Glossary: Key Terms & Definitions

Overview

A plain-English guide to the key terms, acronyms and concepts Australian businesses meet under Tranche 2, grouped by theme.

Core AML terms

AML/CTF - Anti-Money Laundering and Counter-Terrorism Financing. The laws, regulations and procedures designed to prevent criminals disguising illegally obtained funds and financing terrorism.
AML/CO - Compliance Officer. The person legally responsible for ensuring the AML/CTF program is followed.
ML/TF - Money Laundering and Terrorism Financing. The two primary risks AML/CTF programs are designed to prevent.
Designated Service - a specific service listed in the AML/CTF Act (e.g. conveyancing, managing client funds) that triggers the obligation to comply.
Reporting Entity (RE) - a business or individual required to register with AUSTRAC and comply because it provides designated services.
Reporting Group - related entities consolidating their AML/CTF obligations under a single registration (replaces the former "Designated Business Group").
DNFBP - Designated Non-Financial Businesses and Professions: non-financial businesses captured by AML/CTF (lawyers, accountants, real estate agents, dealers in precious metals and stones).
Risk Assessment - a documented evaluation of the ML/TF risks your business faces, based on customer types, services, delivery channels and geography.
Watchlists - official lists of individuals and entities subject to sanctions or otherwise flagged by authorities.

Customer due diligence

CDD - Customer Due Diligence: identifying a customer, understanding their business purpose, and assessing their ML risk.
KYC - Know Your Customer: verifying the identity of an individual client, including a sole trader (often used interchangeably with CDD).
KYB - Know Your Business: verifying a legal entity (company, trust, partnership, SMSF) is genuine and active, and identifying its controllers and ultimate beneficial owners.
VOI - Verification of Identity: confirming a person is who they claim to be using acceptable ID.
EDD / ECDD - Enhanced (Customer) Due Diligence: stricter verification and monitoring for higher-risk clients, transactions or relationships (e.g. PEPs).
OCDD / ODD - Ongoing (Customer) Due Diligence: keeping customer information current and monitoring transactions throughout the relationship.
PDD - Personal Due Diligence: assessing the integrity of internal employees or agents performing AML/CTF roles.
Reliance - where one reporting entity relies on another's CDD checks.
Tipping Off - the criminal offence of informing someone, directly or indirectly, that a Suspicious Matter Report has been or will be submitted about them.

Beneficial ownership

BO - Beneficial Owner: the natural person(s) who ultimately own or control a client (25%+ ownership or control).
UBO - Ultimate Beneficial Owner: the individual(s) at the top of the ownership chain (used interchangeably with BO).
Shell Company - a legal entity with no active operations, used to move money and hide true ownership.
Structuring - deliberately breaking up large cash transactions to avoid reporting thresholds.

Reporting

SMR - Suspicious Matter Report: a mandatory, confidential report to AUSTRAC when you form a suspicion on reasonable grounds that a transaction or activity involves proceeds of crime or terrorism financing.
TTR - Threshold Transaction Report: required for physical currency (cash) transactions of A$10,000 or more.
IVTS (formerly IFTI) - International Value Transfer Service: an instruction to move money or property into or out of Australia (usually reported by banks, relevant if you manage client funds).

Regulatory bodies

AUSTRAC - Australian Transaction Reports and Analysis Centre: Australia's financial intelligence unit and AML/CTF regulator.
FATF - Financial Action Task Force: the global body that sets international AML/CTF standards, which Australia follows.
AFP - Australian Federal Police: receives intelligence from AUSTRAC for investigation.
DFAT - Department of Foreign Affairs and Trade: maintains the Consolidated List of sanctions targets.
PEXA - Property Exchange Australia: the online platform for property settlements and lodgements.

Financial and sanctions terms

Source of Funds (SoF) - evidence of where the money for a specific transaction came from (e.g. salary, property sale, inheritance, loan).
Source of Wealth (SoW) - evidence of how a person accumulated their overall wealth over time (e.g. career, business ownership, trust distributions, long-term investments).
Sanctions List / Consolidated List - Australia's official DFAT list of individuals and entities subject to targeted financial sanctions.
PF - Proliferation Financing: providing funds or services for the manufacture or acquisition of nuclear, chemical or biological weapons.

People and roles

PEP - Politically Exposed Person: someone holding (or who has held) a prominent public position, and their close family and associates, posing a higher corruption risk.

Programs and legislation

AML/CTF Act - the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, the primary legislation.
AML/CTF Rules - detailed regulations made under the Act.
AML Program - the documented policies, procedures and systems a reporting entity must maintain to comply.
Tranche 1 - the first phase of regulation (financial services, gambling, remittance, bullion; commenced 2006).
Tranche 2 - the second phase (real estate, lawyers, accountants and other DNFBPs; commencing 1 July 2026).
Pre-commencement rules - rules applying to agreements entered before the new legislation takes effect, which may be exempt from new requirements.
Starter Kits - AUSTRAC guidance documents helping Tranche 2 businesses implement their obligations.

Risk assessment terms

ML/TF Risk Assessment - assessment of the ML/TF risks facing your business (required for all reporting entities).
NRA - National Risk Assessment: a country-level assessment conducted by the Australian Government.

Industry terms

FI - Financial Institution: banks, credit unions and other financial providers (Tranche 1 entities).
VASP - Virtual Asset Service Provider: a business dealing in cryptocurrencies and other digital assets (enhanced obligations from 31 March 2026).