March 24, 2025 • 21 mins
In this episode of The RegTech Pulse, host Ankit Sharma speaks with Konstantin Poptodorov, Market Planning Director at LexisNexis Risk Solutions, about Australia’s anti-money laundering (AML) and counter-terrorism financing (CTF) reform. They explore the key changes the legislation introduces including Tranche 2, their implications for the affected industries, and what businesses need to do to stay compliant. Tune in for expert insights on regulatory shifts and global AML trends.
DISCLAIMER: The information provided in this podcast is for informational purposes only and is not intended to and shall not be used as legal advice. The views and opinions expressed in this podcast are solely those of the speakers and do not necessarily reflect the views or positions of LexisNexis Risk Solutions. LexisNexis Risk Solutions does not warrant that the information provided in this podcast is accurate or error-free.
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Episode Transcript
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Speaker 1 (00:12):
Welcome to another episode of the REC Tech Pulse
podcast, powered by LexisNexisRisk Solutions, where industry
leaders discuss the latesttrends in financial compliance.
I'm your host, ankit Sharma,and today is a special edition.
We've got my friend Kon PopTodorov, who's the Market
Planning Director at LexisNexisRisk Solutions, based in
(00:32):
Australia, and he's joining meto discuss the recent AML CFD
reforms that happened inAustralia.
Really exciting times.
Welcome, kon.
How are you?
Speaker 2 (00:41):
Thank you, Ankit.
I'm great and it is good to behere.
Speaker 1 (00:44):
Lovely and I remember Kon our last conversation in
the series that we had forAustralia and New Zealand.
We did speak about some ofthese regulations which will be
knocking our door and looks likethey're around the corner.
They're about to, in the largercontext of history, change what
we will be expecting from aregulatory and reporting
standpoint.
Speaker 2 (01:08):
So I'm sure these are exciting times and something
that you're looking forward toAbsolutely so.
Last time we discussed the scamaccord, and today we're going
to be talking about slightlydifferent and quite significant
topic, and that's the upcomingAMR-CTF reform in Australia.
Speaker 1 (01:15):
Lovely.
So let's jump straight into it.
Colin, if I could, just for thebenefit of our listeners, if
you could give a brief overviewof the historical context of
these anti-money laundering andcounterterrorism financing
regulations in Australia andbasically what has led to these
reforms in the first place?
Speaker 2 (01:33):
Sure.
So MLCTF legislation it's arecent form because it is
changed.
It was introduced in Australiain 2006, following the financial
transaction reporting at 1988.
And it was enacted to combatmoney laundering and terrorism
financing by regulatingfinancial transactions and
ensuring that financialinstitutions and other regulated
(01:54):
entities implement measures todetect and prevent
projectivities.
So it has taken us about 20years to get to where we are and
, given the timeframe or thetimeline, it is clear that it is
time to make a change.
So back then, there were a mixof driving forces behind the
introducing the regulations, andthat includes international
(02:16):
pressure from the FinancialAction Task Force, which is also
the case today and generallyprotecting the integrity of the
Australian financial system andenhancing national security and
again, all these reasons remainvalid, also the case today and
generally protecting theintegrity of the Australian
financial system and enhancingnational security and again, all
these reasons remain valid.
We just needed to keep up withtimes and update the legislation
.
Speaker 1 (02:33):
And that's an interesting point, conrad.
So, of course, better late thannever.
It's taken us some time, but weare heading into the right
direction, as you said, which isvery exciting.
Can you share perhaps someexample, either use cases or
problems that led to the currentlegislation and the need for
the reforms?
Basically, and how does theFinancial Action Task Force
assessment play into all this,because you mentioned FATF being
(02:56):
a key component within this aswell?
Speaker 2 (02:58):
Great questions, ankit.
So maybe I'll start with thedrivers, or the international
drivers, for the reform.
And we live in a constantlyevolving and quite volatile
world today, and financialcrimes are constantly evolving
and the reform ensures that, ingeneral, australia's regime can
effectively deal and prevent anddisrupt those activities.
(03:21):
As we alluded earlier, thereform aligns Australia's law to
international standards set bythe FATF and that helps
Australia maintain itsreputation and effectiveness in
the global fight againstfinancial crime.
Conversely, had we notintroduced the reform, it could
have had quite negativeconsequences for our economy.
So it is about the right timeto do that Now.
(03:46):
There is another part to thereform and that is that serious
and organised crime can exploitlegitimate businesses and the
reform helps protect theAustralian economy from such
exploitation.
And, for example, when we we'regoing to talk about this
perhaps later when we talk aboutthe so-called trans-stitute
entities.
So these new professions thatwere brought under the MRCTF
regime.
We're going to talk about thisperhaps later when we talk about
the so-called transitorentities.
