AML/CTF Glossary
This Glossary has been prepared based on the future requirements of the AML/CTF for Tranche 2 entities that will commence 1 July 2026.
| Acronym | Definition | What it means |
| AML/CTF | Anti-money Laundering / Counter-Terrorism Financing | Commonly used to refer to anything in connection with AML/CTF |
| AML/CTF Act | Anti-Money Laundering and Counter-Terrorism Financing Act 2006 | The primary legislation for the AML/CTF regulatory regime, which objects include, but are not limited to, providing measures to detect, deter and disrupt money laundering, the financing of terrorism, and other serious financial crimes |
| AML/CTF Compliance Officer | The person who is responsible for ensuring that the business complies with its AML/CTF obligations | Responsibilities include overseeing and coordinating the day-to-day AML/CTF compliance procedures, communicating with AUSTRAC, and reporting to the board or senior management
Must met specific criteria to be eligible to be appointed, set out in the AML/CTF Act and AML/CTF Rules |
| AML/CTF Policies | All policies, procedures, systems and controls of the reporting entity | The content of the reporting entity’s AML/CTF Program (including all supplementary procedures), which set out how it will address and mitigate the risk of the reporting entity being used for ML/TF/PF activity, and comply with all obligations under the AML/CTF legislation |
| AML/CTF Program | Comprises the reporting entity’s ML/TF risk assessment and AML/CTF policies | A core compliance requirement of the AML/CTF Act
If sets out the framework to address and mitigate the reporting entity’s ML/TF/PF risks, and comply with its AML/CTF obligations |
| AML/CTF Rules | Anti-money Laundering/Counter-Terrorism Financing Rules | Supplements the AML/CTF Act by providing more detailed information and specific requirements in relation to the obligations set out in the AML/CTF Act |
| AUSTRAC | Australian Transaction Reports and Analysis Centre | Regulator of the AML/CTF regime in Australia– provides guidance and education for reporting entities to assist with complying with the AML/CTF legislation, and enforces compliance |
| AUSTRAC Compliance Report | Annual report that must be lodged with AUSTRAC between 1 January and 31 March each year | It includes questions about how the reporting entity has met its AML/CTF obligations for the previous calendar year and is lodged online through the AUSTRAC Online porta |
| Beneficial owner | Of a person* (other than an individual) means an individual who ultimately owns (either directly or indirectly) 25% or more of the person or controls (directly or indirectly) the person*refer to the definition of person |
Relevant when conducting customer due diligence checks, as beneficial owners of non-individual customers must be identified and verified before providing a designated service to a client |
| Business relationship | Means a relationship between a reporting entity and a customer involving the provision of a designated service or designated services that has, or could reasonably be expected to have, an element of duration | Relevant when conducting customer due diligence checks.
Also relevant to determining who is a pre-commencement customer |
| CDD | Customer Due Diligence | CDD is the process of appropriately identifying and verifying the identity of the customer before providing a designated service, and if relevant, conducting the same investigations in relation to any beneficial owners of the customer
It includes both initial and ongoing, as well as simplified and enhanced CDD requirements depending on the ML/TF risk the reporting entity has assigned to the customer |
| Customer | Who the designated service is provided to | Who the customer depends on the type of designated service being provided
For example, if a reporting entity that provides a service to assist a person to plan or execute the restructuring of a body corporate, the customer of the designated service is the person seeking the service If the person is an entity, then the customer is the entity and beneficial owners and directors of the company |
| CRA | Customer Risk Assessment | A procedure to assess the level of ML/TF risk posed by each customer
It considers several factors which include the type of customer, the nature of the designated services provided, the method of delivery and the jurisdiction risk |
| Designated service | Refers to the services listed in section 6 of the AML/CTF Act | The specific service provided that will trigger the requirement for a person to enrol with AUSTRAC as a reporting entity and comply with the requirements of the AML/CTF regime |
| FATF | Financial Action Task Force | International organisation whose objective is the combatting of ML/TF/PF, by creating internationally endorsed global standards against ML/TF/PF activity, and requiring FATF members to implement AML/CTF legislation which complies with those standards |
| Governing Body | The individual, or group of individuals, with primary responsibility for the governance and executive decisions of the reporting entity | Its responsibilities include overseeing and ensuring that the reporting entity complies with its AML/CTF policies in the AML/CTF Program, as well as with its AML/CTF obligations |
| Independent Review | An independent assessment of the design and content your AML/CTF program, as well as how you have implemented its policies and procedures
From 1 July 2026 it will be referred to as an independent evaluation |
It checks that the reporting entity is complying with its AML/CTF program and that it properly addresses its ML/TF risks, as well as complies with its AML/CTF obligations
From 1 July 2026 it must be completed at least every three years, depending on the nature size and complexity of your business |
| Item 54 | (Type of designated service)
In the capacity of holder of an Australian financial services (AFS) licence, making arrangements for a person to receive a designated service (other than a service covered by this item) |
