Foreign branches and subsidiaries (Reform)
Learn what your anti-money laundering and counter-terrorism financing (AML/CTF) obligations are if you provide designated services through a permanent establishment in a foreign country.
On this page
- Obligations for overseas services
- Conflicts with foreign laws
- Penalties for overseas breaches
- Related pages
Australian reporting entities providing designated services through a permanent establishment in a foreign country have different obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the Act) to those based in Australia.
This includes businesses that provide these services through foreign branches of an Australian reporting entity or subsidiaries of an Australian parent company.
Obligations for overseas services
This section refers to the Explanatory Memorandum paragraphs 70, 101 and 220.
The Act adopts a risk-based approach. It focuses on what you must achieve, instead of prescribing how to achieve it. This means foreign branches and subsidiaries can use systems and controls that suit foreign conditions, as long as they achieve the required outcomes.
Certain obligations only apply to designated services provided at a permanent establishment in Australia.
AML/CTF obligations comparison: Australian versus overseas services
The following table compares the AML/CTF obligations of Australian versus overseas services.
| Obligation | Applies to permanent establishment in Australia | Applies to permanent establishment in foreign country | Sections of the Act applicable to permanent establishment in foreign country |
|---|---|---|---|
| Enrolment and registration | Yes – must comply in full | Yes – must comply in full |
|
| ML/TF risk assessment | Yes – must comply in full |
Yes – limited obligations
Must undertake a risk assessment based on nature, size and complexity of business
Must keep risk assessment up to date and review or update at least once every 3 years |
|
| AML/CTF policies | Yes – must comply in full |
Yes – limited obligations
Must develop and maintain AML/CTF policies that achieve outcomes in s26F(1)
Must comply with AML/CTF policies |
|
| Governance | Yes – must comply in full |
Yes – must comply in full, with one exception:
|
|
| Customer due diligence (CDD) | Yes – must comply in full |
Yes – limited obligations
If the reporting entity achieves the high-level outcomes in the Act, this will often be sufficient under Australian law even if they haven’t followed the specific steps required under the Act
The reporting entity also:
|
|
| Reporting | Yes – must comply in full |
Yes – limited obligations
Must submit:
Not required to submit:
|
|
| Record keeping | Yes – must comply in full |
Yes – limited obligations
Must keep records relating to:
|
Additional obligations apply if the entity is:
|
| Civil penalties | Yes – applies to each provision of a designated service |
Yes – limited
Breaches of certain AML/CTF programs and CDD obligations are calculated daily, rather than every time a designated service is provided |
Penalties that are calculated daily:
|
Conflicts with foreign laws
This section refers to the Act section 236A and Explanatory Memorandum paragraphs 69, 159, 160, 161 and 162.
You must comply with these obligations overseas unless foreign laws prohibit it.
If a foreign branch or subsidiary can’t comply with certain AML/CTF program or CDD obligations, you may rely on a defence from certain civil penalties.
To use this defence, the reporting entity must:
- notify us of the conflict before any breach occurs, using the new form (this will become available before laws start on 31 March 2026)
- take reasonable steps to appropriately identify, assess, mitigate and manage any additional money laundering, terrorism financing or proliferation financing risks (we refer to these as ML/TF risks).
You’ll bear the legal burden of this defence. This means you’ll likely need to provide:
- evidence of the conflict, including evidence of the foreign law (such as cited legislation)
- an explanation of how it conflicts with Australian AML/CTF requirements.
Penalties for overseas breaches
This section refers to the Act sections 26E(3), 26E(4), 26F(9), 26F(10), 28(9), 28(10), 30(7) and 30(8).
Penalties for breaching certain Australian AML/CTF program and CDD obligations (outlined in the table above) differ depending on whether the breach is committed in Australia or a foreign country.
A foreign branch or subsidiary incurs a separate breach for each day the non-compliance occurs. However, a reporting entity providing a designated service in Australia incurs a separate breach for each designated service provided. This recognises that breaches overseas are likely also to attract penalties under local AML/CTF laws.
Example: Australian bank doesn’t have policies in place
An Australian bank doesn’t have AML/CTF policies to mitigate and manage its ML/TF risks for one day after they start providing designated services. During that day, it accepts 500 deposits through a permanent establishment in Australia.
The Australian branch commits 500 contraventions – one for each designated service provided.
The Australian bank also provides designated services at a permanent establishment in a foreign country. The foreign branch doesn’t have AML/CTF policies for one day after they start providing designated services, during which it accepts 500 deposits through the foreign branch.
The foreign branch commits one contravention – one for each day the breach occurs.
Related pages
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.