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Digital Asset Licensing After 30 September 2026: Do You Need an AFSL Variation?

Hannah Deuk — Thu, 15 Oct 2026 17:45:38 +0000

Introduction

Australian Securities and Investments Commission (ASIC)’s sector-wide no-action position for digital asset businesses passed on 30 September 2026. The position reflected ASIC’s enforcement discretion, rather than a legislative exemption, as explained in Regulatory Guide 108 (RG 108).

Existing Australian Financial Services Licence (AFSL) holders should therefore review whether their authorisations cover their digital asset products and services. This article explains when a licence variation may be required, the key steps involved, and how the current regime differs from the Corporations Amendment (Digital Assets Framework) Act 2026 (‘Digital Assets Framework Act‘), which commences on 9 April 2027.

Interactive Tool: Check If Your Digital Asset Business Needs an AFSL

AFSL Digital Asset Compliance Checker

Quickly check if your digital asset business needs to apply for, vary, or review an Australian Financial Services Licence (AFSL) after ASIC’s 2026 deadline.

Did your business provide financial services involving digital assets in Australia before 31 December 2025?

Did you lodge an AFSL application or variation, or become an authorised representative by 30 September 2026?

Does your digital asset or related arrangement qualify as a ‘financial product’ under the Corporations Act?

Does your existing AFSL cover all digital asset products, services, and client types you offer?

✅ You Are Likely Compliant (Pending ASIC Assessment)

You lodged your AFSL application or variation by 30 September 2026 and your digital asset activities are covered by your existing or pending authorisations. ASIC’s no-action position may protect you while your application is assessed, but this does not authorise the conduct. Clients may still have rescission rights under Section 925A of the Corporations Act 2001 (Cth).

Continue monitoring for changes under the Corporations Amendment (Digital Assets Framework) Act 2026 (Cth) from 9 April 2027.

Section 911A(1) of the Corporations Act 2001 (Cth)
Section 914A of the Corporations Act 2001 (Cth)
Section 916A of the Corporations Act 2001 (Cth)
Section 925A of the Corporations Act 2001 (Cth)
Corporations Amendment (Digital Assets Framework) Act 2026 (Cth)

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⚠️ You May Need an AFSL Variation

Your existing AFSL may not cover all your digital asset products, services, or client types. Section 911A(1) of the Corporations Act 2001 (Cth) requires your licence to match your activities. Consider applying for a variation under Section 914A.

ASIC may consider tailored authorisations for novel digital asset arrangements (RG 1.65(k)).

Section 911A(1) of the Corporations Act 2001 (Cth)
Section 914A of the Corporations Act 2001 (Cth)
Regulatory Guide 1 (RG 1.65(k))

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❌ Not Compliant – Immediate Legal Risk

You did not lodge an AFSL application or variation by 30 September 2026 and/or your activities are not covered. Section 911A(1) of the Corporations Act 2001 (Cth) is a civil penalty provision (Section 911A(5B)), with maximum penalties for bodies corporate under Section 1317G(4) and criminal liability under Section 1311(1) and Schedule 3.

Operating without the correct authorisation exposes you to significant fines and possible criminal charges.

Section 911A(1) of the Corporations Act 2001 (Cth)
Section 911A(5B) of the Corporations Act 2001 (Cth)
Section 1317G(4) of the Corporations Act 2001 (Cth)
Section 1311(1) and Schedule 3 of the Corporations Act 2001 (Cth)

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⚖️ Uncertain – Seek Professional Assessment

If you are unsure whether your digital asset or arrangement is a ‘financial product’, or whether your AFSL covers your activities, you should seek legal advice. The classification depends on the asset’s rights, features, and use, as well as the services you provide (Sections 763A, 763B, 764A, 766A–766E of the Corporations Act 2001 (Cth)).

Sections 763A, 763B, 764A, 766A–766E of the Corporations Act 2001 (Cth)
ASIC Information Sheet 225 (INFO 225)

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Understanding ASIC’s 2026 Digital Asset Licensing Deadline

Who Can Rely on ASIC’s No-Action Position?

Eligible businesses providing financial services in Australia for digital assets that are financial products may rely on ASIC’s no-action position if they satisfy its conditions. The business must have provided the relevant financial service in Australia by 31 December 2025 and, by 30 September 2026, taken one of the following steps:

Lodge an application for an AFSL under Section 913A of the Corporations Act, including an application to vary an existing licence under Section 914A;
Become an authorised representative of an AFS licensee under Section 916A;
Use an arrangement involving a related body corporate or an intermediary authorisation that meets the conditions in the no-action letter.

As a condition of the no-action position, a business providing services to retail clients must also become a member of the Australian Financial Complaints Authority (AFCA) before lodging its application.

Once licensed, AFCA membership is a statutory obligation under Sections 912A(1)(g) and 912A(2)(c) of the Corporations Act. In addition, under the terms of ASIC’s no-action letter, the position does not cover crypto lending or earn products, most non-cash payment facilities, or derivatives relating to digital assets other than wrapped tokens.

What Happens After 30 September 2026?

Section 911A(1) of the Corporations Act applies whether the no-action position applies or not. From 1 October 2026, a firm that requires an AFSL or variation but has not satisfied the position’s conditions no longer has the benefit of ASIC’s stated enforcement forbearance.

Section 911A(1) is a civil penalty provision.
For a body corporate, the maximum pecuniary penalty under Section 1317G(4) is the greatest of:
- 50,000 penalty units;
- three times the benefit derived and detriment avoided; or
- 10% of annual turnover, capped at 2.5 million penalty units.
Contravention is also an offence.

ASIC has stated that it will not take action against an eligible firm that lodged its AFSL application or variation application by 30 September 2026 while ASIC assesses the application, subject to the no-action position’s conditions.

This does not authorise the conduct. Under RG 108, a no-action letter does not bind courts or third parties, and clients may still have rescission rights against an unlicensed provider under Section 925A of the Corporations Act. The position continues until ASIC makes a final decision, such as granting, refusing or otherwise ending the application.

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When Digital Asset Activities Require an AFSL for Your Australian Business

Is Digital Asset a Financial Product?

A digital asset is not automatically a financial product. Instead, the assessment depends on the rights, benefits, features and related arrangements attached to it, including how the asset is offered and used in practice.

Under Section 911A(1) of the Corporations Act, a person carrying on a financial services business in this jurisdiction must hold an AFSL covering the provision of those services, unless an exemption in Section 911A(2) applies.

ASIC’s Information Sheet 225 (INFO 225), which is guidance rather than law, applies the statutory definitions in Division 3 of Part 7.1 of the Corporations Act, and identifies several possible financial product categories, including:

Managed investment scheme interests
Securities, such as shares or debentures
Derivatives
Non-cash payment facilities
Facilities for making a financial investment

A digital asset may fall within more than one category. In addition, an arrangement that combines a digital asset with other products or services may be assessed as a single arrangement under Section 761B and Section 762C of the Corporations Act. The classification may change if the asset’s rights, benefits, or features change.