So these are these newprofessions that were brought
(04:07):
under the MRCTF regime.
The Attorney General, in theintroduction of the bill,
highlighted that, for example,real property makes up more than
65% of confiscated proceeds ofcrime in Australia, while most
(04:32):
of real estate transactions arelegitimate.
Speaker 1 (04:33):
This example highlights or it's just one of
the examples that highlights,why there is a need to introduce
such regulation, makes sense.
You mentioned the DNFPB segment, kind of coming within the new
regulatory and reportingframework, and we did touch upon
some of the initialfundamentals of this regulation
which is coming into force.
But if we could just take onestep forward and go into the
details of this concept, whatare the key changes being
introduced in the Amendment Actand, for the understanding of
(04:58):
our listeners, how do they aimto?
Basically simplify, strengthenand modernize the current
regulatory framework thatalready exists within Australia?
Speaker 2 (05:07):
So there is a two-part answer to your question
.
If you look at AML reform ingeneral, that affects all
reporting entities.
There are four or five specificchanges that are happening and
that they're going to helpsimplify, streamline AML-CTF
regulations for AML-CTF effortsand make them more effective.
(05:28):
Possibly the most important oneis risk-based approach.
So the new framework shiftsfrom a compliance-based approach
to a risk-based approach oroutcomes-based approach, which
is again quite important, andthis allows entities to tailor
their AML-CTF measures to thespecific risks they face.
Linked to this is also customerdue diligence.
Enhanced requirements forcustomer due diligence will be
(05:51):
introduced, and that includesalso more stringent verification
process and ongoing monitoring.
The new measures also are aimedto prevent tipping off,
ensuring that suspiciousactivity reports do not
inadvertently alert the subjectof investigations, or such
provisions are considered in thelegislation or they're part of
the legislation In terms ofvalue or in terms of transfers.
(06:15):
The changes to the reporting ofinternational transfer from
instruction to value transfersis something that is also being
introduced.
And then, finally, governanceand compliance, or the emphasis
of the role of senior managementand governing bodies in
overseeing MLCTF programs, andthat also includes the
appointment of dedicated MLCTFcompliance officers.
(06:38):
Now the second part, which ismore prominent and has received
a lot more attention due to, Isuppose, the scale of it, is the
introduction of the so-calledtrans-2 entities, with trans-1
being the existing, mostlyfinancial institutions, existing
reporting entities.
And the trans-2 professions arebroadly, or these are,
(07:01):
professions who form atouchpoint with increased
financial crime.
As to the nature of what theydo, that could be the value of
transactions, their professionalexpertise and or the
confidentiality of theirservices.
So these professions are realestate that includes agents,
buyers, as well as sellers andproperty developers, dealers in
(07:21):
precious stones, metals andproducts in addition to bullions
, which is subject of the recentregulations, lawyers and
conveyancers, accountants, trustand company service providers
and then eventually, after March2026, virtual asset service
providers.
So this is the summary ofchanges to the reform.
Of course, there is a lot moreto it that every business needs
(07:44):
to consider, but broadlyspeaking, this is, or, in a
nutshell, this is what thereform is about.
Speaker 1 (07:50):
That's great.
I mean you know reallyoptimistic steps by the
regulator and the enforcementagencies and the community
coming together in that, and youtalked about the various
segments and industries beingadded from a regulatory
expectation or reportingperspective, and at the start of
it we talked about how excitedthe market is to these in the
(08:11):
conversations that you may behaving locally in the market.
But why is this so significant,Con?
Because I've also been pickinga lot of chatter on social media
and otherwise around this.
But if you just help usunderstand the significance of
this or the impact that itbrings along with us and, more
importantly, what specificchanges will the institutions
need to do to implement thesenew regulations going forward?
Speaker 2 (08:32):
So, if we talk about a broader impact, what is in the
public eye, what alsoprofessionals are discussing, is
, of course, the scale or thesize of the pool that the
introduction of the tranche touris capturing.
We are looking at about atenfold increase to over 100,000
(08:52):
entities that are going to becovered by the regime once the
reform is through.
And this is going to bechallenging, obviously for the
affected organisations, but alsofrom an enforcement point of
view.
You can imagine that Austrakohave quite a bit of an extended
scope of what they do and quitea large number of entities to
oversee compared to what theyhave today.
(09:14):
And there are also models, ofcourse, that could help address
this.
For example, group reportingcould be one way to reduce the
effective number of entitiesthat are monitored.
But ultimately, again, thescale and the number of affected
entities is clearly expected tobe quite challenging.
Now, when we look at the impacton individual businesses, it
(09:34):
will result from having toreview and possibly change their
AML CTF progress.
So that applies to allregulated entities today, not
only to the new industries thatwill come under the regime.
