Updated AML Regulation for Australian Digital Currency Exchange

The attorney-General proposed changes to AML/CTF frameworks in April 2023. The Australian Government has committed to reforming its AML/CTF regime, according to the paper, which will impact digital currency exchanges (DCEs) providers.

To reform Australia’s AML/CTF regime, the Federal Government has proposed changes that will impact digital currency exchanges (DCEs). AML/CTF reform proposals were first outlined in a consultation paper released by the Attorney General in April 2023. The reforms outlined in the consultation paper will adversely affect DCE providers. AML/CTF regulations should be extended to crypto-to-crypto exchanges and custody (instead of just fiat on and off ramps), as well as, comply with the “travel rule” for DCE providers.

As the Treasury considers broader reforms, DCE providers and other service providers may soon be required to obtain licences. Currently, DCE providers are only affected by laws about converting digital currencies to fiat. For example, Bitcoin for Australian dollars. Several reforms will be enacted, expanding the regime to include digital currency exchanges, transfers on behalf of customers, storage or administration, and financial services by issuers related to the offer and sale of digital currencies.

The reforms also propose extending the “travel rule” to remitters and providers of digital currency exchanges. Unlike financial institutions, DCE providers aren’t subject to the travel rule. Financial institutions must collect information about the payer when transferring fiat currency electronically to increase transparency. The updated travel rule requires entities to include payer and payee payment information in electronic transfers and verify payer payments. Later this year, the Attorney-General’s Department will release another consultation paper based on stakeholder feedback. 

The consultation paper, released in April 2023, outlined several reforms to strengthen and modernise Australia’s AML/CTF regime. It consists of two parts:

Part 1 outlines reforms aimed at simplifying and modernising the regime’s operation. In addition to responding to industry requests for a simplified AML/CFT system and to industry requests, several recommendations have been outlined in the 2016 Statutory Review of the AML/CFT Act 2006.

The second part of the proposal proposes the regime’s extension to “tranche-two entities”, including lawyers, accountants, trustees, real estate agents, and precious metals and gemstone dealers. This part aligns Australia’s regime with international standards, including those recommended by the FATF.

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