Expansion and modification of rules relating to the transfer of funds
Reforms to the anti-money laundering and counter-terrorism financing (AML/CTF) will take effect from 31 March 2026, which will change the circumstances in which a transfer of money or property will be treated as a designated service. These changes include:
- Consolidating existing designated services for transfer of money, funds or property, into a concept to be known as a 'transfer of value' – which will now include transfers of virtual assets;
- Introduces a new notion known as a 'value transfer chain'; and
- Replaces 'international funds transfer instructions' (IFTIs)' with new 'international value transfer service' (IVTS) reporting obligations.
The changes sit alongside other modifications to extend AML/CTF obligations to a broader range of services involving virtual assets beyond just digital currency exchange platforms (which we will consider in a separate article).
Businesses that are involved in the transfer of value (including existing reporting entities involved in the transfer of funds) will need to consider how these amendments impact them. For example, entities that do not currently have IFTI reporting obligations may have direct obligations to report IVTIs once the new law takes effect.
New obligations for the designated service of providing a value transfer will commence on 31 March 2026, although transitional rules will be made to allow for a later commencement of the reporting obligations for an IVTS.
What is the nature of the changes to the way these designated services are described?
The reforms simplify and broaden the scope of designated services by replacing four existing categories with three new ones based on the concept of a ‘transfer of value’. These services are defined by reference to whether they relate to electronic fund transfer (EFT) instructions OR transfers of money or property under designated remittance services. Reporting obligations apply to entities involved in these arrangements depending on whether the transfer is an EFT or a transfer made under a designated remittance arrangement. Obligations related to these arrangements are specified for parties involved in a 'funds transfer chain' including where they are acting as an interposed institution.
The reform replaces those existing designated services with 3 streamlined and expanded new designated services centred around a single concept of a transfer of value.
Existing designated service
- In the capacity of ordering institution, accepting an electronic funds transfer instruction from the payer
- In the capacity of beneficiary institution, making money available to the payee as a result of an electronic funds transfer instruction
- Accepting money or property from a transferor entity to be transferred under a designated remittance arrangement
- Making money or property available to an ultimate transferee entity as a result of a transfer under a designated remittance arrangement
Newly described designated services
- In the capacity of ordering institution, accepting an instruction for the transfer of value on behalf of a payer (Item 29)
- In the capacity of beneficiary institution, in relation to a transfer of value, making the transferred value available to a payee (item 30)
- In the capacity of intermediary institution, passing on a transfer message for a transfer of value in a value transfer chain to another intermediary institution or to the beneficiary institution (item 31)
Of course, only a business which provides one or more of these designated services and satisfies the 'geographical link' test will be a reporting entity and will then be required to comply with the AML/CTF regime. There are no changes to the 'geographical link' test in the Amendment Act.
What are the new designated services relating to a 'transfer of value'?
The new designated services relating to 'transfers of value' can be represented as follows, however, there may be more than one intermediary in any chain.
Payment Flow Process
- Ordering Institution: accepts instruction from the payer.
- Intermediary Institution: passes on the message to another intermediary or the beneficiary institution.
- Beneficiary Institution: makes value available to the payee.
Terminology relating to electronic funds transfers and the transfer of money or property will be replaced with a wider single concept of 'transfer of value', meaning a transfer of money, virtual assets or property, but does not include a transfer of physical currency or other tangible property.
The concept of 'funds transfer chain' will be replaced with 'value transfer chain', which refers to the passage of value between ordering, intermediary, and beneficiary institutions where a transfer of value has occurred. Each of these institutions has specific obligations, considered below.
Who's who in the value transfer chain
The key parties involved in a transfer of value are the ordering institution, beneficiary institution, and intermediary institution. Whether a person falls into one of these categories will be determined in accordance with the recently released Second Exposure Draft Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 (AML/CTF Rules) (released 19 May 2025) . We set out the definitions below, together with examples included in the Exposure Draft Explanatory Statement to the AML/CTF Rules:
Ordering institution
A person will be an ordering institution if it 'accepts' an instruction for a transfer of value on behalf of a payer in the course of carrying on a business.
Example – the person receives the value to be transferred from the payer or a person acting on behalf of the payer, such as when a customer provides cash or virtual assets over the counter to a remitter, financial institution or virtual asset service provider to fund a value transfer (whether or not the transfer of value is international or domestic).
Beneficiary institution
A person is a beneficiary institution if the person makes the value transferred available to the payee in the course of carrying on a business.
Example – a person makes the transferred value available to the payee directly, or by depositing the value into an account held by the payee with the person (including in a virtual asset wallet). For example, a remitter, financial institution or VASP may be a beneficiary institution where they provide cash or virtual assets over the counter to the customer (whether or not the transfer of value is international or domestic), or where a financial institution credits transferred money to the customer’s account.
Intermediary institution
An institution that passes on the instruction through the funds transfer chain will be an intermediary institution.
Note that passing on an instruction is distinct from simply providing a communications network to permit an instruction to be sent. Accordingly, instruction messaging services like the NPP and operators of card schemes will generally not be intermediary institutions, but institutions using those services will be if they ‘pass on’ instructions through these messaging services.
Importantly, there are some limited exceptions to the above definitions. For example, a person is not an ordering institution where they transfer value in circumstances where the transfer is reasonably incidental to the provision of another service (with some specific exclusions from this exception). An example might be a payment made from a lawyer's trust account in accordance with instructions given by the lawyer's client where the payment is related to legal services provided by the lawyer. Of course, in some circumstances this payment could involve the lawyer providing one of the new designated services under item 3 in Table 6 of section 6(5B) of the Act. There is a similar exception from the definition of 'beneficiary institution' in the context of making value available to a payee.
