Obligations for lead entities and members (Reform)

There are other obligations for lead entities and members. Find out what they are and how you can make sure you’re complying with your anti-money laundering and counter-terrorism financing (AML/CTF) obligations.

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Lead entity

This section refers to the Act section 26F(5)(a), (6)(a–c) and 26U, the Rules section 5–16 and Explanatory Memorandum 56.

As a lead entity, you must have AML/CTF policies dealing with the appropriate information sharing between members of your reporting group. This is to support:

  • conducting customer due diligence (CDD)
  • appropriately identifying, assessing, mitigating and managing money laundering, terrorism financing and proliferation financing risks (we refer to these as ML/TF risks) that each member may reasonably face in providing designated services
  • compliance with AML/CTF obligations by reporting entity members of your reporting group.

An important function of reporting groups is that they allow members of your group to share sensitive information with each other.

For example, in some circumstances, you may share information about suspicious matter reports (SMRs). You would share this information with other members of the group for ML/TF risk management. 

This is only if group-wide policies are in place to make sure the information shared: 

  • is appropriately used
  • remains confidential
  • isn’t disclosed in a way that would lead to tipping off.

The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the Act) defines a lead entity as being a reporting entity. This applies even if your business doesn’t usually provide designated services. As the lead entity, you take on the responsibilities of your members together with them. 

This includes, planning, starting or already providing designated services. 

As a lead entity you must enrol with us. You must also make sure that:

  • your policies identify which members can discharge obligations for other members, and that records are readily accessible by them. For example, allocating a member within the group to submit an annual AML/CTF compliance report for the reporting group
  • you keep records about membership of the reporting group up to date, including recording changes of membership
  • when developing your AML/CTF program, you consider the nature, size and complexity of each other reporting entity in the group. This includes your own business
  • your governing body is exercising ongoing oversight across the reporting group
  • your AML/CTF compliance officer supports your governing body to fulfil its oversight obligations.

You must also take reasonable steps to make sure that your members are:

  • identifying, assessing, managing and mitigating their risks
  • complying with their AML/CTF obligations.

For example, you’re a lead entity that’s a small franchisor and your reporting group includes 10 franchisees. Your AML/CTF program must reflect the full operational and risk profile of each franchisee in the reporting group and not just your business as franchisor. 

This will help you to: 

  • identify, assess, mitigate and manage the group-wide risks
  • exercise effective oversight across all members of the group.

Members

This section refers to the Act sections 26G(2) and 236B(3).

If you’re a member of a reporting group and you’re a reporting entity, you must comply with:

  • your own AML/CTF policies
  • the policies of the lead entity of the reporting group that apply to you.

Your lead entity is also considered to provide the same designated service in the same way as you, if: 

  • you're part of a reporting group
  • you plan, start or already provide a designated service.

For example: 

  • your lead entity is taken to provide the same designated services as all reporting entity members
  • any permanent establishment of a member is taken to be a permanent establishment of your lead entity
  • if your members receive information from us identifying or assessing the risk associated with their designated services then your lead entity is also taken to have received that information.

This means that your lead entity must mitigate and manage all ML/TF risks associated with the designated services provided by your reporting group.

Liability for breaches

This section refers to the Act section 236B(6).

You must make sure that you’re meeting your AML/CTF obligations as either a lead entity or a member of your reporting group. 

Failure to meet your AML/CTF obligations can amount to a contravention of the Act and result in civil penalties. For example, substantial fines as well as other potential enforcement actions. 

If you breach a civil penalty provision as a member, bothyou and your lead entity are considered to have breached a requirement of the Act.

Learn more about consequences of not complying.

Discharging AML/CTF obligations

This section refers to the Act section 236B(5).

If you’re a reporting entity, any member in your group can discharge your AML/CTF obligations for you. For example, even non-reporting entity members can perform AML/CTF obligations for you. This facilitates centralised AML/CTF compliance functions and sharing of resources within the group. 

The reporting entity whose obligation is being performed by another member remains responsible for ensuring compliance with the obligation.

For example, different members in your group can discharge different obligations on behalf of other members, such as:

If members don’t have the resources, your lead entity could discharge all obligations on behalf of all members.

Discharging obligations by other members

This section refers to the Act sections 26F(4)(d–e) and (6)(b) and the Rules sections 2–3 and 2-4(2–3).

There are some conditions when a member in your reporting group is tasked with discharging certain AML/CTF obligations on behalf of others in your group. 

You can’t have your obligations discharged by another member, if your group doesn’t have a lead entity in place. 

If you’re discharging the obligations of another member of the group, then we expect you to:

  • clearly document of which members you’re discharging obligations for and keep records showing how you have met these obligations
  • make sure immediate access to these records is available to the group member whose obligations you’re discharging.

If you’re a member that’s not a reporting entity and are discharging obligations for another member that is a reporting entity, you must ensure that both: 

  • personnel due diligence (PDD) and training is conducted on personnel engaged by your business that carry out AML/CTF related functions
  • any due diligence and training meets the standards set out in the AML/CTF policies of the reporting entity whose obligations you are discharging. 

Due diligence and training

This section refers to the Act section 26F(4)(d).

You must conduct PDD and training on all persons engaged who perform functions to meet AML/CTF obligations. This includes:

  • employees
  • contractors
  • any other entities. 

The PDD and training you conduct must satisfy each of the reporting entities’ AML/CTF policies.

As you’re within a reporting group, you can rely on information sharing to complete your PDD and training obligations. This includes information relevant to PDD and training performed by other members of your group. 

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: 1347

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