FAAA seeks clarity from AUSTRAC amid conflicting legal advice

Mike Taylor

Managing Editor/Publisher, Financial Newswire

2 March 2026

The Financial Advice Association of Australia (FAAA) has written to AUSTRAC warning that the regulator has a time-critical need to clarify regulatory changes which would impose costly new obligations on small advice firms.

The FAAA has pointed to the failure of AUSTRAC to clarify the situation which will be faced by small advice businesses that include a Corporate Authorised Representative (CAR) licensed to provide financial product advice by an external, non-related licensee (AFSL).

The FAAA is worried that the new AUSTRAC approach is at odds with conventional operations under the Corporations Act and risks creating confusion for small advice businesses about their obligations.

The FAAA has told AUSTRAC a clear regulatory response on Reporting Groups is needed for AFSL holders, CARs, and muti-disciplinary firms.

The FAAA has also pointed to a lack of clarity around reliance agreements.

It said there is a lack of regulatory clarity on the intersection between the provision of financial product advice as an item 54 designated service, and the new tranche 2 designated service.

Further the FAAA says that advice firms which have sought their own legal advice have come up with conflicting interpretations.

“Given the lack of regulatory clarity, we know many of our members have sought their own legal advice and, based on the same facts, have received conflicting legal advice as to whether they are providing a tranche 2 professional service(s) under Table 6 of s5B of the amended Act, particularly in respect to item 3 designated service,” it said.

“This is now a time critical issue. Not being able to operate under the item 54 modified obligations would require significant changes to our members’ systems and processes – noting 95% of them operate as small businesses – if they are required to comply with all the new obligations. Determining what designated services a reporting entity provides is also necessary for members to conduct a compliant business ML/TF risk assessment, as required under the reforms,” the FAAA said.

Clear guidance from AUSTRAC on this critical outstanding issue is urgently needed so our members understand their obligations and can prepare to meet the requirements by 31 March 2026 for item 54 services only; and by 1 July 2026 for any entities that may also be deemed to provide a tranche 2 service(s).”