For them, of course, that'sgoing to be a little bit harder
because they have to introducethose programs and set
everything up from the beginning, and there will be, of course,
(09:56):
operational and other costimplications, and they must not
be underestimated.
However, I think most listenerswould agree that the industries
that are facing this changewill be affected a lot more if
the changes weren't happening byincreasing financial crime, and
there is also cost of crime tothe business.
(10:17):
So we think that the long-termimpact of the changes will be
mitigated by the benefits forthe country and the society as a
whole.
Now, if we look at specificallythe trans-2 entities, most of
them are sole traders in smallcompanies, family businesses and
some with little or noawareness of what's coming their
(10:37):
way, and the new obligationswill mean significant changes
not only in the way they work.
They need to startunderstanding the obligations.
They need to implementcompliance measures.
For large organizations, theyneed to be cultural changes so
that they understand the reasonsof what they're being asked to
do.
And, of course, there will becost implications.
(10:57):
Now, again, money laundering iscosting legitimate entities
right now.
Money laundering is costinglegitimate entities right now,
and the benefits of reducingfinancial crime should outweigh
the investment, not only fromfinancial but also from ethical
standpoint.
We would like Australia tobecome a lot less attractive for
financial crime.
All businesses should benefitfrom the ability to control
(11:18):
these activities and preventcriminal activity from a
reputational point of view.
And finally, technology is alsothere to help, and choosing the
right technology solution thatwill assist with compliance will
also help manage how muchbusinesses spend in due course
or longer term on thoseactivities, since we have found
(11:38):
out in our own research thatbusinesses that invest in the
right technology ultimatelybenefit from lower spend on
compliance over time.
Speaker 1 (11:47):
So you've raised a couple of interesting points
there, right, con, and thank youfor going into the details.
I mean so one, of course, thetenfold increase in terms of the
volume of entities coming intothe purview.
And then, secondly, the typesof organizations and who may not
necessarily have the means orresources to ensure compliance
from day one, right?
So in the past we've doneresearch reports through
(12:10):
LexisNexis risk solutions aroundthe cost of compliance, which
was ballooning towards a $5.3billion Australian dollar amount
in 23.
And then the other aspect whichit brings along is on the
friction of a consumer doingtransaction or on the onboarding
side because of these enhancedkind of regulatory expectations,
right?
(12:30):
So from where you are seeingthis gone, what would be your
recommendation to complianceprofessionals or the new
transfer regulated entities tobasically be in that journey of
preparation before the rolloutof these reforms?
What should they do?
Speaker 2 (12:44):
Well, technology is certainly a part of that, and we
can talk about technologyseparately From an organisation
standpoint.
And this, by the way, shouldn'tbe taken as legal advice, or
the first thing that I'd adviseorganisations is to take
professional and legal advice totake them on that journey.
However, broadly speaking, whatorganisations need to do is
(13:07):
understand their new obligationsand, again, taking advice is
something that they think ismandatory in this case.
Conduct a gap analysis tounderstand what changes are
necessary to comply with therequirements.
Whether they're existingreporting entities that need to
change their MLCTF programs orthey will be newly regulated,
and particularly if they'renewly regulated, they need to
know what they will be facing.
Introduce or update policiesand procedures.
(13:29):
Again for existing reportingentities who, by the way, are
quite likely to already becompliant with many points, so
maybe just updating is requiredthere they need to revise their
policies to align particularlywith the new risk-based,
outcomes-oriented approach andensure that for all businesses
that those procedures aretailored to specific risks and
(13:50):
operations in the business.
And, again for newly regulatedentities, such processes need to
be introduced and built up fromthe ground Now.
Organizational changes may alsobe necessary, like, for example,
appointing an AMR CTFcompliance officer, our CTF
(14:11):
compliance officer operationallyintroducing more stringent
customer verification process inline with the new requirements
in order to meet the duediligence aspect of the
regulation Again, from operationor from people point of view.
Establish and strengthen theculture of compliance.
So that involves providingregular training to staff from
the new AML CTCTF obligationsand their role in compliance, so
(14:31):
that the organisation ensuresthat everyone is aware of the
changes, how to implement themeffectively and also what their
particular role is inmaintaining compliance and
combating financial crime.
So it is really important forpeople to understand why they're
doing what they are being askedto do in their roles.
And finally, engage withAUSTRAC.
Austrac is not only anenforcement body.
(14:52):
They also are there to guideentities through those changes
and participate in consultationsand also seek advice and
guidance from professionalorganizations as well as from
technology vendors.
Like ourselves, we have a lotof experience in providing
services to regulated entitiesworldwide and we can also
(15:13):
provide advice as to what aregood and wise choices in terms
of technology.