What Financial Service Is the Business Providing?

The AFSL question also depends on what the business does in relation to the financial product, making advice from financial services lawyers for regulated digital asset businesses valuable.

Section 766A(1) of the Corporations Act defines the financial services relevant here, which INFO 225 identifies as core:

Advice
Dealing
Making a market
Custodial or depository service

Dealing can include issuing, acquiring, disposing of, varying or arranging transactions involving a financial product. Financial product advice may arise where the business recommends an asset or expresses an opinion intended to influence a person’s decision. A business that regularly quotes prices at which it will buy or sell a financial product may be making a market.

Custody requires separate attention. Under Section 766E(1) of the Corporations Act, a custodial, or depository service involves holding a financial product, or a beneficial interest in one, on trust for or on behalf of a client under an arrangement.

ASIC’s view in INFO 225 is that where a provider controls private keys connected with a public blockchain address and holds financial products or a beneficial interest for clients, the provider will likely be providing that service. However, a self-custody or self-hosted wallet arrangement is unlikely to involve that service where the client retains control of the private keys.

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When Existing AFSL Holders Need a Licence Variation for Digital Assets

Are Your Existing Authorisations Broad Enough?

An existing AFSL does not automatically cover every digital asset activity, because Section 911A(1) of the Corporations Act requires the licence to cover the particular services provided. Authorisations are licence conditions, imposed and varied under Section 914A. It is therefore important to compare each proposed activity with the product, financial service and client authorisations already stated on the licence.

The comparison should cover whether the business will provide advice, deal in financial products, make a market, or provide a custodial or depository service. It should also confirm whether services will be provided to retail clients, wholesale clients, or both. Regulatory Guide 1 (RG 1) at RG 1.47 states that licensees should apply only for authorisations covering the financial services and products they intend to provide.

What New Authorisations May Be Required?

Any additional authorisations depend on the type of financial product, the financial services provided and the clients receiving those services. Under Regulatory Guide 1 at RG 1.45, authorisations affect:

the financial services a business may provide;
the products those services may relate to;
the clients it may serve; and
its obligations as a licensee.

Possible additions may include authorisations covering any of the financial services identified above—for example, financial product advice, dealing, market making or a custodial or depository service.

ASIC may consider a tailored authorisation where a digital asset product or arrangement is novel and does not fit an existing category, as described in RG 1 at RG 1.65(k).

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What an AFSL Variation Application Involves for Financial Services Businesses

Responsible Managers & Organisational Competence

Under Section 912A(1)(e) of the Corporations Act, a financial services licensee must maintain the competence to provide the financial services covered by its licence. Section 912A(1)(e) does not refer to responsible managers. Under its guidance in Regulatory Guide 105 (RG 105), ASIC assesses this requirement by reviewing the knowledge and skills of the nominated responsible managers.

For digital asset businesses, ASIC expects responsible managers to demonstrate:

relevant products and services experience;
an understanding of the technology supporting those products; and
knowledge of the regulatory requirements applying to an AFS licensee.

The number and experience of responsible managers will depend on the nature, scale, and complexity of the business.

To show how each responsible manager’s experience supports the new authorisations, our AFSL Table of Organisational Competence Template (Formerly B1.3) offers a structured starting point.

Financial & Operational Requirements

An AFSL variation may affect the financial and operational requirements applying to a business. RG 1.208 identifies base-level financial requirements, surplus liquid funds requirements where the business holds client money or property, and adjusted surplus liquid funds requirements where it transacts with clients as principal.

A custodial or depository service may also attract additional financial requirements. ASIC states that custodians will typically require at least $10 million in net tangible assets, subject to the circumstances of the service.

Where the variation changes your financial requirements, our AFSL Financial Resources Template (Formerly B5) can help you document how you will meet them.

Businesses providing financial services to retail clients must also maintain compensation arrangements, with professional indemnity insurance being the primary method under Section 912B of the Corporations Act and RG 1.239.

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Why Digital Asset Businesses Cannot Wait for the New Digital Assets Framework

What changes on 9 April 2027?

The Digital Assets Framework Act commences on 9 April 2027 and introduces specific rules for digital asset platforms (DAPs) and tokenised custody platforms (TCPs). These platforms become financial products unless an applicable exception applies. The new regime also introduces requirements concerning:

asset-holding standards;
transactional and settlement standards;
platform rules; and
disclosure through a DAP/TCP Guide for retail clients.

ASIC has stated that it will issue further guidance and standards as part of the transition to the new regime.

Will Existing AFSL Authorisations Still Matter?

Existing AFSL authorisations will continue to matter after 9 April 2027. ASIC has stated that many existing authorisations will still be required, so the Digital Assets Framework Act does not remove the need to hold authorisations covering existing financial products and services.

The transitional provisions provide a six-month transition period for certain DAP/TCP financial services. A business that does not hold an authorisation covering the relevant service may apply for an AFSL or vary its existing licence during that period. Some businesses may therefore need further variations as the new regime begins.

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Practical Steps for AFSL Holders

Classifying Digital Assets & Mapping Financial Services

Assess each digital asset together with its related arrangements, rather than relying on the asset’s label. Review the rights, benefits, features, terms, marketing materials and how customers use the product.

A digital asset or related arrangement may fall within more than one of the financial product categories discussed above. Next, map the services provided for each product, as identified above. Finally, reassess the classification if the asset’s rights, benefits, or features change.

Assessing Existing Authorisations & Lodging Your Variation Application

Compare the mapped products, services, and client types with the authorisations on your existing AFSL. Check whether the business provides services to retail clients, wholesale clients, or both, and whether responsible managers have the knowledge and skills required for the proposed activities under Section 912A(1)(e) of the Corporations Act.

If additional authorisations are needed, AFSL application and variation lawyers can help you apply to vary the licence through the ASIC Regulatory Portal and pay the application fee when lodging. As noted above, applicants should seek authorisations for the services and products they intend to provide, rather than adding authorisations speculatively. To rely on ASIC’s no-action position, an eligible business had to lodge its variation application on or before 30 September 2026.

Conclusion

Digital asset businesses do not all require an AFSL, but classification depends on the asset’s rights, features, related arrangements and the financial services provided. Existing AFSL holders should review their authorisations and, where required, lodge a variation application.

With that review in mind, contact Click Legal’s lawyers for AFSL applications and variations to assess your digital asset activities, existing authorisations and licensing options. Our Australian commercial and financial services lawyers can help identify whether a variation may be required and support your licensing position following the 30 September 2026 deadline, while keeping the existing regime separate from the Digital Assets Framework commencing on 9 April 2027.

Frequently Asked Questions

Do all digital asset businesses need an AFSL?