Initially, the First Exposure Draft AML/CTF Rules (released 11 December 2024) proposed a 'priority' concept for determination of who is an ordering or beneficiary institution. AUSTRAC received a number of submissions requesting clarity on the 'priority' concept, particularly when multiple entities are involved in the value chain. In response, the Second Exposure Draft of the AML/CTF Rules no longer includes the 'priority' concept and instead now sets out non-exhaustive circumstances in which a person may be an ordering or beneficiary institution.
AUSTRAC proposes to further illustrate a range of different scenarios to assist reporting entities in determining whether they are an ordering institution, intermediary institution or beneficiary institution. These were not included in the draft Explanatory Statement forming part of the second round of AUSTRAC consultation.
Obligations of ordering institutions, beneficiary institutions, and intermediary institutions
Each institution in the value transfer chain has specific responsibilities to ensure transparency and traceability of transactions. These responsibilities include obligations to collect and transmit key information about both the payer and payee as part of the designated services. The second round consultation version of the AML/CTF Rules contains descriptions of information that must travel with the instruction, but AUSTRAC has sought specific feedback on the completeness of this drafting. The information travels with the transfer of value to provide payment transparency and to aid traceability and to allow for preventative measures such as sanctions screening and financial crime monitoring.
1. Ordering Institution – is responsible for:
- Collecting both payer and payee information.
- Verifying the payee’s details, unless the transaction is a card-based pull payment or a refund of such a payment.
- Passing relevant information, such as payer, payee, tracing, or card details to the next institution in the chain, depending on the transaction context.
2. Intermediary Institution – must:
- Take reasonable steps to monitor whether it has received the necessary information.
- Given the high volume of value transfers, these steps may include sampling transfer messages and conducting assurance activities, rather than reviewing every message individually.
3. Beneficiary Institution – is expected to:
- Take reasonable steps to confirm receipt of all relevant information (e.g., payer and payee details), unless special circumstances apply.
- Verify the accuracy of the information received about the payee, who is the institution’s customer.
Consistent with other obligations in the AML/CTF regime, the requirement to take 'reasonable steps' to monitor will need to be determined by what is appropriate to mitigate the ML/TF risk and the nature, size and complexity of the reporting entity’s business.
Who has an obligation in relation to IVTS Reports?
Another key change under the Amendment Act is the replacement of an IFTI report with a report of an IVTS.
A service will be an IVTS if it is an Item 29 or Item 30 designated service, and the value is transferred from Australia to a foreign country, or from a foreign country into Australia. There will no longer be a distinction between the current two types of reports, IFTI-Es for financial institutions and IFTI-DRAs for remittance service providers. AUSTRAC has indicated that it proposes to provide examples in its guidance on when value is considered to be located in Australia or in foreign country (examples were not included in the Explanatory Statement included in the second round of consultation).
AUSTRAC has indicated that the IVTS reporting obligation will lie with the reporting entity closest to the Australian customer. The IVTS reporting obligations will therefore depart from the existing IFTI requirements.
How IVTS differs from IFTI
Under the current law, IFTI reporting obligations are not determined by reference to the level of connection with the Australian customer. The existing IFTI obligations apply to the financial institution that either sends or receives the instruction for transferring money across borders.
However, a reporting entity will only have an obligation to report a IVTS if the IVTS is provided at or through a permanent establishment of the entity in Australia (see section 46).
Reporting conditions and exceptions
In practice, the recasting of the reporting obligations may result in some entities that do not currently have IFTI reporting obligations being given IVTI reporting obligations (because they have the closer connection to the Australian customer). This may include, for example, a smaller financial institution which receives an instruction from a customer and then contracts with a larger onshore ADI to give effect to the transfer on its behalf. Conversely, some entities that are currently have IFTI reporting obligations may not have IVTI reporting obligations for transactions that they perform of other entities in a value transfer chain (this would be the case for the larger ADI in our example above).
The exact contents of the IVTS reports have not been clarified in the second consultation round version of the AML/CTF Rules.
Exemptions to reports of IVTS will be considered as part of future Rules development. Transitional rules will also consider commencement timeframes for IVTS reporting to allow sufficient time for reporting entities and AUSTRAC to update and implement required system changes. The existing IFTI reporting framework will be retained in operation under the transitional rules.
New designated service descriptions relevant to Remittance Sector
Although the term 'designated remittance service' will no longer appear in the new framework, the Remittance Sector Register will remain in its place.
The concepts relevant to registration requirements (including for example the designated service Item 32A and the definition of 'registrable remittance service'), will refer to the designated services in the new items 29 and 30. These registration requirements will not apply to financial institutions (such as ADIs, banks, building societies and credit unions). The Act contemplates that the AML/CTF Rules may also exclude entities from the key definitions.
One final point to consider is that the definition of 'registrable remittance service' specifically excludes a service that involves the transfer of virtual assets. This is largely because the providers of such services are subject to separate obligations under the Virtual Asset Service Provider Register, which for these reporting purposes will operate in a manner similar to the Remittance Sector Register.
Historically, compliance with IFTI reporting obligations has attracted significant regulatory attention. The new approach to 'transfers of value' requires careful attention by those involved in the transfer of funds and virtual assets, particularly where there is an international element. For some it may trigger have direct IVTI reporting obligations event though they do not currently have IFTI reporting obligations.