Speaker 1 (15:18):
Absolutely.
I mean, having a responsibleregtech partner who has an
understanding of global AMLstandards, as well as regional
and local nuances, is quitecritical whenever these new
changes and regulatory policiesare put in place.
But just so that we simplifythis, if you could just walk us
through the timeline for theimplementation of these reforms
(15:40):
and what are some of the keydeadlines that businesses need
to be aware of?
Speaker 2 (15:44):
This is quite topical .
The timeline is quite wide, butlet's not be deceived by it,
because changes take a lot oftime to implement, so businesses
need to start thinking andacting right now.
The legislation passed inParliament in November last year
, in 2024, and the first roundof rule consultations was
(16:07):
completed on the 14th ofFebruary.
There will be another round.
The rules, then, are expectedto be finalised in July 2025.
So this is where we all willhave a bit more information as
to how the legislation will beimplemented in practice.
Core guidance for reportingentities will be finalised in
August, and tranche two specificguidance will be released by
(16:27):
the end of the year.
So this is where these entitiescan look forward to a bit more
specific guidance for theirindustries, although they also
need to remember that they needto adopt a risk-based approach.
So don't expect to be takenstep-by-step in the process of
what exactly you need to do.
And then tranche-to transferentities can register with
(16:49):
Ostrac from March 2026 andcompliance is mandatory from
July 2026.
So we've got just under twoyears to go now.
However, again, it is importantthat we start these activities
today so that we are prepared atthe right time.
Speaker 1 (17:07):
Thank you for simplifying that.
That is really helpful, I'msure, for our listeners.
I mean, if we had to take astep back and maybe look at this
from the prism of regionalregulations within APAC or even
global regulations that you areaware of and I'm sure this is
brought up in your conversationswith regulators and industry
bodies within the region andglobally how are you comparing
(17:30):
this with, let's say, some ofthe AML directives in European
Union or the regulations thatyou may have noticed around
Monetary Authority of Singaporeor, you know, the Hong Kong
regulator?
And then I mean again, if weare to look at this from a
global view or a sub-regionalview, you know what are the
benefits of aligning Australia'sregulations with global
(17:51):
standards and does it impact andif it does, in what way into
the country's reputation andbusiness environment, which is
also important?
Speaker 2 (17:58):
Really really good question, ankit.
And that brings us also back tosome of the reasons why the
reform is going ahead inAustralia.
It will bring us in line withinternational jurisdictions
Australia is one of only fivesuch jurisdictions more than 200
that do not regulate tranche20s, for example and by
implementing those changes,we'll be joining other major
(18:21):
economies like Europe, the UK,regional economies like Hong
Kong and Singapore, as well asNew Zealand, which implemented
the tranche to coverage back in2018.
And the country will certainlybenefit from this as a whole
because, again, it will make ita lot less attractive place for
(18:41):
conducting criminal activities.
But also the reform is aimed toavoiding a negative fat death
assessment, which could havenegative consequences for our
economy, in worst case, impactour ability to trade
internationally.
So it is quite important to bealigned with all other developed
(19:02):
countries in our approach tocombating financial crime, and
this legislation brings us there.
Speaker 1 (19:08):
Thanks, Con.
I mean I've really found thisconversation meaningful and
insightful and it's always apleasure to talk to you, but
right towards the concludingpart of it, you mentioned
previously around thepreparedness on people, process
and technology.
So, within this framework, whatwould be your final thoughts or
key takeaway as advice to thelisteners of this podcast today?
Speaker 2 (19:35):
I think just to summarize what we've just
mentioned earlier be prepared,stay on the pulse, monitor all
announcements and changes,participate in the RORS
consultation, as that would helpshape the RORS implementation
of the legislation.
Look at revising and revampingyour AML-CTF programs if they
exist, or plan for creatingthose if they don't.
It is important to build inflexibility in all your
(19:58):
processes as well as anytechnology that you might be
looking to help you out there,because AML regulations change,
or all regulations change, andthey may change frequently and
especially in the areas of crimeprevention.
Again, we're dealing with aquite a dynamic environment, so
changes would always come andthey can come very quickly if we
(20:18):
think in recent or maybe not sorecent anymore sanction changes
, where we have to act veryquickly again, building
flexibility in your programs andprocesses and technology,
because that would help you keepup with changes and ultimately
even stay ahead and also watchthis space.
We're also going to releasefurther information assets.
(20:40):
We're looking forward todelivering a webinar and other
materials that could help youstay informed.
Speaker 1 (20:46):
Absolutely, as you said, con, watch this space.
But again, thank you so muchfor joining us today, con.
As I said, I found this reallyinsightful and valuable, as I'm
sure will our listeners.
It's always a pleasure to talkto you.