No. The need for an AFSL depends on whether the digital asset or related arrangement is a financial product and whether the business provides a financial service in relation to it.

Does an existing AFSL cover digital asset activities automatically?

No. An AFSL only covers the financial products and services listed in its authorisations, so digital asset activities may require additional authorisations.

When do I need to vary my AFSL for digital assets?

You generally need to apply for a variation when your digital asset products, services, or client types fall outside your existing authorisations. This includes expanding to new products, services or retail clients under the Corporations Act and Regulatory Guide 1.

What was ASIC’s 30 September 2026 deadline?

The 30 September 2026 deadline was for eligible businesses relying on ASIC’s no-action position to lodge an AFSL application, apply to vary an existing licence or become an authorised representative. From 1 October 2026, firms that have not met the conditions lose the benefit of ASIC’s no-action position; the obligation in Section 911A(1) applied throughout of the Corporations Act.

Can I keep operating while ASIC assesses my AFSL variation?

ASIC has stated that it will not take action against an eligible business while its application is being assessed, provided the application was lodged by 30 September 2026 and all conditions of ASIC’s no-action position are met. The no-action position may continue to apply until ASIC makes a decision on the application.

What happens when the Digital Assets Framework starts on 9 April 2027?

As discussed above, the Digital Assets Framework Act commences on 9 April 2027 and introduces rules for DAPs and TCPs. Existing AFSL authorisations may still be required after commencement.

What are the penalties for operating without the correct AFSL authorisations?

A business that operates without required authorisations may breach Section 911A(1) of the Corporations Act, as discussed above, and face civil and criminal penalties, including fines of up to 10% of annual turnover.

How does ASIC assess responsible managers for digital asset businesses?

As described above, ASIC assesses this under Section 912A(1)(e) of the Corporations Act, looking at the responsible managers’ experience with the products and services offered, the underlying technology and the regulatory requirements applying to an AFS licensee.

Are digital asset wallets considered financial products?

They can be, depending on their features and use. A wallet that allows payments to third parties may be a non-cash payment facility, while a provider controlling private keys may provide a custodial or depository service under Section 766E of the Corporations Act.

How to Vary a Restrictive AFSL Condition

Hannah Deuk — Thu, 15 Oct 2026 12:09:04 +0000

Introduction

An Australian Financial Services Licence (AFSL) may authorise a financial service or product while separately restricting how, to whom or under what circumstances the licensee operates. These restrictions can include key person conditions and other requirements imposed by the Australian Securities and Investments Commission (ASIC), and they remain binding under Section 912A(1)(b) of the Corporations Act 2001 (Cth) (‘Corporations Act‘) unless ASIC formally varies or revokes them.

AFSL holders seeking to change a restriction must apply under Section 914A and show why the original rationale no longer supports the existing condition. The discussion covers what the application must establish, supporting evidence, the distinction between ASIC-imposed and prescribed conditions, and ASIC’s assessment process under Section 914B.

Interactive Tool: See If Your AFSL Condition Can Be Varied

AFSL Restrictive Condition Variation Checker

Quickly check if your AFSL restriction can be varied or removed under the Corporations Act and what evidence you’ll need for ASIC.

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Do you have evidence showing your current arrangements address the original regulatory concern?

❌ Condition Prescribed by Regulation – Variation Not Available

Conditions prescribed by regulations, such as those under Regulation 7.6.04(1) of the Corporations Regulations 2001 (Cth), cannot be varied or revoked by ASIC under Section 914A(8) of the Corporations Act 2001 (Cth). Only ASIC-imposed conditions may be varied.

Review your licence and supporting documents to confirm the source of the restriction.

Section 914A(8) of the Corporations Act 2001 (Cth)
Corporations Regulations 2001 (Cth)

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⚠️ No Material Change – Variation Unlikely

ASIC will generally not vary or remove a restrictive AFSL condition unless you can show that the original regulatory concern has been addressed by material changes in your business. Commercial inconvenience or business growth alone is not enough.

Consider strengthening your compliance, governance, or responsible manager arrangements before reapplying.

Section 914A of the Corporations Act 2001 (Cth)
ASIC Regulatory Guide 1.9(b)

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⚠️ Evidence Not Sufficient – Strengthen Your Case

ASIC requires targeted, established evidence that your current arrangements address the specific concern behind the original AFSL condition. Generic or future-focused documents are not enough.

Gather records showing responsible manager competence, reporting lines, compliance monitoring, and succession arrangements before applying.

Section 912A(1)(e) of the Corporations Act 2001 (Cth)
ASIC INFO 294

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✅ You May Apply for Variation or Removal

If your AFSL restriction is ASIC-imposed, your business circumstances have materially changed, and you have strong, targeted evidence of compliance and competence, you may apply to vary or remove the condition under Section 914A(2)(b) of the Corporations Act 2001 (Cth).

Ensure your application clearly links the original rationale, changed circumstances, and supporting evidence. Applications are lodged via the ASIC Regulatory Portal.

Section 914A(2)(b) of the Corporations Act 2001 (Cth)
Section 912A(1)(e) of the Corporations Act 2001 (Cth)
ASIC INFO 294

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⚖️ Unsure About Your Condition? – Get Legal Guidance

Determining whether your AFSL restriction is ASIC-imposed or prescribed by regulation is critical. Review your licence documents or seek legal advice before preparing a variation application.

Section 914A of the Corporations Act 2001 (Cth)

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Can a Restrictive AFSL Condition Be Varied?

What is a Restrictive AFSL Condition?

Sections 914A(6)–(7) of the Corporations Act require the licence to specify the financial services or class of financial services the licensee is authorised to provide, including by reference to particular financial products or product classes. ASIC may also impose additional conditions under Section 914A(1)(a).

A restrictive AFSL condition is not a defined term in the Corporations Act. It describes a condition that limits how, to whom or under what circumstances an AFSL holder may operate.

ASIC’s Pro Forma (PF) 209, which sets out ASIC’s standard licence conditions rather than additional statutory requirements, shows that an authorisation condition may be tailored by:

financial services;
financial products;
client types;
capacity; or
method of service.

Separate conditions may include a key person requirement or tailored supervision, reporting, governance or operational controls.

ASIC-Imposed Conditions Versus Prescribed Conditions

Under Section 914A(1)(b) of the Corporations Act, ASIC may vary or revoke conditions imposed on an AFSL. An AFSL holder may apply for ASIC to take that action under Section 914A(2)(b) of the Corporations Act.

However, Section 914A(8) of the Corporations Act creates a separate limitation. ASIC cannot vary or revoke conditions prescribed by regulations, including conditions prescribed by Regulation 7.6.04(1) of the Corporations Regulations 2001 (Cth) (‘Corporations Regulations‘). As a result, the source of the restriction must be identified before an AFSL holder prepares a variation application.

