FAAA warns AUSTRAC advisers, AFSLs need clarity

Mike Taylor

Managing Editor/Publisher, Financial Newswire

16 March 2026

AUSTRAC’s proposed transition to new Anti-Money Laundering and Counter Terrorism Laws arrangements are continuing to worry financial planning licensees with the Financial Advice Association of Australia (FAAA) arguing for more clarity on transitional arrangement.

The FAAA has written to AUSTRAC pointing the almost ubiquitous “reliance agreements” between licensees and product providers and the subsequent need for the regulator to be clear on its intentions and requirements.

The FAAA has further pointed out that financial advisers undertake most initial Consumer Due Diligence (CDD) tasks because they hold the relationship with the client.

The problem raised by the FAAA is that the draft changes proposed by AUSTRAC propose a three-year transitional period during which entities will need to adopt either the existing regime on CDD or move to the new regime.

“A core obligation under the reformed AML/CTF regime is that a reporting entity must undertake an ML/TF risk assessment, from which they must determine how to structure their AML/CTF policies to comply with their reformed CDD and customer risk assessment obligations,” the FAAA submission said.

“We and our members are concerned how these transitional arrangements will therefore work in practice and enable them to comply with their obligations.,” it said.

“For example, it is unclear how the ACIP obligations under the current AML/CTF Act can align with the reformed AML/CTF program and record keeping obligations for reporting entities under the reformed AML/CTF Act and Rules.

“Further, we are concerned that permitting reporting entities to operate under two regimes increases the risk of an inadvertent breach of their obligations,” the FAAA said.

“Clear guidance is needed from AUSTRAC to support the proposed amendments to ensure reporting entities understand how they can appropriately integrate the initial CDD transitional arrangements into their new ML/TF risk assessment and reformed AML/CTF policies, should they wish to continue relying on their existing ACIP procedures during the transitional period.”

The FAAA pointed out that reliance agreement are standard practice between AFSLs and financial product providers “as financial product providers rely on the initial CDD conducted by financial advisers on behalf of the AFSL to comply with their AML/CTF obligations”.

“This is because the financial adviser generally holds the relationship with the client and acts as the conduit between the client and financial product provider,” it said.

“The reliance arrangement is typically included as part of the product distribution agreement between the financial product provider and the AFSL.

“To ensure that a financial adviser, through their authorisation under the AFSL, can recommend appropriate financial products to their clients, determined by factors such as their client’s financial objectives and needs, AFSLs generally have reliance arrangements in place with a large number of financial product providers.

“We assume that where a reliance arrangement is entered into, both reporting entities, for example the AFSL and financial product provider, will need to conduct initial CDD under the same procedure for the reliance arrangement to be effective and compliant.

“However, the proposed transitional provisions for initial CDD may result in one reporting entity electing to transition to the new initial CDD obligations under s28 before the other reporting entity does during the transition period,” the FAAA said.