deficiencies, which may include system upgrades and new policy development. |
| Implement Staff Training | Ensure all relevant staff receive comprehensive training on new obligations, the Reporting Group structure, and updated internal policies. |
| Continuously Monitor & Refine | Establish processes for ongoing monitoring of your AML/CTF program’s effectiveness and refine as needed. |
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Conclusion
AUSTRAC’s new Reporting Group framework, effective from 31 March 2026, fundamentally reshapes AML/CTF compliance for accounting firms, replacing DBGs and introducing concepts like ‘control’ for group formation and pivotal Lead Entity responsibilities. Understanding these changes, from risk classification and its impact on obligations to implementing robust mitigation strategies and adhering to the transition timeline, is crucial for all reporting entities to ensure compliance and effectively manage financial crime risks.
Effectively navigating these comprehensive AML/CTF reforms requires diligent preparation and expert guidance. Contact AML House today for trusted expertise and specialised legal consulting services, tailored to help your accounting firm strategically manage the transition to Reporting Groups and meet your new compliance obligations, turning regulatory challenges into opportunities for enhanced resilience.