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When Should You Consider Varying a Restrictive AFSL Condition

Changed Business Circumstances

A restrictive AFSL condition may become less appropriate when the circumstances supporting it have changed. This may occur where the business develops:

additional responsible managers;
stronger compliance systems;
clearer reporting lines;
more staff; or
established governance arrangements.

The application should explain why those changes support varying the restriction. ASIC’s Regulatory Guide (RG 1.9(b)) states that, when assessing a variation to an ‘other condition’, ASIC considers whether changing the condition is appropriate.

As a practical matter, commercial inconvenience alone is unlikely to address that question; the stronger case is to explain how the licensee’s present resources, competence, and controls address the concern underlying the condition.

Example of Varying or Removing a Key Person Condition

Consider a general licensee whose AFSL contains a key person condition naming Responsible Manager A. When the condition was imposed, the business may have relied heavily on that person’s experience to demonstrate organisational competence.

The licensee later develops overlapping experience among several responsible managers, documented succession arrangements and stronger compliance systems. It may then apply under Section 914A(2)(b) of the Corporations Act to vary or remove the condition.

Responsible Manager A’s departure does not remove the restriction automatically. The existing condition remains binding under Section 912A(1)(b) of the Corporations Act unless ASIC formally varies or revokes it under Section 914A(1)(b).

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What Should the Supporting Case Address

The Original Rationale

The application should identify the exact AFSL condition the licensee wants ASIC to vary or revoke. It should also explain why ASIC imposed that condition when the AFSL was granted or later changed.

The relevant rationale may appear in the original licensing material, ASIC correspondence, responsible manager information or the notice imposing the condition. A clear explanation of the original concern helps ASIC assess whether that concern still justifies the existing restriction.

Changed Circumstances

The application should identify the material facts that have changed since ASIC imposed the condition. Those changes must be connected to the reason the restriction was originally considered necessary.

Relevant changes may include:

additional responsible managers;
overlapping experience;
clearer reporting lines;
documented succession arrangements; and
established compliance processes.

The application should explain how those developments affect the specific concern addressed by the condition, rather than relying only on business growth or commercial inconvenience.

Remaining Regulatory Issues & Controls

The licensee should state whether the issue that led to the condition still exists. If some risk remains, the application should explain how the licensee’s existing arrangements address it without relying on the condition in its current form.

The explanation should focus on controls connected to the restriction, including:

responsible manager coverage;
supervision;
reporting lines;
documented responsibilities; and
compliance monitoring.

Assertions should be supported by evidence that the arrangements are established and operating, rather than only proposed for the future.

Complete Removal Versus Narrower Wording

The application should state whether the licensee seeks complete revocation or a narrower variation of the AFSL condition. The preferred outcome should reflect the remaining regulatory issue and the controls already operating.

A narrower condition may be more appropriate where the original concern still exists but the current restriction is broader than necessary. The proposed wording should be precise and address the actual condition, rather than asking ASIC to make the AFSL “less restrictive” in general terms.

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What Evidence Should Support the Variation

Key Person & Organisational Competence Evidence

Section 912A(1)(e) of the Corporations Act requires an AFSL holder to maintain the competence to provide the financial services covered by its licence. Separately, ASIC INFO 294 states that a key person variation will require information about the competence of the licensee’s responsible manager(s).

Where removal is sought because the named key person is no longer a responsible manager, ASIC also states that the application will need to explain why the licensee is no longer dependent on a single responsible manager.

Relevant documents may include:

responsible manager experience and competence records;
organisational charts and reporting lines;
documented responsibilities and delegation arrangements; and
succession planning showing continuity if a key person leaves.

The evidence should connect these arrangements to the original reason for the restriction and show how the AFSL holder now maintains the required competence.

Where the variation relies on several responsible managers, our AFSL Table of Organisational Competence Template (Formerly B1.3) can help show how they collectively meet competence requirements.

Operational & Governance Evidence

Evidence for an operational or governance condition should address the control that the restriction was intended to support. Relevant material may include:

policies and procedures;
compliance monitoring records;
board or committee records;
staffing information; and
assurance reports.

The documents should show that the relevant arrangements are established and operating, rather than only proposed for the future. A general collection of compliance material may carry less weight if it does not explain how the AFSL holder manages the specific issue addressed by the condition.

Our Free Compliance Guide on Core Obligations for AFS Licensees can help with reviewing core licence obligations and related compliance records.

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How to Apply to Vary a Restrictive AFSL Condition

Reviewing the Condition & Licensing History

Start by obtaining the current AFSL and reviewing the exact wording of the restrictive condition. Confirm whether it appears within an authorisation condition or as a separate condition, and check any definitions or cross-references affecting its scope.

The licensing history may include:

the original application;
ASIC correspondence;
responsible manager material;
earlier variation applications; and
any notice explaining the condition.

This review should confirm whether the condition is ASIC-imposed and may be varied under Section 914A, or prescribed by regulations and cannot be varied under Section 914A(8).

Deciding the Exact Variation Sought

The application should identify the precise outcome sought. The licensee may ask ASIC to:

revoke the condition entirely;
narrow its scope;
replace a named person; or
substitute the existing wording with another condition.

A complete revocation may be appropriate where the regulatory concern no longer exists, while narrower wording may be more suitable where some concern remains but the existing restriction is broader than necessary. The application should state the proposed wording rather than asking generally for the AFSL to become less restrictive.

Preparing the Supporting Case

The supporting case should connect the original reason for the restriction with the changes that have occurred since it was imposed. Evidence may include:

responsible manager competence records;
organisational charts;
reporting lines;
documented responsibilities;
succession arrangements;
compliance monitoring records; and
evidence that relevant controls operate.

The licensee should also explain how it will continue meeting its obligations after the proposed variation. Where relevant, this includes organisational competence under Section 912A(1)(e) of the Corporations Act. The AFSL Compliance Checklist (Free) can assist with reviewing compliance records and controls before the application is prepared.

Lodging via the Regulatory Portal

A licensee-initiated application to vary or revoke an ASIC-imposed condition is made under Section 914A(2)(b) of the Corporations Act. ASIC’s INFO 294 states that AFSL variation applications are submitted online through the ASIC Regulatory Portal.

The application should identify whether it concerns:

financial service or product authorisation conditions;
other conditions, such as a key person condition; or
both.

Since 16 June 2025, ASIC has processed these applications through the ASIC Regulatory Portal rather than the former FS03 and eLicensing process.

Section 914B and Fit & Proper Considerations

ASIC may refuse the application if the fit and proper person requirement in Section 913BA of the Corporations Act is not satisfied in relation to the applicant and the AFSL as proposed to be varied. Section 914B(2) of the Corporations Act gives ASIC this power when assessing an application under Section 914A(2)(b) of the Corporations Act.

The assessment may extend beyond the wording of the condition. The licensee should review relevant fit and proper matters before lodging the application, including information concerning people considered under Section 913BA of the Corporations Act.

