Introduction
The introduction of ‘Tranche 2’ reforms to Australia’s anti-money laundering (AML) and counter-terrorism financing (CTF) laws marks a significant regulatory shift for the accounting profession. Under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), Australian accountants will be classified as reporting entities from 1 July 2026, imposing strict obligations to help detect and deter money laundering and terrorism financing.
Failure to comply with these duties can result in severe consequences, as the Australian Transaction Reports and Analysis Centre (AUSTRAC) has a range of enforcement powers. A breach can lead to substantial civil penalties, criminal prosecution for serious non-compliance, and lasting reputational damage, making it crucial for every accountant and practice owner to understand the potential penalty for an AUSTRAC AML.
Understanding the AUSTRAC Civil Penalty Framework
Maximum AML Fines for Firms & Practitioners
For a serious breach of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), AUSTRAC can apply to the Federal Court of Australia for a civil penalty order. This can result in significant financial consequences for both accounting firms and individual practitioners.
The court may order you to pay a penalty to the Commonwealth based on a system of penalty units. These maximum civil penalties highlight the substantial financial risks of non-compliance and are typically reserved for:
- Systemic issues with an AML and CTF program
- Repeated failure to report suspicious matters
Based on the penalty unit value of $313, effective from 1 July 2023, the maximum fines are:
- For a body corporate: An accounting firm can face a penalty of up to 100,000 penalty units, which equates to a maximum fine of $31,300,000.
- For an individual: An individual accountant can be ordered to pay up to 20,000 penalty units, resulting in a maximum penalty of $6,260,000.
Daily Penalties for Failing to Enrol with AUSTRAC
A critical and distinct penalty applies to any accountant or firm providing designated services that fail to enrol with AUSTRAC. This is considered a strict liability offence under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth).
This specific breach underscores the regulator’s zero-tolerance policy for entities operating outside the AML framework. Importantly, penalties can accrue daily and accumulate rapidly, even without intent. The daily accruing civil penalties are:
- For a body corporate: A daily penalty of up to 60 penalty units, which amounts to $18,780 per day.
- For an individual: A daily penalty of up to 12 penalty units, which amounts to $3,756 per day.
Infringement Notices for Less Severe AML Breaches
For less severe instances of non-compliance, AUSTRAC has the option to issue an infringement notice rather than pursuing a civil penalty order in court. This enforcement action addresses specific breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) and serves as a more immediate penalty for administrative or procedural failings.
These notices can be issued for a range of compliance failures, including those related to:
- Know Your Customer (KYC) procedures
- Reporting obligations
- Record-keeping requirements
- Enrolling or registering with AUSTRAC
While infringement notices carry lower fines than court-ordered penalties, they remain a significant consequence of a breach and can be made public. For less severe breaches, these notices can result in fines of up to $42,000 for individuals and $210,000 for corporations per breach.
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Criminal Offences & Severe Penalties for Accountants
The Risk of Imprisonment for Structuring & Tipping Off
In addition to civil penalties under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), accountants face serious criminal offences that can lead to imprisonment. These offences are designed to target actions that deliberately undermine the AML/CTF regime, and two of the most significant risks for the profession are structuring and tipping off.
Furthermore, these actions are not treated as minor administrative errors but as deliberate attempts to obstruct justice, carrying severe consequences for any accountant found guilty:
| Offence (and Section) | Description | Maximum Penalty |
|---|---|---|
| Structuring (Section 142) | Intentionally conducting multiple transactions to avoid the $10,000 reporting threshold required for a Threshold Transaction Report (TTR). | 5 years’ imprisonment and a fine of 300 penalty units. |
| Tipping Off (Section 123) | Disclosing that a Suspicious Matter Report (SMR) has been or will be submitted, or that AUSTRAC is investigating, in a way that could prejudice an inquiry. | 2 years’ imprisonment and a fine of 120 penalty units. |
Financial Penalties Under the Criminal Code Act
Separate from the Anti-Money Laundering and Counter-Terrorism Financing Act 2006(Cth), the Criminal Code Act 1995 (Cth) contains broader money laundering offences that carry even more severe penalties. These laws apply when an accountant deals with money or property that is, or is at risk of becoming, the proceeds of crime.
The term “deal with” is defined broadly to include:
- receiving the property
- possessing the property
- concealing the property
- disposing of the property
Moreover, the penalties under the Criminal Code Act 1995 (Cth) depend on both the value of the money or property involved and the offender’s state of mind—whether knowledge, recklessness, or negligence. For a company:
- negligence can be established by demonstrating inadequate corporate management or supervision
- authorisation of an offence may be proven by a failure to maintain a corporate culture that required compliance
Ultimately, the most serious offences—those involving large sums and a high degree of knowledge—can result in life imprisonment.
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AUSTRAC’s Non-Monetary Enforcement Actions & Consequences
Understanding Remedial Directions & Enforceable Undertakings
Beyond seeking civil penalties, AUSTRAC has a range of enforcement tools designed to compel compliance from a reporting entity, such as an accounting practice. These non-monetary actions can impose significant operational burdens and costs.
AUSTRAC can issue a remedial direction, which is a formal-written instruction compelling an accountant or their firm to take specific actions to comply with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth). This is not a mere suggestion, but a legal directive to rectify identified weaknesses, such as submitting overdue reports or ensuring a breach does not happen again.
