The word of “money laundering” sounds like a plot in a movie, but in the real business world, it is not far away from us. More and more enterprises, in the daily transactions, have inadvertently become a link in the “money laundering chain”. Whether it is because the customer background is not clear, or the internal mechanism is slack, once suspected of being involved in money laundering. businesses may face consequences ranging from frozen accounts in minor cases, to criminal warnings and loss of business partners in severe cases, dealing a heavy blow to the enterprise.
Money laundering is not only a financial issue, but also a legal compliance issue. As global regulation continues to tighten, enterprises need to establish a sense of responsibility and re-examine their compliance system from the legal level. This article will focus on three core issues: first, analyze what is money laundering and why enterprises are prone to be “hit”; second, sort out the tightening trend of anti-money laundering regulations globally; and finally, discuss how enterprises should effectively deal with the challenges of anti-money laundering compliance.
When mentioning “money laundering”, the first reaction of many enterprises is: “We are not financial institutions, and do not do gray transactions, it has nothing to do with us, right?” But the reality is – money laundering behaviour is far more hidden than you think, more likely to let the ordinary business “get trapped”.
Money-laundering is the process of disguising and transferring the proceeds of crime through complex financial operations to make them appear to be legitimate funds. This process usually involves three major steps: Placement, Layering and Integration. The “layering” stage often relies on third-party companies, cross-border transactions, real estate sales, etc., to conceal the true source. Therefore, even if the enterprise itself is not involved in illegal behaviour, it may fall into a link of the “money laundering chain” because of a certain transaction or a certain customer.
Money-laundering is a major contributor to serious crimes such as child exploitation, drug and sex trafficking, fraud, scams, terrorism and the proliferation of weapons of mass destruction. Money laundering has become a priority in the fight against financial crime in Australia, and the relevant legal provisions are extremely stringent. Enterprises that are found to have failed in their duty of review and assisted or indirectly participated in money-laundering may face serious consequences such as freezing of accounts, revocation of business licenses and even criminal charges.
The Australian Transaction Reports Analysis Centre (AUSTRAC) is Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regulator. They ensure that regulated businesses meet their obligations to have robust systems and controls in place to manage risk and protect themselves and the community from crime.
Particularly alarming is the practice of Cuckoo Smurfing, as identified by the Australian Federal Police (AFP). This is a sophisticated technique whereby criminal groups use legitimate international money transfer processes to “sneak” illegal funds into an unsuspecting victim’s bank account. These cases have been seen frequently in exporting companies, international students and immigrant families. Businesses that do not check the source of funds at the time of receipt may be unknowingly “helping to launder money”.
The Australian Money Laundering National Risk Assessment 2024 (ML NRA), published by the Australian Transaction Reports and Analysis Centre (AUSTRAC), states that businesses are often exploited by money laundering networks. Some industries are inherently in high-risk zones themselves: such as real estate, physical diamonds, cash transactions, crypto-assets, foreign trade transfers, immigration services, etc., which are the areas most vulnerable to exploitation by ulterior motives when crossing the border between normal and money laundering.
As financial crimes become more sophisticated, regulators around the world are continuing to strengthen anti-money laundering (AML) and counter-terrorism financing (CTF) regimes, and global law enforcement efforts are increasing significantly. 2025 onwards, there are three major trends in global anti-money laundering regulation: firstly, there is closer collaboration between countries and cross-border capital flows will be more strictly monitored; secondly, penalties are becoming more severe, with not only higher fines but also possible restrictions on business; thirdly, the frequency of compliance checks is rising, and the ability of firms to control risks is being scrutinized as never before.
Behind this global trend, the Financial Action Task Force (FATF) plays a central role. As an intergovernmental international organization, the FATF is responsible for setting global standards on anti-money laundering and counter-terrorism financing, and supervising the implementation of member countries’ regimes through the issuance of guidelines, the conduct of mutual evaluations, and the blacklisting and grey-listing systems. The FATF’s recommendations have been widely incorporated into the legislation and regulatory practices of various countries, and have directly impacted the direction of reforms in major economies, such as Australia, the European Union, China, and so on.
1. Australia
In Australia, regulators are moving forward with a major reform to bring the national system more in line with FATF’s international requirements. From March 31, 2026, the Australian Transaction Reporting and Analysis Centre (AUSTRAC) will expand the scope of its regulation to include industries such as lawyers, accountants, real estate agents, virtual currency service providers and precious metals dealers. These industries will in future be required to fulfill compliance obligations similar to banks, including knowing the identity of their clients, monitoring transactions for anomalies and reporting them in a timely manner. This change reflects the Australian Government’s recognition that the risk of money-laundering is not limited to the traditional financial sector, and that many professional service industries also have the potential to be “exploited”.
2. European Union
In May 2024, the EU also adopted a comprehensive anti-money laundering and counter-terrorism financing (AML/CFT) reform program. The new legislation imposes stricter anti-money laundering obligations on all “obliged entities” (including accountants, auditors and tax advisors). These firms will henceforth be subject to more specific responsibilities in the areas of client identification, transparency of the source of funds, and monitoring of unusual transactions. The introduction of the new regulation not only complements the existing regulatory framework, but also means that the harmonization of institutional standards among EU member States will gradually be achieved, enhancing the ability of the entire region to prevent and control illicit financial flows.