Information & Audit Requests

Under Section 914B(3)(a) of the Corporations Act, ASIC may give the applicant a written notice requiring prescribed-form information about matters ASIC must have regard to when deciding whether the Section 913BA fit and proper person requirement is satisfied. Under Section 914B(3)(b), ASIC may also request an audit report on those matters, prepared by a suitably qualified person specified in the notice.

If ASIC proposes to grant the application, Section 914B(3)(c) of the Corporations Act allows it to request a statement identifying any material changes to information provided with the application or confirming that no material changes have occurred. Section 914B(5) allows ASIC to withdraw the request or extend the specified time.

If the requested information, audit report or statement is not lodged in the prescribed form within the specified time, Section 914B(6) provides that the application is taken to have been withdrawn.

If ASIC proposes to refuse the application instead, Section 914B(9) requires ASIC to first give the applicant an opportunity for a private hearing and to make submissions.

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Common Mistakes When Varying a Restrictive AFSL Condition

Focusing on the Wording Instead of the Original Rationale

A variation application should do more than identify wording the AFSL holder wants removed. It should explain why ASIC imposed the condition and what has changed since that decision.

The application should connect:

the original regulatory concern;
the condition imposed to address it;
the changes affecting that concern; and
the reason the proposed variation is now appropriate.

A request based mainly on commercial inconvenience may not address the issue ASIC must assess. The focus should remain on whether the condition is still required in its existing form.

Providing Generic or Future-Focused Evidence

A broad collection of compliance documents may not establish why a restrictive AFSL condition should change. The evidence should relate directly to the concern that led ASIC to impose the condition.

Documents showing established arrangements may carry greater weight than controls that exist only as proposals. Relevant material may include:

responsible manager records;
reporting lines;
documented responsibilities;
succession arrangements;
compliance monitoring records; and
evidence that governance or operational controls are functioning.

The application should show what the AFSL holder does now, rather than relying mainly on measures it intends to introduce after ASIC varies the condition.

Assuming Business Growth Alone Justifies the Variation

Business growth does not, by itself, establish that an AFSL condition is no longer necessary. A larger business may still have the same competence, supervision, or governance concern that supported the original restriction.

The application should explain how the change in size or resources affects the specific regulatory issue. Relevant evidence may include:

additional responsible managers with overlapping experience;
clearer reporting and delegation arrangements;
established compliance systems; and
succession arrangements supporting continuity.

The connection between growth and reduced reliance on the restriction must be explained rather than assumed.

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Assuming the Condition Stops Applying Once You Apply

Lodging an application does not suspend the existing AFSL condition. The restriction remains binding under Section 912A(1)(b) of the Corporations Act while ASIC considers the application, and the AFSL holder should continue operating within it unless and until ASIC formally varies or revokes it under Section 914A(1)(b) of the Corporations Act. An application alone does not authorise activities that the existing condition prevents.

Conclusion

Varying a restrictive AFSL condition requires identifying its legal source, explaining the changed circumstances and showing why the existing restriction is no longer necessary or should be narrowed. The licensee must support its application with targeted evidence and continue complying with the existing condition.

For assistance with the next step, contact Click Legal’s AFSL application lawyers in NSW for varying restrictive licence conditions to assess the condition, prepare the supporting case and help present the application clearly to ASIC.

Frequently Asked Questions

Can ASIC vary a restrictive condition on an AFSL?

Yes, if ASIC imposed the condition. Under Section 914A(1)(b) of the Corporations Act, ASIC may vary or revoke it, including on an application under Section 914A(2)(b).

Can every AFSL condition be varied?

No. Section 914A(8) of the Corporations Act prevents ASIC from varying or revoking conditions prescribed by regulations, including conditions prescribed by Regulation 7.6.04(1) of the Corporations Regulations.

What is a restrictive AFSL condition?

A restrictive AFSL condition limits how, to whom or under what circumstances an AFSL holder may operate. The term is not defined in the Corporations Act.

Can a key person condition be removed?

Potentially. The licensee must show that its organisational competence no longer depends materially on the named person and continues to satisfy Section 912A(1)(e) of the Corporations Act.

What evidence should support an AFSL condition variation?

The evidence depends on why the condition was imposed and may include responsible manager records, organisational charts, governance documents, reporting lines, succession arrangements and compliance records.

Does ASIC reassess fit and proper persons during a variation?

It can. Under Section 914B(2) of the Corporations Act, ASIC may refuse the application if the Section 913BA fit and proper person requirement is not satisfied for the applicant and proposed licence.

Can ASIC request an audit report?

Yes. Section 914B(3)(b) of the Corporations Act allows ASIC to request an audit report from a suitably qualified person about matters relevant to the Section 913BA fit and proper person requirement.

How do you apply to vary an AFSL condition?

The licensee applies under Section 914A(2)(b) of the Corporations Act through the ASIC Regulatory Portal. The application identifies whether it concerns authorisation conditions, other conditions or both.

Can a licensee stop complying with the restrictive condition while ASIC considers the variation?

No. Section 912A(1)(b) of the Corporations Act requires compliance with the AFSL’s conditions until ASIC formally varies or revokes the condition.

ASIC’s RG 1: A Practical Guide to Applying for or Varying an AFSL

Hannah Deuk — Thu, 15 Oct 2026 11:17:56 +0000

Introduction

Issued by Australian Securities and Investments Commission (ASIC) in June 2025, Regulatory Guide 1 (RG 1) explains ASIC’s approach to assessing applications for an Australian Financial Services Licence (AFSL) and variations to existing licences. It also identifies the information and documentation applicants must provide.

RG 1 applies to new AFSL applicants, existing licensees seeking to vary their authorisations, and foreign financial services providers. In this article, we explain how ASIC assesses AFSL applications and variations, focusing on key requirements for authorisations, responsible managers, fit and proper people, financial resources and supporting documents.

Interactive Tool: See If You’re Ready to Apply for or Vary Your AFSL

AFSL Application & Variation Readiness Checker

Quickly check if you’re ready to apply for or vary an Australian Financial Services Licence (AFSL) under ASIC RG 1.

Question 1 of 3

What is your current AFSL status?

Question 2 of 3

Which best describes your business change?

Question 3 of 3

Have you prepared all required People Proofs for responsible managers and fit & proper persons (no more than 12 months old)?

✅ You Appear Ready to Apply or Vary Your AFSL

Great work! Based on your answers, you have addressed the key requirements under ASIC Regulatory Guide 1 and the Corporations Act 2001 (Cth). Ensure your application clearly describes your business, authorisations sought, and includes up-to-date People Proofs for all responsible managers and fit & proper persons.

Remember, ASIC may request further information during assessment (see Section 913B(3) of the Corporations Act 2001 (Cth)).