Thank you so much for your timetoday, thank, you Ankit.
Speaker 2 (21:00):
Thanks everyone for joining us.
Speaker 1 (21:03):
All right For our listeners.
If you want to learn more abouthow LexisNexis Risk Solutions
can help you comply with thesenew AML CTF reforms, please
visit our websiterisklexisnexiscom.
I'm your host, ankit.
Thank you for your time.
We'll be back with a newpodcast.
Thank you.
Welcome to another episode of the REC Tech Pulse
podcast, powered by LexisNexisRisk Solutions, where industry
leaders discuss the latesttrends in financial compliance.
I'm your host, ankit Sharma,and today is a special edition.
We've got my friend Kon PopTodorov, who's the Market
Planning Director at LexisNexisRisk Solutions, based in
(00:32):
Australia, and he's joining meto discuss the recent AML CFD
reforms that happened inAustralia.
Really exciting times.
Welcome, kon.
How are you?
Speaker 2 (00:41):
Thank you, Ankit.
I'm great and it is good to behere.
Speaker 1 (00:44):
Lovely and I remember Kon our last conversation in
the series that we had forAustralia and New Zealand.
We did speak about some ofthese regulations which will be
knocking our door and looks likethey're around the corner.
They're about to, in the largercontext of history, change what
we will be expecting from aregulatory and reporting
standpoint.
Speaker 2 (01:08):
So I'm sure these are exciting times and something
that you're looking forward toAbsolutely so.
Last time we discussed the scamaccord, and today we're going
to be talking about slightlydifferent and quite significant
topic, and that's the upcomingAMR-CTF reform in Australia.
Speaker 1 (01:15):
Lovely.
So let's jump straight into it.
Colin, if I could, just for thebenefit of our listeners, if
you could give a brief overviewof the historical context of
these anti-money laundering andcounterterrorism financing
regulations in Australia andbasically what has led to these
reforms in the first place?
Speaker 2 (01:33):
Sure.
So MLCTF legislation it's arecent form because it is
changed.
It was introduced in Australiain 2006, following the financial
transaction reporting at 1988.
And it was enacted to combatmoney laundering and terrorism
financing by regulatingfinancial transactions and
ensuring that financialinstitutions and other regulated
(01:54):
entities implement measures todetect and prevent
projectivities.
So it has taken us about 20years to get to where we are and
, given the timeframe or thetimeline, it is clear that it is
time to make a change.
So back then, there were a mixof driving forces behind the
introducing the regulations, andthat includes international
(02:16):
pressure from the FinancialAction Task Force, which is also
the case today and generallyprotecting the integrity of the
Australian financial system andenhancing national security and
again, all these reasons remainvalid, also the case today and
generally protecting theintegrity of the Australian
financial system and enhancingnational security and again, all
these reasons remain valid.
We just needed to keep up withtimes and update the legislation
.
Speaker 1 (02:33):
And that's an interesting point, conrad.
So, of course, better late thannever.
It's taken us some time, but weare heading into the right
direction, as you said, which isvery exciting.
Can you share perhaps someexample, either use cases or
problems that led to the currentlegislation and the need for
the reforms?
Basically, and how does theFinancial Action Task Force
assessment play into all this,because you mentioned FATF being
(02:56):
a key component within this aswell?
Speaker 2 (02:58):
Great questions, ankit.
So maybe I'll start with thedrivers, or the international
drivers, for the reform.
And we live in a constantlyevolving and quite volatile
world today, and financialcrimes are constantly evolving
and the reform ensures that, ingeneral, australia's regime can
effectively deal and prevent anddisrupt those activities.
(03:21):
As we alluded earlier, thereform aligns Australia's law to
international standards set bythe FATF and that helps
Australia maintain itsreputation and effectiveness in
the global fight againstfinancial crime.
Conversely, had we notintroduced the reform, it could
have had quite negativeconsequences for our economy.
So it is about the right timeto do that Now.
(03:46):
There is another part to thereform and that is that serious
and organised crime can exploitlegitimate businesses and the
reform helps protect theAustralian economy from such
exploitation.
And, for example, when we we'regoing to talk about this
perhaps later when we talk aboutthe so-called trans-stitute
entities.
So these new professions thatwere brought under the MRCTF
regime.
We're going to talk about thisperhaps later when we talk about
the so-called transitorentities.
So these are these newprofessions that were brought
(04:07):
under the MRCTF regime.
The Attorney General, in theintroduction of the bill,
highlighted that, for example,real property makes up more than
65% of confiscated proceeds ofcrime in Australia, while most
(04:32):
of real estate transactions arelegitimate.
Speaker 1 (04:33):
This example highlights or it's just one of
the examples that highlights,why there is a need to introduce
such regulation, makes sense.
