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In bringing virtual asset service providers (VASPs) under its anti-money laundering and counter-terrorism financing (AML/CTF) framework, Australia aims to align with global standards and simplify financial regulation.
The proposed reforms, which follow a two-stage public consultation process, have three objectives: combatting crime, improving Financial Action Task Force (FATF) compliance and minimising regulatory burden.
The new rules, published on August 29, 2025, supplement the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 and extend the regime to higher-risk services, known as tranche 2 entities.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) said tranche 2 entities will be subject to the new rules from July 1, 2026.
The reforms, which have altered the AML/CTF framework to a more outcomes-based approach, are intended to modernise the regime and bring it into line with international standards set by FATF.
Currently, businesses internationally recognised as providing high‑risk services are not regulated as part of the AML/CTF regime, leaving them vulnerable to exploitation by criminals.
In a statement, the government said that without reform the AML/CTF regime would become progressively less effective and more wasteful over time, while regulated entities would be subject to an overly complex regime.
“The costs of inaction are significant, and would likely increase over time with Australia falling further behind continually strengthened international standards set by the FATF, heightening the risk of substantial reputational and economic damage and increasing criminal threats to Australia’s financial systems and professional services,” it said.
AUSTRAC said that although the rules are designed to be enduring, they are also subject to an ongoing process of development, refinement and review. This involves scrutiny from stakeholders including the FATF, Australian government bodies and law enforcement agencies.
Regime overhaul
The underpinning legislation, the Anti-Money-Laundering and Counter-Terrorism-Financing Amendment Act, was passed in 2024 and overhauled the country’s AML/CTF regime.
It introduced new risk assessment obligations and stressed their importance in maintaining a financial crime prevention framework.
Under the legislation, AML reporting entities are subject to customer due diligence (CDD) requirements that go beyond previous measures, requiring reporting entities to identify and verify the identity of their customers and certain persons associated with their customers.
In addition, enhanced customer due diligence is required if certain conditions are met.
These include high money laundering/terrorist financing (ML/TF) risk – for example, where a designated service is provided to a customer or beneficial owner who is a politically exposed person or a reporting entity wants to transact with a party in a prescribed foreign country (currently Iran and North Korea).
The drive for regulatory simplification mirrors similar moves in the Australian Securities and Investments Commission (ASIC).
In its corporate plan for 2025–26, ASIC stated that it will continue to explore how it can administer the law in the areas it regulates more efficiently and effectively.
Regulatory clampdown
The new rules were published soon after AUSTRAC challenged Binance on its business practices in Australia.
As covered by Vixio, the regulator ordered Binance to appoint an external auditor due to “serious concerns” about its local AML/CTF controls.
The scrutiny of the world’s largest exchange reflects broader reforms aimed at closing gaps in virtual asset regulation and tackling money laundering risks in the digital asset sector.