Legal References:

Section 912A(1)(e) of the Corporations Act 2001 (Cth)
Section 913B(3) of the Corporations Act 2001 (Cth)
RG 1.8, RG 1.45, RG 1.148–RG 1.149

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⚠️ You Need to Prepare Required People Proofs

ASIC requires up-to-date People Proofs for all responsible managers and fit & proper persons, including a national criminal history check, bankruptcy check, and Statement of Personal Information (see RG 1.146–RG 1.150). These must be no more than 12 months old and in English or with a certified translation.

Your application may be delayed or refused if these documents are missing.

Legal References:

Section 913BA of the Corporations Act 2001 (Cth)
RG 1.146–RG 1.150

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⚖️ No Variation Required for Simple Updates

If you are only updating business or contact details (not adding services, products, or client types), a formal licence variation is generally not required. However, you must notify ASIC of changes as required by your licence conditions and the Corporations Act 2001 (Cth).

Legal References:

Section 912A of the Corporations Act 2001 (Cth)
RG 1.9

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ASIC’s Approach to AFSL Applications

Assessment of the Applicant

Under Section 913B(1)(b) of the Corporations Act 2001 (Cth) (‘Corporations Act’), ASIC must be satisfied that it has no reason to believe the applicant will not comply with the obligations that will apply under Section 912A if the licence is granted. RG 1.8 states that ASIC considers the following:

Competence: the applicant’s competence to provide the proposed financial services;
Financial resources: sufficient financial resources, where applicable;
Risk management: adequate risk management systems;
Fit and proper requirements: compliance with the applicable requirements;
Dispute resolution and compensation: appropriate arrangements for retail clients; and
Ongoing obligations: the ability to comply with its other obligations as an AFS licensee.

Under Section 913B(1) of the Corporations Act, read with Sections 913BA and 913BB, ASIC must also be satisfied that there is no reason to believe the applicant, or the relevant people associated with it, are not fit and proper.

For a variation, ASIC considers whether the applicant has the capacity and competence to provide the additional financial services or products covered by the requested change.

Understanding ASIC’s Risk-Based Procedure

ASIC’s assessment of financial resources depends on the financial services and products proposed, together with the nature, scale, and complexity of the business. RG 1.207 explains that these factors affect the financial requirements an applicant may need to meet.

ASIC’s financial requirements support effective financial risk management, while the broader risk management obligation under section 912A(1)(h) of the Corporations Act requires applicants to maintain adequate risk management systems, as outlined in RG 104.

Requests for Further Information

ASIC may request clarification or supporting material after accepting an application for assessment. RG 1.192 states that the requested responses and documents will depend on what ASIC considers relevant to deciding whether the application should be granted.

Under Section 913B(3) of the Corporations Act, ASIC may give written notice requiring an applicant to provide:

information;
an audit report; or
a statement about material changes to information already lodged.

If the applicant does not provide the requested material in the required form and time, the application is taken to have been withdrawn under Section 913B(4B) of the Corporations Act.

Possible AFSL Outcomes

Under Section 913B(1) of the Corporations Act, ASIC must grant an AFS licence if, and only if, the requirements are met, including:

the application was made in accordance with Section 913A;
the fit and proper person requirements; and
that ASIC has no reason to believe the applicant will not comply with the obligations that will apply under Section 912A.

Under Section 914A of the Corporations Act, ASIC may impose conditions on a licence. ASIC’s practice, described in RG 1, is to impose a key person condition where the business depends heavily on one or more responsible managers.

Under RG 1.175–RG 1.176, that condition can require notification if the key person leaves and the nomination of another suitably qualified responsible manager.

ASIC must refuse an application containing materially false or misleading information, or a material omission, under Section 913B(2) of the Corporations Act. Lodging false or misleading information with ASIC may also be an offence under Section 1308.

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Selecting & Varying AFSL Authorisations

Selecting the Scope of Your Licence

RG 1.45 explains that your AFS licence authorisations determine:

the financial services you can provide;
the financial products those services may relate to;
the obligations that apply to you as a licensee.

RG 1.46 states that applicants should assess each proposed business activity to identify whether it is a financial service and which authorisation is required.

RG 1.47 states that you should apply only for authorisations covering the financial services and products you intend to provide if the licence is granted. If you are unsure which authorisations to seek, we recommend obtaining legal advice. Seeking authorisations on a “just in case” basis may increase the application fee, industry funding levies and the time ASIC needs to assess the application.

Variations to Existing Licence Authorisations

RG 1.9 states that a variation may be required when an existing financial services business changes. ASIC assesses whether the licensee has the capacity and competence to provide any additional financial services or products, or whether changes to other licence conditions are appropriate.

RG 1.38 identifies business expansion as one situation where a variation is likely to be needed. This can include:

adding financial services or products; or
extending services to different client types, such as retail clients.

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Demonstrating Organisational Competence & Fit & Proper People

The Role of Responsible Managers

‘Responsible manager’ is not a term defined in the Corporations Act. It is the mechanism ASIC uses to assess compliance with Section 912A(1)(e). RG 1.167–RG 1.171 describes responsible managers as the people who manage the financial services business and make significant day-to-day decisions about providing financial services.

Under RG 105, ASIC assesses the organisational competence obligation in Section 912A(1)(e) of the Corporations Act by examining the knowledge and skills of these people.

Applicants should nominate only people who are directly responsible for significant day-to-day decisions. The number of responsible managers depends on the nature, scale, and complexity of the business.

Demonstrating Competence

ASIC expects each responsible manager to meet one of the five options in Section C of RG 105 for demonstrating appropriate knowledge and skills. The responsible managers must also collectively cover all financial services and products included in the proposed authorisations.

The relevant experience must relate to the services and products the applicant seeks to provide. RG 105.39–RG 105.40 recognises that experience gained under another licence authorisation may be relevant, but the applicant must demonstrate why that experience provides appropriate knowledge and skills for the new authorisations.

To show how your responsible managers collectively cover each proposed authorisation, our AFSL Table of Organisational Competence Template (Formerly B1.3) helps you spot gaps before lodging.

Who May Be Assessed Under the Fit & Proper Test

Section 913BA of the Corporations Act, as explained in RG 1.141–RG 1.145, applies to the applicant and specified people connected with its management or control. The people assessed may include:

officers of a body corporate;
partners or trustees of a partnership or multiple trustee;
senior managers of a partnership or trust;
the individual applicant; and
controllers of the applicant, including relevant officers, partners, trustees and senior managers.

‘Control’ has the meaning given in Section 50AA of the Corporations Act, which is the capacity to determine the outcome of decisions about an entity’s financial and operating policies.

These include prior licence suspension or cancellation, banning and disqualification orders, relevant convictions within the previous 10 years, insolvency history, and any other matter ASIC considers relevant. RG 1.139 states that ASIC considers competence, character, diligence, honesty, integrity, judgement, legal disqualification and material conflicts of interest.

