Karen McDonald, Accountancy Insurance
There have been a few questions raised about whether our Professional Indemnity PI Shield provides cover in relation to the new Anti‑Money Laundering (AML) laws.The answer is yes. Cover is available under the Statutory Liability section of the policy, subject to a sub‑limit of $250,000.
AML/CTF legislative changes
The Anti‑Money Laundering and Counter‑Terrorism Financing Act 2006 (the Act) is changing.
From 1 July 2026, new designated services and entities, known as ‘Tranche 2’ entities, will come under the legislation.
These changes impact several professions, including real estate agents and property developers, dealers in precious stones, metals and products, lawyers, conveyancers, accountants, and trust and company service providers.
There is specific guidance for accountants, including the AUSTRAC (Australian Transaction Reports and Analysis Centre) Accountants Program starter kit, available here: Accountants Starter Kit Austrac
Tranche 2 compliance obligations
Affected Tranche 2 businesses must, by 1 July 2026:
- Enrol with AUSTRAC (enrolment starts on 31 March 2026)
- Provide details of the business, key personnel, and services offered
- Conduct a money laundering and terrorism financing risk assessment
- Implement an AML/CTF Program (policy) • Conduct customer due diligence
- Comply with reporting, record keeping, staff training, and independent review obligations
Penalties for non‑compliance
If a business does not comply with its obligations under the Act, AUSTRAC may take steps to enforce compliance and or seek a penalty, including the following.
1. Civil Penalties (Fines)
AUSTRAC may apply to the Federal Court for civil penalty orders. These are among the most substantial financial sanctions under the Act.
Maximum civil penalties
- Individuals: up to 20,000 penalty units
- Body corporate (companies): up to 100,000 penalty units
Penalty Unit Value
The monetary value of one penalty unit depends on the date of the breach. For offences on or after 7 November 2024, the penalty unit value is $330.
What this means in dollar terms
- Individuals: 20,000 × $330 = $6.6 million
- Companies: 100,000 × $330 = $33 million
2. Administrative Actions
Other enforcement actions available to AUSTRAC include enforceable undertakings, infringement notices, remedial directions, and written notices requiring the appointment of an external auditor and or the completion of a money laundering or terrorism financing risk assessment.
How the PI Shield policy responds
When reviewing whether the Guild policy will cover AML/CTF non‑compliance penalties, the answer is yes, subject to the circumstances of the enforcement action and the following points:
- The fine/penalty is compensatory and insurable under Australian law
- The legal proceedings must arise from the insured’s “Professional Services” i.e. the act, error or omission must occur in the provision of accountancy services as defined in the wording.
- The breach must NOT arise from gross negligence – The statutory liability cover does not apply if the breach was caused by gross negligence.
- The act must occur on or after the Retroactive Date – And the legal proceedings must be first served and notified within the Period of Cover.
- Sub limits and excess apply – The statutory liability section has its own sub limit stated in the Schedule, with a possible excess. Note the sub-limit is $250,000.
From a practical standpoint
For professional indemnity claims involving accountants, the following types of penalties commonly fall within insurable territory, assuming no exclusions apply:
- Civil penalties for inadvertent breaches of state‑based accountants, or consumer protection legislation.
- Certain administrative/disciplinary fines issued for unintentional non‑compliance.
Please note that penalties arising from criminal, reckless, intentional, or grossly negligent conduct will be excluded.
In summary, if you receive a civil fine or penalty arising from your professional services, and the fine is legally insurable (that is, compensatory rather than punitive), and the conduct was not grossly negligent, then the Professional Indemnity policy will generally provide cover under the Statutory Liability section, subject to the policy terms, conditions, and sub‑limit.
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