Managing risk and assessing foreign jurisdictions for reliance (Reform)

Learn how to decide if it’s appropriate to use reliance, including with a foreign entity.

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Any reliance you use must be appropriate to the money laundering, terrorism financing and proliferation financing risks (we refer to these as ML/TF risks) you face when providing designated services. 

This guidance will help you determine whether it’s appropriate to use reliance, particularly with foreign entities. 

Determining if reliance is appropriate

This section refers to the Rules sections 6–29 and 6–31.

If you use reliance, it must be appropriate to the ML/TF risks you may reasonably face in providing designated services, considering the:

  • nature, size and complexity of the third party’s business
  • products and services the third party provides
  • delivery channels the third party uses to provide services
  • kinds of customers they provide services to
  • countries where they operate or are a resident.

If the nature, size and complexity of the third party is very different to your own business, it’s important to carefully consider if it’s appropriate to rely on the third party. In these circumstances, a third party may not have experience implementing identification procedures suitable to your customers and the designated services you provide.

For example, if you propose to rely on a third party to carry out customer identification procedures in relation to a trust that’s part of a complex legal structure, we expect you to show why it’s appropriate to rely on a foreign small business that primarily provides services to individual customers.

Assessing the ML/TF risks of foreign entities

This section refers to the Rules sections 6–29 and 6–31.

You can rely on a third party regulated under laws in a foreign country that give effect to the Financial Action Task Force (FATF) recommendations relating to CDD and record keeping.

When determining if it’s appropriate to rely on a third party located in a foreign jurisdiction, you must consider the country they operate in or are a resident of. The identification procedures that the third party uses must be appropriate in the context of the ML/TF risk and serious crimes risk in that country.

It’s important that you have sufficient evidence, such as by keeping written records, to show that it’s appropriate to rely on that third party. It’s also important that you review the appropriateness of relying on the third party at regular intervals.

Factors to consider when assessing other countries 

To determine if it’s appropriate to rely on a foreign third party, it may be useful to consider:

  • geographical ML/TF risk factors
  • contextual factors, such as political stability, level of corruption, fraud activity in the country
  • evidence of relevant criticism of a country. For example, FATF public statements or United Nations Security Council or Australian autonomous sanctions in respect of the jurisdiction
  • how effectively the implementation standards the third party is subject to (including quality and effectiveness of supervision)
  • independent and public assessments of the country’s overall AML/CTF regime
  • the third party’s recent ML/TF risk assessments.

We expect you to document the process you used to determine whether it was appropriate to rely on the third party and your findings.

Determining if the laws of a foreign country give effect to the FATF recommendations for CDD and record keeping

All FATF members and members of FATF-style Regional Bodies (such as the Asia Pacific Group on Money Laundering) have agreed to implement the FATF global standards for combating ML/TF.

You can find information on how effectively these jurisdictions implement the FATF standards through:

Generally, it won’t be appropriate to rely on third parties subject to AML/CTF regulation in countries or regions that are:

  • currently assessed to be non-compliant with FATF Recommendation 10 (Customer Due Diligence), Recommendation 11 (Record Keeping) and/or Recommendation 12 (Politically Exposed Persons)
  • publicly listed by FATF as a high-risk jurisdiction or subject to increased monitoring because of concerns about CDD, record keeping and/or politically exposed persons.

These evaluations may include information to help you determine if it’s appropriate to rely on a third party based in that country. For example, an evaluation may indicate that some business sectors in a country or region are well regulated and implementing CDD and record keeping obligations effectively, while other business sectors aren’t.

Most countries and regions in the world aren’t low risk. This doesn’t necessarily mean that their AML/CTF legislation and the standards of CDD in those countries are inadequate.

However, the effectiveness of AML/CTF measures vary significantly, so it’s important to consider the risks associated with particular countries. 

To do this, you may also consider other resources such as:

This guidance sets out how we interpret the Act, along with associated Rules and regulations. Australian courts are ultimately responsible for interpreting these laws and determining if any provisions of these laws are contravened. 

The examples and scenarios in this guidance are meant to help explain our interpretation of these laws. They’re not exhaustive or meant to cover every possible scenario.

This guidance provides general information and isn't a substitute for legal advice. This guidance avoids legal language wherever possible and it might include generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases your particular circumstances must be taken into account when determining how the law applies to you.

Last updated: 16 Oct 2025
Page ID: 1320

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