How to Develop a Compliant AML/CTF Program (Part A & B)

Isabella Chen had built her Sydney-based accounting firm from the ground up over eight years, serving small to medium enterprises across New South Wales. But in March 2024, when AUSTRAC’s Tranche 2 reforms officially commenced, everything changed. What had once been a straightforward professional service business suddenly required her to navigate the complex world of Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) compliance.

“I went from focusing purely on tax returns and financial statements to needing an entirely new framework for client verification, risk assessment, and reporting,” Isabella recalls. “The learning curve was steep, but the alternative—facing potential penalties of up to $22.2 million—simply wasn’t an option.”

Isabella’s experience mirrors that of thousands of Australian professionals who now fall under AUSTRAC’s regulatory umbrella. The development of a compliant AML/CTF program isn’t just a regulatory checkbox—it’s a fundamental business transformation that, when done correctly, can actually strengthen your operations and client relationships.

This comprehensive guide will walk you through the essential components of developing both Part A and Part B of your AML/CTF program, transforming regulatory complexity into a clear, actionable roadmap for compliance success.

Understanding the Foundation: Why Part A and Part B Matter to Your Bottom Line

Before diving into the technical requirements, it’s crucial to understand why AUSTRAC structures AML/CTF programs into two distinct parts—and how this structure can actually work in your favor.

Part A represents your program’s strategic foundation: the policies, procedures, and governance frameworks that define how your business approaches AML/CTF compliance. Think of it as your compliance blueprint—the document that guides every decision and action your team takes.

Part B is your operational manual: the detailed procedures that translate your Part A policies into day-to-day actions. It’s the difference between knowing you need to verify customer identity and having a step-by-step process that ensures consistent, compliant verification every time.

For businesses like Isabella’s accounting firm, this two-part structure offers significant advantages. Part A provides the strategic oversight that satisfies board and senior management requirements, while Part B ensures frontline staff have clear, practical guidance for client interactions.

Part A: Building Your Strategic Compliance Framework

The Governance Foundation That Protects Your Business

Your Part A program begins with governance—the structure that ensures AML/CTF compliance remains a business priority, not an afterthought. This isn’t about creating bureaucracy; it’s about establishing clear accountability that protects your business from costly oversights.

Board and Senior Management Oversight

AUSTRAC expects your board or senior management to take active ownership of your AML/CTF program. This means:

• Formally approving your AML/CTF program through board resolutions or management decisions
• Allocating adequate resources for program implementation and maintenance
• Receiving regular reports on program effectiveness and compliance incidents
• Ensuring the program evolves with your business and regulatory changes

Consider how Melbourne-based law firm partner, Ethan Rodriguez, approached this challenge. Rather than viewing governance as an administrative burden, he positioned AML/CTF oversight as a competitive advantage: “Our clients now see us as more than just legal advisors. We’re trusted partners who understand the broader compliance landscape they operate in.”

Your Risk-Based Approach: The Heart of Effective Compliance

The cornerstone of any effective AML/CTF program is a robust risk-based approach. This isn’t about treating every client the same—it’s about intelligently allocating your compliance resources where they’ll have the greatest impact.

Your Part A program must clearly articulate:

• Risk Assessment Methodology: How you identify, assess, and categorise money laundering and terrorism financing risks
• Risk Tolerance: The level of risk your business is prepared to accept
• Risk Mitigation Strategies: How you address identified risks through enhanced due diligence and monitoring
• Risk Review Processes: Regular evaluation and updating of your risk assessments

Policies That Actually Work in Practice

Effective AML/CTF policies strike the balance between regulatory compliance and operational efficiency. Your Part A program should include comprehensive policies covering:

Customer Due Diligence (CDD) Policies

These policies define when and how you verify customer identity, understand the nature and purpose of business relationships, and conduct ongoing monitoring. The key is creating policies that are specific enough to ensure consistency but flexible enough to accommodate your diverse client base.

Suspicious Matter Reporting Policies

Clear guidelines for identifying, investigating, and reporting suspicious matters to AUSTRAC. These policies should include practical examples relevant to your industry and clear escalation procedures.