You mentioned the DNFPB segment, kind of coming within the new
regulatory and reportingframework, and we did touch upon
some of the initialfundamentals of this regulation
which is coming into force.
But if we could just take onestep forward and go into the
details of this concept, whatare the key changes being
introduced in the Amendment Actand, for the understanding of
(04:58):
our listeners, how do they aimto?
Basically simplify, strengthenand modernize the current
regulatory framework thatalready exists within Australia?
Speaker 2 (05:07):
So there is a two-part answer to your question
.
If you look at AML reform ingeneral, that affects all
reporting entities.
There are four or five specificchanges that are happening and
that they're going to helpsimplify, streamline AML-CTF
regulations for AML-CTF effortsand make them more effective.
(05:28):
Possibly the most important oneis risk-based approach.
So the new framework shiftsfrom a compliance-based approach
to a risk-based approach oroutcomes-based approach, which
is again quite important, andthis allows entities to tailor
their AML-CTF measures to thespecific risks they face.
Linked to this is also customerdue diligence.
Enhanced requirements forcustomer due diligence will be
(05:51):
introduced, and that includesalso more stringent verification
process and ongoing monitoring.
The new measures also are aimedto prevent tipping off,
ensuring that suspiciousactivity reports do not
inadvertently alert the subjectof investigations, or such
provisions are considered in thelegislation or they're part of
the legislation In terms ofvalue or in terms of transfers.
(06:15):
The changes to the reporting ofinternational transfer from
instruction to value transfersis something that is also being
introduced.
And then, finally, governanceand compliance, or the emphasis
of the role of senior managementand governing bodies in
overseeing MLCTF programs, andthat also includes the
appointment of dedicated MLCTFcompliance officers.
(06:38):
Now the second part, which ismore prominent and has received
a lot more attention due to, Isuppose, the scale of it, is the
introduction of the so-calledtrans-2 entities, with trans-1
being the existing, mostlyfinancial institutions, existing
reporting entities.
And the trans-2 professions arebroadly, or these are,
(07:01):
professions who form atouchpoint with increased
financial crime.
As to the nature of what theydo, that could be the value of
transactions, their professionalexpertise and or the
confidentiality of theirservices.
So these professions are realestate that includes agents,
buyers, as well as sellers andproperty developers, dealers in
(07:21):
precious stones, metals andproducts in addition to bullions
, which is subject of the recentregulations, lawyers and
conveyancers, accountants, trustand company service providers
and then eventually, after March2026, virtual asset service
providers.
So this is the summary ofchanges to the reform.
Of course, there is a lot moreto it that every business needs
(07:44):
to consider, but broadlyspeaking, this is, or, in a
nutshell, this is what thereform is about.
Speaker 1 (07:50):
That's great.
I mean you know reallyoptimistic steps by the
regulator and the enforcementagencies and the community
coming together in that, and youtalked about the various
segments and industries beingadded from a regulatory
expectation or reportingperspective, and at the start of
it we talked about how excitedthe market is to these in the
(08:11):
conversations that you may behaving locally in the market.
But why is this so significant,Con?
Because I've also been pickinga lot of chatter on social media
and otherwise around this.
But if you just help usunderstand the significance of
this or the impact that itbrings along with us and, more
importantly, what specificchanges will the institutions
need to do to implement thesenew regulations going forward?
Speaker 2 (08:32):
So, if we talk about a broader impact, what is in the
public eye, what alsoprofessionals are discussing, is
, of course, the scale or thesize of the pool that the
introduction of the tranche touris capturing.
We are looking at about atenfold increase to over 100,000
(08:52):
entities that are going to becovered by the regime once the
reform is through.
And this is going to bechallenging, obviously for the
affected organisations, but alsofrom an enforcement point of
view.
You can imagine that Austrakohave quite a bit of an extended
scope of what they do and quitea large number of entities to
oversee compared to what theyhave today.
(09:14):
And there are also models, ofcourse, that could help address
this.
For example, group reportingcould be one way to reduce the
effective number of entitiesthat are monitored.
But ultimately, again, thescale and the number of affected
entities is clearly expected tobe quite challenging.
Now, when we look at the impacton individual businesses, it
(09:34):
will result from having toreview and possibly change their
AML CTF progress.
So that applies to allregulated entities today, not
only to the new industries thatwill come under the regime.
For them, of course, that'sgoing to be a little bit harder
because they have to introducethose programs and set
everything up from the beginning, and there will be, of course,
(09:56):
operational and other costimplications, and they must not
be underestimated.
However, I think most listenerswould agree that the industries
that are facing this changewill be affected a lot more if
the changes weren't happening byincreasing financial crime, and
there is also cost of crime tothe business.