AFS licensees who only provide item 54 designated services have modified obligations under the AML/CTF regime, which exempt them from the obligation to appoint an AML/CTF Compliance Officer or lodge an annual compliance report |
| KYC | Know Your Customer | KYC refers to information and processes that form part of the customer due diligence checks which identify and verify the identity of customers |
| Legal Arrangement | Means:
|
Relevant for defining some designated services, for example – assisting a person in the planning or execution of a transaction to buy, sell or transfer a body corporate or legal arrangement
Also relevant for KYC purposes, for example – identifying the beneficial owners of a legal arrangement |
| ML | Money Laundering | Refers to the process of moving or concealing the origin of illicit funds, making them appear legitimate
It involves placing, layering, and integrating these funds into the legitimate financial system to hide their illegal origins |
| ML/TF Risk Assessment | The risk assessment undertaken by the reporting entity that identifies and assesses the risks of money laundering, financing of terrorism, and proliferation financing that the reporting entity may reasonably face in providing its designated services | The process to identify, manage and mitigate the risk that the reporting entity could be used for ML/TF/PF activity when providing designated services
This requires the reporting entity to consider:
The reporting entity must assess the level of ML/TF/PF risk in relation to each designated service it provides, and, after taking into account the controls it has implemented, rank each as posing either a low, medium or high risk |
| ML/TF risk, of a customer | The risks of money laundering, financing of terrorism and proliferation financing that a reporting entity may reasonably face in providing its designated service, or designated services, to the customer | Necessary to assess the risk of ML/TF/PF posed by a customer when providing a designated service in order for the reporting entity to apply appropriate CDD, as well as any other measures required to minimise and manage the identified risk
If the reporting entity deems the ML/TF risk of a customer unacceptable, it can decide to decline the engagement and consider if it is appropriate to lodge an SMR with AUSTRAC |
| PEP | Politically Exposed Person | May be domestic, foreign or international organisation, PEP
The definition extends to include a ‘family member’ – which captures spouse, de facto or equivalent, child of the PEP and parent. Importantly, it captures roles beyond those directly involved in Parliament. |
| PF | Proliferation financing | Refers to the financing of the development, acquisition or spread of weapons of mass destruction, including nuclear, chemical and biological weapons, and related materials |
| Person | Can mean any of the following:
|
The term ‘person’ is used extensively within the AML/CTF regime and can refer to both reporting entities or those who designated services may be provided to |
| Pre-commencement customer | Refers to a customer which has an existing business relationship before the reporting entity was required to comply with the AML/CTF regime a specified date – for Tranche 2 reporting entities this is 1 July 2026 | Pre-commencement customers are subject to transitional arrangements for CDD purposes
Where an SMR obligation arises in relation to a pre-commencement customer, or there is a significant change to the nature of the business relationship between the reporting entity and the customer, that results in the ML/TF risk for the customer being assessed as medium or high, the client ceases to be a pre-commencement customer, and the transitional arrangements cease to apply |
| Reporting Entity | Means a:
|
A reporting entity is the individual, company, trust or partnership (or other arrangement, refer to definition of ‘person’) who must enrol with AUSTRAC as a reporting entity because it provides one or more designated services
Some reporting entities, such as Remittance Service providers and Virtual Asset Service providers, have additional AUSTRAC registration requirements |
| Reporting Group | A group of entities where at least one person in the group provides a designated service
The entities which are members of the reporting group share risk management and AML/CTF compliance arrangements |
Entities may form a reporting group and comply with a group AML/CTF Program
One member of the reporting group can undertake to comply, on behalf of all members of the group, with each member’s AML/CTF obligations |
| Senior Manager | Individual who makes, or participate in making, decisions that affect the whole, or a substantial part, of the business of the reporting entity | Responsible for approving the reporting entity’s AML/CTF Program and the ML/TF risk assessment, as well as any changes to the documents
Depending on the nature, scale and complexity of your business, you can appoint one or more senior manager |
| SMR | A reporting entity must submit an SMR if it forms a suspicion, on reasonable grounds that the customer is not who they claim to be, or the designated service relates to:
If the SMR relates to TF, then the reporting entity must lodge the SMR within 24 hours of forming the suspicion All other SMRs must be lodged within three business days of forming the suspicion |
The specific service provided that will trigger the requirement for a person to enrol with AUSTRAC as a reporting entity and comply with the requirements of the AML/CTF regime |
| TF | Terrorism Financing | Refers to the use of financial resources, either through legitimate or criminal means, to enable terrorist activities |
| Threshold Transaction | A physical cash transaction where the total amount of the transaction is at least AUD$10,000 | Where the physical transaction occurs as part of providing a designated service
Can include receiving or paying cash |
| TTR | Transaction Threshold Reporting | You must submit TTR within 10 business days via the AUSTRAC Online portal |