AML/CTF and Buy Now Pay Later reforms pass overnight: What you need to know

On 29 November 2024, the Government secured passage of the following Bills through both Houses:

• the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 (Cth) (BNPL Bill); and
• the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (Cth) (AML/CTF Bill).

Participants in the financial services industry who are affected by these Bills must now prepare for the significant changes brought by these reforms to take effect. This likely includes taking steps to obtain an appropriate authorisation or registration with the relevant regulatory authority and to ensure adequate systems are in place to ensure compliance with the new obligations.

BNPL Bill

The application of the credit legislation regime under the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act) will now extend to providers of low cost credit contracts (LCCCs), with some modifications. LCCCs are a new category of regulated credit which for now includes "buy now pay later contracts" but may be extended to include other contracts later.

Under the modified NCCP Act and National Credit Code as contained in Schedule 1 of the NCCP Act, LCCC providers will be required to hold and maintain an Australian credit licence and comply with the general conduct obligations applicable to credit licensees.

However, LCCC providers will be subject to a modified disclosure regime, and they can elect to comply with either a modified responsible lending obligations (RLO) framework for LCCCs or with all of the existing responsible lending requirements in the NCCP Act. Other changes, including new anti-avoidance scheme provisions, will further regulate the conduct of LCCC providers.

Commencement of the BNPL Bill is currently split, with the key obligations set to commence six months after the Act receives Royal Assent.

AML/CTF Bill

Services provided by professional service providers, dealers in precious stones and metals, and real estate professionals (the "tranche two entities") will now be regulated under the amended Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act).

For organisations who already must comply with the AML/CTF Act as "reporting entities", the amendment substantially reforms the AML/CTF Act in several material ways that will change obligations and, as a result, what reporting entities must do to comply. This includes extending the regulation of digital currency and of virtual asset and payments technology to harden this rapidly growing sector against exploitation, as well as introducing changes to simplify the regime with respect to:

• the structure of AML/CTF programs;
• governance requirements, with modified oversight responsibilities;
• the role of the AML/CTF Compliance Officer;
• increased customer due diligence requirements;
• tipping off offences; and
• related groups of reporting entities, including the new "reporting group" structure replacing the existing "designated business group" concept.

The AML/CTF Bill provides for varying commencement dates, with transitional rules allowing further amendments to be made by legislative instrument dealing with transitional matters and unintended consequences of the reforms. The substance of the reforms will commence on 31 March 2026, with some leeway for tranche two entities who may enrol before but are not required to comply until 1 July 2026.

It will be necessary to consider the AML/CTF Bill alongside the changes to the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (Cth), as they will affect the scope of many of the obligations and exemptions. The new rules are yet to be released, although it is expected that a consultation draft will be released by AUSTRAC before the end of the year.