How AUSTRAC’s New Reporting Group Framework Affects Your Accounting Firm

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.

Key Differences From Designated Business Groups DBGs

The transition from DBGs to Reporting Groups introduces several key differences that impact accounting firms’ compliance frameworks:

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.

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:

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.

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:

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.

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:

As a result, reporting entities in higher-risk categories must prepare for increased scrutiny and more demanding reporting schedules to maintain compliance.

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:

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.

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.

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:

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:

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.

Frequently Asked Questions