(10:17):
So we think that the long-termimpact of the changes will be
mitigated by the benefits forthe country and the society as a
whole.
Now, if we look at specificallythe trans-2 entities, most of
them are sole traders in smallcompanies, family businesses and
some with little or noawareness of what's coming their
(10:37):
way, and the new obligationswill mean significant changes
not only in the way they work.
They need to startunderstanding the obligations.
They need to implementcompliance measures.
For large organizations, theyneed to be cultural changes so
that they understand the reasonsof what they're being asked to
do.
And, of course, there will becost implications.
(10:57):
Now, again, money laundering iscosting legitimate entities
right now.
Money laundering is costinglegitimate entities right now,
and the benefits of reducingfinancial crime should outweigh
the investment, not only fromfinancial but also from ethical
standpoint.
We would like Australia tobecome a lot less attractive for
financial crime.
All businesses should benefitfrom the ability to control
(11:18):
these activities and preventcriminal activity from a
reputational point of view.
And finally, technology is alsothere to help, and choosing the
right technology solution thatwill assist with compliance will
also help manage how muchbusinesses spend in due course
or longer term on thoseactivities, since we have found
(11:38):
out in our own research thatbusinesses that invest in the
right technology ultimatelybenefit from lower spend on
compliance over time.
Speaker 1 (11:47):
So you've raised a couple of interesting points
there, right, con, and thank youfor going into the details.
I mean so one, of course, thetenfold increase in terms of the
volume of entities coming intothe purview.
And then, secondly, the typesof organizations and who may not
necessarily have the means orresources to ensure compliance
from day one, right?
So in the past we've doneresearch reports through
(12:10):
LexisNexis risk solutions aroundthe cost of compliance, which
was ballooning towards a $5.3billion Australian dollar amount
in 23.
And then the other aspect whichit brings along is on the
friction of a consumer doingtransaction or on the onboarding
side because of these enhancedkind of regulatory expectations,
right?
(12:30):
So from where you are seeingthis gone, what would be your
recommendation to complianceprofessionals or the new
transfer regulated entities tobasically be in that journey of
preparation before the rolloutof these reforms?
What should they do?
Speaker 2 (12:44):
Well, technology is certainly a part of that, and we
can talk about technologyseparately From an organisation
standpoint.
And this, by the way, shouldn'tbe taken as legal advice, or
the first thing that I'd adviseorganisations is to take
professional and legal advice totake them on that journey.
However, broadly speaking, whatorganisations need to do is
(13:07):
understand their new obligationsand, again, taking advice is
something that they think ismandatory in this case.
Conduct a gap analysis tounderstand what changes are
necessary to comply with therequirements.
Whether they're existingreporting entities that need to
change their MLCTF programs orthey will be newly regulated,
and particularly if they'renewly regulated, they need to
know what they will be facing.
Introduce or update policiesand procedures.
(13:29):
Again for existing reportingentities who, by the way, are
quite likely to already becompliant with many points, so
maybe just updating is requiredthere they need to revise their
policies to align particularlywith the new risk-based,
outcomes-oriented approach andensure that for all businesses
that those procedures aretailored to specific risks and
(13:50):
operations in the business.
And, again for newly regulatedentities, such processes need to
be introduced and built up fromthe ground Now.
Organizational changes may alsobe necessary, like, for example,
appointing an AMR CTFcompliance officer, our CTF
(14:11):
compliance officer operationallyintroducing more stringent
customer verification process inline with the new requirements
in order to meet the duediligence aspect of the
regulation Again, from operationor from people point of view.
Establish and strengthen theculture of compliance.
So that involves providingregular training to staff from
the new AML CTCTF obligationsand their role in compliance, so
(14:31):
that the organisation ensuresthat everyone is aware of the
changes, how to implement themeffectively and also what their
particular role is inmaintaining compliance and
combating financial crime.
So it is really important forpeople to understand why they're
doing what they are being askedto do in their roles.
And finally, engage withAUSTRAC.
Austrac is not only anenforcement body.
(14:52):
They also are there to guideentities through those changes
and participate in consultationsand also seek advice and
guidance from professionalorganizations as well as from
technology vendors.
Like ourselves, we have a lotof experience in providing
services to regulated entitiesworldwide and we can also
(15:13):
provide advice as to what aregood and wise choices in terms
of technology.
Speaker 1 (15:18):
Absolutely.
I mean, having a responsibleregtech partner who has an
understanding of global AMLstandards, as well as regional
and local nuances, is quitecritical whenever these new
changes and regulatory policiesare put in place.
But just so that we simplifythis, if you could just walk us
through the timeline for theimplementation of these reforms
(15:40):
and what are some of the keydeadlines that businesses need
to be aware of?
Speaker 2 (15:44):
This is quite topical .