Information ASIC Considers for Fit & Proper People

Under RG 1.146–RG 1.150, ASIC considers the matters required by Section 913BB(2) of the Corporations Act and requires information and supporting documents for each relevant fit and proper person. ASIC requires (as an administrative requirement under RG 1, rather than a statutory one) that these People Proofs be no more than 12 months old and include:

a national criminal history check, including overseas checks where required;
a bankruptcy check for each relevant country of residence; and
a completed and signed Statement of Personal Information.

RG 1.150 states that documents must be in English or accompanied by a certified translation. RG 1.148 also confirms that People Proofs are required for responsible managers, even where they are assessed separately from the people covered by Section 913BA of the Corporations Act.

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Financial Resources & Other General Licence Requirements

Meeting the Financial Requirements

Under Section 912A(1)(d) of the Corporations Act, a licensee must have available adequate resources (including financial, technological and human resources). ASIC imposes its specific financial requirements as licence conditions under Section 914A, as explained in RG 1.206–RG 1.213. The applicable requirements depend on the financial services and products offered, together with the nature, scale, and complexity of the business.

RG 1 identifies three possible components:

base-level financial requirements;
a surplus liquid funds requirement where the licensee holds client money or property; and
an adjusted surplus liquid funds requirement where the licensee transacts with clients as principal.

The financial resource obligation in Section 912A(1)(d) of the Corporations Act does not apply to a body regulated by the Australian Prudential Regulation Authority (APRA).

Compensation & Risk Management Obligations

Applicants providing financial services to retail clients must address dispute resolution and compensation arrangements. Under Section 912A(1)(g) and Section 912A(2) of the Corporations Act, the dispute resolution system must include:

an internal dispute resolution procedure that complies with the standards and requirements made or approved by ASIC, under Section 912A(2)(a); and
membership of the Australian Financial Complaints Authority (AFCA) scheme.

RG 1.230–RG 1.235 states that ASIC will only issue the licence if the applicant is an AFCA member.

Under Section 912B of the Corporations Act, retail client compensation arrangements are also required, with professional indemnity insurance being the primary method described in RG 1.236–RG 1.242 and RG 126. The arrangements must satisfy the requirements in Regulation 7.6.02AAA of the Corporations Regulations, or be approved by ASIC, under Section 912B(2).

As noted above under Section 912A(1)(h) of the Corporations Act, applicants must maintain adequate risk management systems unless an APRA-related exception applies. RG 1.226–RG 1.229 states that those systems should address risks specific to the business and reflect its nature, scale, complexity, and risk profile.

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Documents & Information RG 1 Expects

Core Application Information Required

Under Section 913A of the Corporations Act, an application must include the information, and be accompanied by the documents, required by the regulations. RG 1.36–RG 1.37 expects applicants to describe how their financial services business operates. The information should cover:

financial services and products;
income sources and the estimated proportion of income from each service or product;
expected business growth;
retail or wholesale clients;
distribution channels and service delivery methods;
Australian and overseas operations;
compliance supervision and monitoring; and
outsourced functions and service providers.

ASIC also recommends diagrams showing the business model, significant supporting entities, outsourced services, and relevant transaction and money flows.

To draw this information together for an application or variation, our AFSL Business Description Template (Formerly A5) provides a structured starting point.

Additional Information ASIC May Request

ASIC may request further material after accepting an application for assessment, as described above under Section 913B(3) of the Corporations Act. Materials requested may include updated financial statements, cash flow projections, or additional proofs for complex authorisations, such as foreign exchange activities. Applicants should respond in the prescribed form and within the time stated in ASIC’s notice.

What RG 1 Does Not Cover in Detail & Practical Takeaways

Cross-References to RG 105 & Organisational Competence

RG 1 Applying for and varying an AFS licence gives an overview of how ASIC assesses organisational competence but directs applicants to RG 105 AFS licensing: Organisational competence for further detail.

As discussed above, each responsible manager must meet one of the five options in Section C of RG 105 and must collectively cover all financial services and products included in the proposed authorisations, as explained in RG 105.54.

Specialist Licensing Guidance for Specific Services

RG 1 does not set out every requirement that may apply to a proposed financial services business; instead, it directs applicants to specialist guidance dealing with particular services, products, and licence obligations. Relevant guides include:

RG 166 AFS licensing: Financial requirements, for detailed financial resource requirements;
RG 271 Internal dispute resolution, for retail client complaint procedures; and
RG 126 Compensation and insurance arrangements for AFS licensees, for compensation arrangements and professional indemnity insurance.

RG 1.42, RG 1.43 and RG 1.211 identify these cross-references so applicants can locate the guidance that relates to their proposed authorisations.

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Practical Takeaways for AFSL Applicants & Licensees

Applicants should compare their proposed business activities with the authorisations they seek, and apply only for those covering the financial services and products they intend to provide (see RG 1.47 above).

People Proofs should also be prepared early. As discussed above (RG 1.148–RG 1.149), these documents are required for relevant fit and proper people and responsible managers and must be no more than 12 months old.

Conclusion

ASIC RG 1 Applying for and varying an AFS licence explains how ASIC assesses applications, variations, people, authorisations, resources and supporting documents. It provides an overview of ASIC’s approach under the Corporations Act, while directing applicants to more detailed guidance where specific obligations apply.

For help assessing your proposed authorisations or preparing an AFS licence application or variation, contact Click Legal’s AFSL application and variation lawyers. Our team can help you understand what ASIC expects, identify relevant supporting material and present your business information clearly. Reach out to Click Legal to discuss your licensing requirements and reduce avoidable delays during the assessment process.

Frequently Asked Questions

What is ASIC Regulatory Guide 1?

ASIC RG 1 explains ASIC’s approach to assessing AFSL applications. It also outlines the information and documents applicants must provide when applying for or varying a licence.

Who does Regulatory Guide 1 apply to?

RG 1 applies to people and entities applying for an AFSL or varying an existing licence. It also applies to foreign financial services providers seeking or varying a foreign AFS licence.

Does Regulatory Guide 1 apply to AFSL variations?

Yes, RG 1 applies to licence variations. A variation may be needed when your business adds financial services, products or client types, as described in RG 1.9 and RG 1.38.

Is ASIC Regulatory Guide 1 legally binding?

No, RG 1 is guidance and does not constitute legal advice. It explains ASIC’s interpretation of the Corporations Act and how ASIC exercises its statutory powers.

What does Regulatory Guide 1 say about responsible managers?

RG 1 says responsible managers manage the financial services business and make significant day-to-day decisions. ASIC assesses their knowledge, skills, and fitness under Section 912A(1)(e) and Section 913BA of the Corporations Act.

What documents does Regulatory Guide 1 require?

RG 1 requires business information and People Proofs for relevant fit and proper people. People Proofs include a Statement of Personal Information, national criminal history check and bankruptcy check, each no more than 12 months old under RG 1.148–RG 1.149.

