Expect the trickle of information about the Federal Government’s new AML/CTF regime to become a flood in the coming months. What does it mean in a practical sense for you and your clients?

We have seen a rise in banks and other financial institutions willing to halt transactions, impede settlement and even refuse to give access to accounts if there are issues in legal documents. The new Anti-Money Laundering and Counterfeit -Terrorism Financing Legislation will bring this into even sharper focus.

This is due to rigid KYC requirements that banks and financial institutions employ in order to safeguard both the bank and clients from fraud, money laundering and terrorism funding.

The New Regime

Approximately 20 years ago the first AML/CTF legislation was introduced in Australia largely in response to the events of 9/11. It was driven by US demands that governments globally crack down on organised crime, fraud, tax avoidance and terrorism funding.

As a result, financial institutions became subject to a regime that required them to properly identify customers and report suspicious behaviour to a regulator (in Australia, this is AUSTRAC). Banks and other financial organisations have been required to positively identify their customers through a process known as “Know Your Customer” or KYC. All of us are now familiar with the need to produce 100 points of identification when opening a bank account for example.

The existing AML/CTF legislation was not extended to other professions or organisations when the AML/CTF legislation was first introduced. However, fast forward to the present and, from 1 July 2026, businesses like ours, along with your firms (among others) must comply with the AML/CTF regime.

Why Does This Matter?

Key dates:

31 March 2026: companies delivering trusts and companies, plus accounting and legal firms are legally required to register as a reporting entity with AUSTRAC.

1 July 2026: We are required to verify the identity of named clients and to identify the beneficial owners in all new legal structures established or re-structured by them. Affected businesses are also required to satisfy themselves on the sources of apparent wealth of their clients.

Because banks have been subject to these rules for some time, they are more vigilant in identifying defects in documents presented to them in the course of business. Many clients will already be familiar with bank demands to correct sometimes innocuous errors in identification documents (e.g. passports, driver’s licences) that do not exactly match the information supplied.

These might include:

• missing middle names and incorrect spelling of names or other information
• the use of anglicised versions of foreign names
• missing full stops or a hyphen from a hyphenated name
• a change of name due to marriage or other
• missing ACNs
• incorrect execution of deeds
• missing dates and trust deeds that are dated before the date of incorporation of a corporate trustee

Consequences

Failing to properly satisfy the AML/CTF requirements can lead to:

• delays in bank or trading account establishments
• freezing of bank accounts
• delays in settlement of critical transactions and a risk of failure of a transaction
• other delays and cost

Under the new AML/CTF regime, clients might also expect to encounter delays in establishing structures or experience adverse reports to AUSTRAC should the service provider identify potentially suspicious behaviour.

Where to from here?

Once the new AML/CTF legislation commences, we expect the incidence of defects in legal documents will be greatly reduced in new structures; however, older or existing structures and their constituent documents will continue to require correction to satisfy the new compliance regime.

Until now, although it is recommended, correction of defects has been largely optional (except where a third party requires it). The new regime will make it mandatory.

In most cases we can assist in the correction of any defective documentation by using a confirming deed. This is an instrument which acknowledges the errors and confirms the validity and effectiveness of the actions taken by a trustee or other parties, notwithstanding the defect.

What We Recommend

When we establish new structures, our team carefully checks the information you provided to us and makes any corrections at the source. We also carefully review re-structure requests to ensure an exact match to the source documentation.

From 1 July 2026, we will be required to verify identification of relevant parties by carrying out our own KYC procedures using the end user’s ID documents.

None of this, however, addresses the issue of defects in older documents. We recommend all practitioners, and your clients examine existing documents to ensure they are compliant well before the 1 July 2026 deadline. The time to act is now.

Please contact our Legal Services team if you need further guidance and changes to trust documents or ASIC details.

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We are here to help with any issues you identify in older documents, including preparing a Deed of Ratification if required. Please get in touch with our Legal Services team today.

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Speak to our Constitute team

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Email info@docscentre.com.au or phone 1800 799 666.

Disclaimer: This article is for general information purposes only and does not constitute legal, accounting or financial advice in any context or application. It is also not intended as financial advice. You should seek independent professional advice relevant to your specific situation before acting or relying on any of the information contained herein.