Alternatively, a reporting entity may offer an enforceable undertaking (EU) to the AUSTRAC CEO. This is a public and legally binding commitment to address compliance deficiencies through a detailed plan of action. The implications of an EU include:
| Implication of an EU | Description |
|---|---|
| Public Commitment | Forces a firm to publicly acknowledge compliance failures and commit to a comprehensive, often costly, remediation plan. |
| Legal Binding | Failure to adhere to the EU’s terms is a serious matter, and AUSTRAC can apply to the Federal Court of Australia for enforcement. |
| Recent Examples | AUSTRAC has accepted EUs from major entities like National Australia Bank and PayPal Australia to uplift their AML/CTF systems. |
The Impact of Registration Suspension & Reputational Damage
The consequences of an AML and CTF breach extend beyond direct regulatory actions to impact a firm’s very ability to operate and its standing in the professional community. In fact, the reputational damage from a public enforcement action can be more destructive to an accountant than a monetary penalty.
While accountants will “enrol” with AUSTRAC, the regulator has the power to refuse, suspend, or cancel the registration of other reporting entities like remittance service providers if they pose an unacceptable risk of AML or CTF. A similar failure by an accountant to meet their obligations could result in being barred from providing designated services, effectively halting a key part of their business.
The most profound consequence is often the erosion of client trust and professional reputation. AUSTRAC’s enforcement actions are typically made public, creating a permanent record of non-compliance that can have cascading effects:
| Consequence | Impact on the Practice |
|---|---|
| Loss of Clients | Existing clients may lose confidence and terminate their relationship with a sanctioned firm. |
| Difficulty Attracting Business | A damaged reputation makes it challenging to attract new clients, who can easily find public records of the enforcement action. |
| Professional Scrutiny | The firm may face heightened scrutiny from banks, insurers, and professional bodies like CPA Australia or Chartered Accountants ANZ. |
| Talent Retention | Attracting and retaining high-quality staff becomes difficult, as professionals may be reluctant to associate with a non-compliant practice. |
Learning from Past AUSTRAC Enforcement Actions
Case Study Insights from SkyCity Adelaide & Crown Resorts
The enforcement actions taken against major casino operators offer critical insights into AUSTRAC’s focus on systemic non-compliance and governance failures. These cases serve as a clear warning for all future reporting entities, including accounting practices, about the consequences of inadequate AML and CTF programs.
Recently, AUSTRAC has pursued significant civil penalty proceedings against major players in the gaming industry. These enforcement actions highlight the regulator’s intolerance for AML/CTF programs that are ineffective or exist only on paper.
Major casino penalties include:
| Entity | Penalty Details | Key Failings Cited by AUSTRAC |
|---|---|---|
| Crown Resorts | Ordered to pay a $450 million penalty in 2023. | Systemic non-compliance with AML laws, poor governance, and failures in risk management that left the business vulnerable to criminal exploitation. |
| SkyCity Adelaide | Ordered to pay a $67 million civil penalty in 2024. | Systemic failures in compliance, particularly concerning the management of high-risk customers and inadequate customer due diligence. |
For an accountant, the key takeaway from these cases is AUSTRAC’s emphasis on the operational effectiveness of a firm’s AML/CTF systems and controls. A breach is not considered an isolated incident but as evidence of deeper, systemic failings in corporate governance and risk assessment.
Case Study Lessons from Westpac & Commonwealth Bank
While the casino industry provides a clear warning about program failures, Australia’s banking sector offers stark lessons on the catastrophic scale penalties can reach when reporting obligations are breached millions of times. These landmark cases demonstrate AUSTRAC’s willingness to seek record-breaking civil penalties in the Federal Court of Australia for widespread non-compliance.
The penalties imposed on two of Australia’s largest banks underscore the immense financial risk of failing to monitor and report transactions accurately:
| Bank | Penalty Amount | Details of Breaches |
|---|---|---|
| Westpac | $1.3 billion (2020)—the largest civil penalty in Australian corporate history. | Over 23 million breaches, including failures to report international fund transfers, lack of due diligence on high-risk customers, and transactions linked to potential child exploitation. |
| Commonwealth Bank of Australia (CBA) | $700 million (2018) | Over 53,000 contraventions, primarily related to failures in risk assessment for “intelligent deposit machines” and subsequent failure to report thousands of large cash transactions. |
These cases illustrate that the number of individual contraventions can multiply into an astronomical final penalty. For an accounting practice, this highlights the critical importance of ensuring that all reporting systems are robust and that every transaction channel is subject to rigorous monitoring to detect and disrupt AML and CTF.
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Conclusion
The introduction of Tranche 2 reforms means Australian accountants face substantial penalties for any breach of their AML and CTF obligations, from multi-million dollar civil penalties and criminal prosecution to severe reputational damage. As demonstrated by AUSTRAC’s enforcement actions against other sectors, non-compliance is met with severe consequences, making proactive preparation essential before the laws take effect on 1 July 2026.
Navigating these complex new responsibilities requires specialised guidance to protect your accounting practice from the significant risks of a breach. Contact the experts at AML House today for trusted expertise on AML compliance for your accounting firm to ensure your accounting practice is AML/CTF compliant.