3. China
China’s newly amended Anti-Money Laundering Law (AML Law), which came into effect on January 1, 2025, explicitly brings key industries outside of traditional finance, such as real estate, legal, accounting and corporate services organizations, under AML regulation for the first time. This expansion not only fills a regulatory gap in the past, but also responds to the reality that the proportion of service industries in China’s economic structure has risen in recent years. At the same time, the new law increases the regulation of online payment, digital currency and other fields, and clarifies the regulatory responsibility and reporting mechanism, showing the vigilance to the “technology-based money laundering” means. This technology-oriented reform idea also makes China’s anti-money laundering system more forward-looking in the digital era.
In the face of an increasingly stringent global regulatory environment, companies can no longer rely on old experience or a “low profile” mindset. Anti-money laundering compliance is no longer the exclusive task of large financial institutions, but small and medium-sized enterprises, especially those involved in cross-border transactions or in high-risk industries, must also take the initiative to enhance their compliance capabilities. This is not only a legal obligation, but also the key to stabilizing business operations and avoiding “passive backstabbing”.
1. Improving customer due diligence mechanism
Enterprises should conduct basic reviews, including identification, verification of beneficial owners, and examination of the source of funds, in accordance with the principles of “Know Your Customer” (KYC) or “Know Your Business Customer” (KYB). For customers with third-party payments, offshore accounts, or links to high-risk countries, it is important to request additional documentation and even conduct enhanced due diligence (EDD) before moving forward. This type of process helps companies to identify potentially risky customers, prevent the possibility of being used as a channel for money laundering, and also to ensure a well-documented and compliant process when subject to regulatory scrutiny in the future.
2. Establishment of internal compliance systems and training
Secondly, enterprises should view compliance as a long-term strategy in their daily operations rather than a temporary response to meet inspections. The core of establishing an internal compliance mechanism does not lie in the number of rules and regulations, but in the ability to truly develop a sensitivity to risk and a consensus on responsibility in the corporate culture. Only when the awareness of compliance penetrates into the daily judgment of management and frontline staff can an enterprise make sound and prudent decisions in the face of complex transactions or external pressures. Once mature, this type of mechanism will become an important guarantee for stable business operations.
3. Establishment of a compliance framework in collaboration with lawyers
Enterprises wishing to establish a systematic compliance framework often cannot do so without the support of professional lawyers. The development of compliance policies, the review of the legality of documents, the design of the content of employee training, and even how to take appropriate legal action when problems are detected, all require the experience and judgment of a professional legal team. We have noticed that many small and medium enterprises do not violate the law intentionally, but rather have limited understanding of the relevant regulations and unclear processes, and thus fall into risk without knowing it. At this point, lawyers should not only play the role of “mending the fold”, but also be a partner in establishing compliance mechanisms from the very beginning.
In the current environment of increasingly strict compliance, money laundering risk is no longer limited to large financial institutions, and any enterprise involved in international business and high-value transactions is facing serious challenges. Establishing the concept of “compliance before cooperation” is not only the necessary bottom line to prevent legal risks, but also a solid guarantee for enterprises to realize long-term development.
As a law firm specializing in corporate legal affairs and with extensive experience in China-Australia cross-border compliance, Sunfield Chambers Solicitors & Associates understands the challenges faced by our clients in dealing with multiple regulations. Whether it is establishing compliance mechanisms, handling offshore due diligence, or responding to unexpected risks, we are committed to providing practical, feasible and forward-looking legal support to enterprises.
Written by Xueying Yang; Content planning: Zhou Yan; Xueying Yang; Proofreading: Sun Gang
The content of this article is based on publicly available information and the author’s understanding, and does not constitute any form of professional legal advice or basis for business decisions. Readers should refer to this article in the context of their own actual situation and consult relevant professionals for specific guidance. The author and the publishing platform do not assume legal responsibility for any consequences arising from the use of the information in this article.
Consultation with Specialized Lawyers
Abraham Sun
Principal Solicitor
As the Principal Solicitor, Abraham has been working with numerous clients including listed companies, state-owned enterprises, ultra-high-net-worth clients, and investment banks. Customers in various industries including Australian and Chinese companies and individual investors, had achieved considerable economic benefits with his professional legal advice.
Dickson Luo
Solicitor
Dickson mainly conducts dispute resolutions and commercial litigation in areas across insolvency, corporations, employment, real property and consumer law. He is proficient in English and Chinese Mandarin, and have extensive experience acting for clients who have limited or no English skills in complex disputes and litigation matters.
Linda Thai
Solicitor
Linda assisted our legal team with a range of litigation matters in Australian intermediate and superior courts. She has established solid foundations in litigation from assisting in matters from the initial investigation stage to briefing and liaising with barristers and also assisting our solicitors at court appearances.
Bhanu Seemar
Solicitor
Bhanu is a commercial litigation lawyer who has extensive experience working closely with counsel on a range of commercial law matters including contract disputes, insolvency disputes, consumer and franchise disputes, shareholder claims, financial services and regulatory enforcement matters, corporations law, and class action litigation.
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