Record-Keeping Policies

Part B: Translating Strategy into Daily Operations

Procedures That Your Team Will Actually Follow

The most sophisticated Part A program is worthless if your team can’t implement it consistently. Part B procedures must be detailed enough to ensure compliance but practical enough for real-world application.

Customer Identification and Verification Procedures

Step-by-step processes for different customer types, including acceptable identification documents, verification methods, and documentation requirements. Consider Charlotte Kim’s approach at her Brisbane-based real estate agency: “We created simple flowcharts for different customer scenarios. Our agents know exactly what documents to request and how to verify them, regardless of whether they’re dealing with individual buyers or complex corporate structures.”

Ongoing Monitoring Procedures That Add Value

Effective ongoing monitoring isn’t just about compliance—it’s about understanding your customers better and identifying opportunities to enhance your service delivery.

Your Part B procedures should detail:

• Transaction monitoring thresholds and triggers
• Regular review schedules for different customer risk categories
• Procedures for updating customer information and risk ratings
• Integration with your existing client relationship management systems

Training and Awareness: Building Compliance Capability

Your Part B program must include comprehensive training procedures that ensure every team member understands their AML/CTF obligations. This goes beyond annual compliance sessions—it’s about building ongoing awareness and capability.

Effective training procedures include:

• Initial AML/CTF training for all new employees
• Role-specific training that addresses the unique risks and obligations relevant to different positions
• Regular refresher training that incorporates regulatory updates and lessons learned
• Practical scenario-based training that helps staff apply procedures in real situations

Integration Strategies: Making Your Program Work Seamlessly

Technology and Systems Integration

Modern AML/CTF programs rely heavily on technology to manage complexity and ensure consistency. Your program should detail how technology supports your compliance objectives without creating unnecessary operational burden.

Consider how technology can enhance:

• Customer Onboarding: Digital identity verification and automated risk scoring
• Transaction Monitoring: Automated alerts for unusual patterns or high-risk transactions
• Record Keeping: Centralised document management and automated retention schedules
• Reporting: Streamlined SMR preparation and AUSTRAC submissions

The Human Element: Culture and Accountability

Technology alone isn’t sufficient—effective AML/CTF programs require a culture where compliance is everyone’s responsibility. Your program should foster an environment where staff feel comfortable raising concerns and where compliance is viewed as integral to business success.

This cultural transformation was evident in Liam Thompson’s Adelaide-based accounting practice: “Initially, our team saw AML/CTF as additional paperwork. But once they understood how it helped us better understand our clients and identify potential risks, they became active participants rather than reluctant participants.”

Your Implementation Roadmap: From Theory to Practice

Phase 1: Foundation Building (Months 1-2)

Governance Establishment

• Secure board or senior management commitment and resource allocation
• Appoint an AML/CTF compliance officer or designate responsible person
• Establish reporting lines and accountability structures

Initial Risk Assessment

• Conduct comprehensive ML/TF risk assessment
• Identify customer, product, delivery channel, and geographic risks
• Document risk assessment methodology and findings

Phase 2: Program Development (Months 2-4)

Part A Development

• Draft comprehensive policies based on risk assessment findings
• Establish governance frameworks and oversight mechanisms
• Define risk tolerance and mitigation strategies

Part B Development

• Create detailed operational procedures for all program elements
• Develop training materials and programs
• Design monitoring and review processes

Phase 3: Implementation and Testing (Months 4-6)

System Integration

• Implement technology solutions and integrate with existing systems
• Test procedures with pilot transactions or customers
• Refine processes based on testing outcomes

Staff Training and Communication

• Deliver comprehensive training to all relevant staff
• Communicate program requirements and expectations
• Establish ongoing support and guidance mechanisms

Your Decision Framework: Determining the Right Approach for Your Business

Not all AML/CTF programs are created equal. The right approach for your business depends on several critical factors that will determine your program’s complexity, resource requirements, and implementation timeline.