The timeline is quite wide, butlet's not be deceived by it,
because changes take a lot oftime to implement, so businesses
need to start thinking andacting right now.
The legislation passed inParliament in November last year
, in 2024, and the first roundof rule consultations was
(16:07):
completed on the 14th ofFebruary.
There will be another round.
The rules, then, are expectedto be finalised in July 2025.
So this is where we all willhave a bit more information as
to how the legislation will beimplemented in practice.
Core guidance for reportingentities will be finalised in
August, and tranche two specificguidance will be released by
(16:27):
the end of the year.
So this is where these entitiescan look forward to a bit more
specific guidance for theirindustries, although they also
need to remember that they needto adopt a risk-based approach.
So don't expect to be takenstep-by-step in the process of
what exactly you need to do.
And then tranche-to transferentities can register with
(16:49):
Ostrac from March 2026 andcompliance is mandatory from
July 2026.
So we've got just under twoyears to go now.
However, again, it is importantthat we start these activities
today so that we are prepared atthe right time.
Speaker 1 (17:07):
Thank you for simplifying that.
That is really helpful, I'msure, for our listeners.
I mean, if we had to take astep back and maybe look at this
from the prism of regionalregulations within APAC or even
global regulations that you areaware of and I'm sure this is
brought up in your conversationswith regulators and industry
bodies within the region andglobally how are you comparing
(17:30):
this with, let's say, some ofthe AML directives in European
Union or the regulations thatyou may have noticed around
Monetary Authority of Singaporeor, you know, the Hong Kong
regulator?
And then I mean again, if weare to look at this from a
global view or a sub-regionalview, you know what are the
benefits of aligning Australia'sregulations with global
(17:51):
standards and does it impact andif it does, in what way into
the country's reputation andbusiness environment, which is
also important?
Speaker 2 (17:58):
Really really good question, ankit.
And that brings us also back tosome of the reasons why the
reform is going ahead inAustralia.
It will bring us in line withinternational jurisdictions
Australia is one of only fivesuch jurisdictions more than 200
that do not regulate tranche20s, for example and by
implementing those changes,we'll be joining other major
(18:21):
economies like Europe, the UK,regional economies like Hong
Kong and Singapore, as well asNew Zealand, which implemented
the tranche to coverage back in2018.
And the country will certainlybenefit from this as a whole
because, again, it will make ita lot less attractive place for
(18:41):
conducting criminal activities.
But also the reform is aimed toavoiding a negative fat death
assessment, which could havenegative consequences for our
economy, in worst case, impactour ability to trade
internationally.
So it is quite important to bealigned with all other developed
(19:02):
countries in our approach tocombating financial crime, and
this legislation brings us there.
Speaker 1 (19:08):
Thanks, Con.
I mean I've really found thisconversation meaningful and
insightful and it's always apleasure to talk to you, but
right towards the concludingpart of it, you mentioned
previously around thepreparedness on people, process
and technology.
So, within this framework, whatwould be your final thoughts or
key takeaway as advice to thelisteners of this podcast today?
Speaker 2 (19:35):
I think just to summarize what we've just
mentioned earlier be prepared,stay on the pulse, monitor all
announcements and changes,participate in the RORS
consultation, as that would helpshape the RORS implementation
of the legislation.
Look at revising and revampingyour AML-CTF programs if they
exist, or plan for creatingthose if they don't.
It is important to build inflexibility in all your
(19:58):
processes as well as anytechnology that you might be
looking to help you out there,because AML regulations change,
or all regulations change, andthey may change frequently and
especially in the areas of crimeprevention.
Again, we're dealing with aquite a dynamic environment, so
changes would always come andthey can come very quickly if we
(20:18):
think in recent or maybe not sorecent anymore sanction changes
, where we have to act veryquickly again, building
flexibility in your programs andprocesses and technology,
because that would help you keepup with changes and ultimately
even stay ahead and also watchthis space.
We're also going to releasefurther information assets.
(20:40):
We're looking forward todelivering a webinar and other
materials that could help youstay informed.
Speaker 1 (20:46):
Absolutely, as you said, con, watch this space.
But again, thank you so muchfor joining us today, con.
As I said, I found this reallyinsightful and valuable, as I'm
sure will our listeners.
It's always a pleasure to talkto you.
Thank you so much for your timetoday, thank, you Ankit.
Speaker 2 (21:00):
Thanks everyone for joining us.
Speaker 1 (21:03):
All right For our listeners.
If you want to learn more abouthow LexisNexis Risk Solutions
can help you comply with thesenew AML CTF reforms, please
visit our websiterisklexisnexiscom.
I'm your host, ankit.
Thank you for your time.
We'll be back with a newpodcast.
Thank you.
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