Accounting

This guide covers the AML/CTF obligations specific to accountants under AUSTRAC Tranche 2. Read this alongside the general AML/CTF guide for the shared compliance framework.

Why accountants are regulated

Accountants are regulated as gatekeeper professions because they:

• Create and administer companies and trusts — structures that are commonly used to layer and disguise the origins of illicit funds
• Facilitate significant financial arrangements — including cross-border transactions, asset acquisitions, and investment structures
• Provide tax and financial advisory services — professional knowledge that can be exploited to structure transactions in ways that avoid detection
• Act as directors, secretaries, trustees, or nominees — positions that provide control over entities that may be used for money laundering

Accountants who provide trust and company services are sometimes referred to as Trust and Company Service Providers (TCSPs) — a category specifically identified by FATF as requiring AML/CTF regulation.

Your designated services

Your AML/CTF obligations are triggered when you provide the following designated services. Importantly, not all accounting work is regulated — only specific activities listed in the AML/CTF Act.

Company formation and administration

• Setting up companies (Pty Ltd, Ltd, or other entities)
• Acting as, or arranging for a person to act as, a director or company secretary
• Providing a registered office or business address for a company
• Acting as, or arranging for a person to act as, a shareholder or nominee shareholder

Trust establishment and management

• Creating trusts (family trusts, unit trusts, discretionary trusts, fixed trusts)
• Acting as, or arranging for a person to act as, a trustee
• Managing trustee arrangements, distributions, and trust variations

Other designated services

• Establishing, managing, or administering other legal arrangements (partnerships, associations)
• Creating nominee arrangements for securities or other property
• Managing client funds or assets in the course of providing the above services

What is NOT a designated service

The following common accounting activities are generally not designated services and do not trigger AML/CTF obligations on their own:

• Preparing tax returns
• Preparing financial statements and reports
• Providing general tax advice
• Bookkeeping and payroll services
• Business advisory services (unless they involve creating structures listed above)
• Auditing

However, if these activities are provided alongside a designated service (e.g., you prepare the tax return for a company you also formed), you should be alert to ML/TF indicators across all your interactions with the client.

Risk factors specific to accounting

Verifia pre-loads industry-specific risk factors based on AUSTRAC guidance and FATF typologies for accounting professionals.

High-risk indicators

Medium-risk indicators

Suspicious behaviour to watch for

• Client asks you to create a complex structure without a clear commercial purpose
• Client wants to use multiple entities to hold a single asset — consider whether the complexity is justified
• Client's stated income or wealth doesn't match the value of assets being structured
• Client pressures you to complete a structure quickly without proper due diligence
• Client asks about the anonymity or confidentiality of corporate or trust structures
• Client offers to pay in cash for professional services without explanation
• Client changes instructions frequently or provides inconsistent information about the structure's purpose
• Client wants to channel funds through multiple accounts or entities without clear commercial rationale
• Client involves multiple advisors for different components of the same transaction — may indicate they are trying to prevent any one advisor from seeing the full picture
• Client requests transfers to or from jurisdictions with no apparent connection to their business
• Client mentions that other accountants or lawyers have declined to act for them

Example scenarios

Scenario 1: Standard company formation

A local business owner wants to set up a Pty Ltd company for a new retail business.

1. CDD: Standard CDD — verify identity of the business owner who will be the sole director and shareholder. Assess risk.
2. Risk assessment: Low risk — simple single-entity structure, known local individual, clear commercial purpose (retail business).
3. Designated service: Company formation. Proceed with ASIC registration.
4. Records: Archive company formation documents, CDD records, and engagement letter in the compliance vault.

Scenario 2: Family trust with corporate trustee

A client wants to establish a discretionary family trust with a Pty Ltd corporate trustee to hold investment assets.

1. CDD: Standard CDD (may escalate to Enhanced depending on the client's risk profile and the value of assets).
2. UBO analysis: Identify all relevant parties — the appointor, settlor, corporate trustee's directors and shareholders, and named beneficiaries or classes of beneficiaries.
3. Structure assessment: Two-layer structure (trust + corporate trustee) — this is a common and legitimate arrangement, but the purpose and parties must still be verified.
4. Risk factors: Assess the source of wealth to fund the trust. Screen for PEP status. Review jurisdictional connections. Is the structure proportionate to the client's needs?
5. Ongoing monitoring: Schedule reviews based on the assessed risk tier. Monitor for changes in trust deed, beneficiaries, or trustee directors.

Scenario 3: Multi-layered offshore structure

A client requests you set up an Australian company owned by a New Zealand trust, which is in turn controlled by entities in a FATF-identified high-risk jurisdiction.

1. CDD: Enhanced CDD immediately triggered — multi-layered structure, international elements, high-risk jurisdiction involvement.
2. ECDD requirements: Identify beneficial owners through all entity layers, verify source of funds and source of wealth, conduct adverse media screening, obtain senior manager approval.
3. Critical questions: Why is this structure needed? What is the legitimate commercial purpose? Why are entities in a high-risk jurisdiction involved? Is the complexity proportionate to the client's needs?
4. Decision point: If you cannot satisfactorily verify the purpose and source of funds:
   • You must not proceed with creating the structure
   • Consider filing an SMR if you have formed a suspicion of ML/TF
5. If proceeding: Document the rationale thoroughly, implement enhanced ongoing monitoring with annual reviews, and ensure the file records why you were satisfied with the explanations provided.

Scenario 4: Large physical currency deposit

An existing client asks you to accept $650,000 in physical currency into their trust account for an upcoming property purchase.

1. TTR trigger: $10,000+ in physical currency — file a Threshold Transaction Report within 10 business days.
2. Risk escalation: $650,000 in cash is a significant high-risk indicator. Reassess the client's risk level and apply Enhanced CDD.
3. Source of funds: Request documentation explaining the source of the cash. This is mandatory for ECDD. Legitimate sources should be verifiable.
4. SMR consideration: If the explanation is unsatisfactory, implausible, or cannot be verified, consider filing an SMR. Large unexplained cash is a strong ML/TF indicator.
5. Decision: Proceed with enhanced controls, apply additional safeguards, or refuse the service — document the decision and rationale.

Daily workflow for accountants

1. Client engagement: When taking on a new client for a designated service, create the customer in Verifia and begin CDD before commencing the work
2. Structure creation: When setting up companies or trusts, record the designated service type and link all relevant parties (directors, shareholders, beneficiaries, etc.)
3. Ongoing monitoring: Review client files at scheduled intervals; update risk assessments when structures or circumstances change
4. Transaction monitoring: Record significant financial transactions; monitor for threshold and suspicious activity

Key Verifia features for accountants