Ask Yourself These 5 Critical Questions

1. What is your business size and complexity?

If you’re operating a small accounting practice with straightforward client relationships, your program can be relatively streamlined. However, if you’re managing complex corporate structures or high-value transactions, you’ll need more sophisticated procedures and controls.

Example: Ava Mitchell’s boutique legal practice in Perth serves primarily local small businesses. Her Part B procedures focus on simplified CDD processes and straightforward risk categorisation. Conversely, Noah Williams’ corporate law firm in Melbourne requires detailed procedures for complex beneficial ownership identification and enhanced due diligence for high-risk clients.

2. What is your risk profile?

High-risk businesses require more comprehensive programs with enhanced monitoring and reporting capabilities. Consider your customer base, transaction types, and geographic exposure when determining program scope.

3. What are your current systems and capabilities?

Businesses with existing compliance infrastructure can build upon current systems. Those starting from scratch may need more comprehensive technology solutions and training programs.

4. What is your resource availability?

Consider both upfront implementation costs and ongoing operational requirements. Factor in staff time, technology costs, and potential external consultant fees.

5. What is your compliance maturity?

Businesses new to regulatory compliance may need more detailed procedures and extensive training programs. Those with existing compliance experience can focus on AML/CTF-specific requirements.

Three Approaches to Program Development

The Self-Build Approach

Best for: Small businesses with straightforward operations and existing compliance capability

Pros: Lower upfront costs, complete control over program design

Cons: Higher time investment, potential compliance gaps

The Consultant-Assisted Approach

Best for: Medium-sized businesses or those with complex risk profiles

Pros: Expert guidance, faster implementation, reduced compliance risk

Cons: Higher upfront costs, potential over-engineering

The Hybrid Approach

Best for: Businesses wanting to balance cost control with expert input

Pros: Combines internal knowledge with external expertise

Cons: Requires careful coordination and project management

Common Pitfalls and How to Avoid Them

The Over-Engineering Trap

Many businesses create programs that are technically compliant but operationally impractical. Avoid this by regularly testing your procedures with actual transactions and customer interactions.

The Set-and-Forget Mistake

AML/CTF programs require ongoing maintenance and updates. Establish regular review schedules and ensure your program evolves with your business and regulatory changes.

The Training Gap

Even the best-designed program fails without proper staff training. Invest in ongoing education and create practical scenarios that help staff apply procedures in real situations.

Looking Ahead: Future-Proofing Your Program

Regulatory Evolution and Your Program

AUSTRAC’s regulatory approach continues to evolve, with increasing focus on beneficial ownership transparency and cross-border transaction monitoring. Ensure your program includes mechanisms for incorporating regulatory updates and industry best practices.

Technology Advancement and Compliance Innovation

Emerging technologies like artificial intelligence and blockchain are transforming AML/CTF compliance. While you don’t need to adopt cutting-edge technology immediately, ensure your program can accommodate future innovations.

The Cost of Getting It Wrong: Learning from Others’ Mistakes

The consequences of inadequate AML/CTF programs are severe and well-documented. Consider the lessons from major enforcement actions that have shaped Australia’s compliance landscape.

Your Next Steps: From Understanding to Implementation

Developing a compliant AML/CTF program represents a significant undertaking, but it’s also an opportunity to strengthen your business operations and build deeper client relationships. The key is approaching it systematically, with clear objectives and realistic timelines.

Whether you’re just beginning your compliance journey or refining an existing program, remember that effective AML/CTF compliance is not just about avoiding penalties—it’s about building a business that operates with integrity and transparency in an increasingly complex regulatory environment.

Ready to Build Your Compliant Future?

Developing an effective AML/CTF program requires more than just understanding the requirements—it demands practical experience and strategic insight into how compliance frameworks integrate with real business operations.

At Corporate Alliance FX, we’ve helped hundreds of Australian businesses navigate the complexities of AML/CTF compliance while maintaining operational efficiency and competitive advantage. Our team understands that compliance isn’t just about ticking regulatory boxes—it’s about building sustainable business practices that protect and enhance your operations.

Whether you need help with initial program development, risk assessment enhancement, or ongoing compliance support, our specialists can provide the expertise and practical guidance you need to succeed.