Does Regulatory Guide 1 contain all AFSL licensing requirements?

No, RG 1 provides an overview rather than covering every licensing requirement. It directs applicants to other guidance, including RG 105 for organisational competence and RG 166 for financial requirements.

How long does ASIC take to assess an AFSL variation application?

ASIC publishes its target assessment timeframes in its Service Charter, and complex applications may take longer if ASIC requests further information. Complex applications may take longer if ASIC requests further information or supporting documents.

Can a trust hold an Australian Financial Services Licence?

No, a trust cannot hold an Australian financial services licence. Under RG 1.20–RG 1.21, the trustee must apply in the trustee’s own name or the name of the corporate trustee.

Independent Evaluations Under the Reformed AML/CTF Act: What Has Changed

Hannah Deuk — Fri, 09 Oct 2026 01:04:44 +0000

Since 31 March 2026, the familiar AML/CTF “independent review” has been replaced by a broader “independent evaluation”.

For newly regulated tranche 2 businesses, the obligation applies from 1 July 2026.

The change is more than a new label.

The evaluation now covers your whole AML/CTF program, the requirement sits in the AML/CTF Act itself, and there is a firm three-year limit between evaluations.

Below is a plain English comparison of the old and new rules, the relevant sections, and the practical steps to take now.

Interactive Tool: Find Out When Your First AML/CTF Evaluation Is Due

AML/CTF Independent Evaluation Deadline Checker

Find out your next AML/CTF independent evaluation deadline and what steps you must take under the reformed Act.

What type of reporting entity are you?

Have you previously completed an independent review of your AML/CTF program?

When was your most recent independent review completed?

✅ Your first evaluation deadline is 31 March 2027 or 4 years after your last review

As an existing reporting entity with a prior review, your first independent evaluation under Section 26F(4)(f) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) is due by the later of 31 March 2027 or 4 years after your last review.

Ensure your AML/CTF policies are updated to reflect the new evaluation requirements and document your process for selecting an independent evaluator. Updates to your program following adverse findings must be made and documented within 14 days.

For tailored advice or to book your evaluation, speak to our AML/CTF lawyers.

Legal References:

Section 26F(4)(f) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)

Section 5-10 of the Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 (Cth)

Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth)

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⚠️ Your evaluation is overdue – act immediately

Your last independent review was over 4 years ago. Under Section 26F(4)(f) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), your first independent evaluation is now due.

Failure to comply may expose you to civil penalties and regulatory action. Update your AML/CTF program, schedule your evaluation, and ensure all findings are addressed and documented within 14 days.

Contact our AML/CTF lawyers for urgent assistance.

Legal References:

Section 26F(4)(f) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)

Section 26G of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)

Get Urgent AML/CTF Legal Advice

⚠️ Your evaluation is overdue – act immediately

You have never completed an independent review. Under Section 26F(4)(f) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), your first independent evaluation is now due.

Failure to comply may expose you to civil penalties and regulatory action. Update your AML/CTF program, schedule your evaluation immediately, and ensure all findings are addressed and documented within 14 days.

Contact our AML/CTF lawyers for urgent assistance.

Legal References:

Section 26F(4)(f) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)

Section 26G of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)

Get Urgent AML/CTF Legal Advice

✅ Your first evaluation is due no earlier than 1 July 2029

As a newly regulated (Tranche 2) business, your first independent evaluation under Section 26F(4)(f) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) is not due before 1 July 2029.

However, you must enrol with AUSTRAC, implement a compliant AML/CTF program, and prepare for your first evaluation by documenting your risk assessment and evaluation process.

Our lawyers can help you set up your program and ensure you are ready for the new obligations.

Legal References:

Section 26F(4)(f) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)

Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 (Cth)

Get AML/CTF Program Setup Advice

⚖️ No independent evaluation required for item 54 arrangers

If you only provide item 54 services, Section 26F(4) does not apply and you are exempt from the independent evaluation requirement.

However, you must still comply with all other relevant AML/CTF obligations.

If you are unsure of your obligations or provide additional services, seek legal advice.

Legal References:

Section 26T(3)(a) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)

Speak to an AML/CTF Lawyer

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Where the obligation now sits

The requirement is in section 26F(4)(f) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), inserted by the AML/CTF Amendment Act 2024. It says a reporting entity’s AML/CTF policies must deal with:

(f) the conduct of independent evaluations of the reporting entity’s AML/CTF program, including the frequency with which such evaluations must be conducted, which must: (i) be appropriate to the nature, size, and complexity of the reporting entity’s business; and (ii) be at least once every 3 years;

The detail of what an evaluation must cover is in section 5-10 of the AML/CTF Rules 2025. AUSTRAC’s guidance, Step 5: Conduct an independent evaluation, explains how it expects this to work in practice.

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Before and after: a side-by-side comparison

“Before” means the regime in force up to 30 March 2026, under the AML/CTF Rules Instrument 2007 (No. 1), Compilation No. 76. “Now” means the AML/CTF Act as amended and the AML/CTF Rules 2025.

Topic	Before 31 March 2026	From 31 March 2026	What this means in practice
Name	Independent review	Independent evaluation	New name, wider scope. Update any policy that still says “independent review”.
Where the obligation sits	2007 Rules, Part 8.6 (standard programs) and Part 9.6 (joint programs)	Act, section 26F(4)(f), with detail in the 2025 Rules, section 5-10	The core requirement is now in the Act itself. See the explanation below.
What is reviewed	Part A of the AML/CTF Program only. Part B (customer identification) was not covered.	The whole AML/CTF program: the ML/TF risk assessment and the AML/CTF policies (Act, section 26B)	The evaluation covers everything. Part A and Part B no longer exist.
How often	“Regular” reviews, timing set by the business based on its size, complexity, and risk. No fixed maximum.	Timing must suit the nature, size, and complexity of the business, and must be at least once every 3 years (Act, section 26F(4)(f)(i) and (ii))	A firm 3-year limit now applies. Higher-risk businesses may need to evaluate more often.
How the obligation works	Part A had to provide for regular independent reviews	Your AML/CTF policies must set out how and how often evaluations happen. You must then follow your own policies (Act, section 26G).	If your policies say every 2 years and you are late, you are in breach of your policies and the Act.
What the evaluator looks at	Whether Part A was effective, complied with the Rules, was implemented and was followed	Three things (2025 Rules, section 5-10): how the risk assessment was done or reviewed; whether the policies are well-designed; and testing whether risks were managed and policies followed	The focus moves from checking documents to testing whether the program works in practice.
Who can do it	An internal or external reviewer not involved in designing, implementing or maintaining Part A	No set qualification. AUSTRAC expects the evaluator to be independent and to know your sector and its risks. Your AML/CTF compliance officer and compliance team cannot do it.	Independence still matters. Your policies should also explain how you choose the evaluator and why they are suitable.
The report	Results, including any report, given to the board and senior management	A written report, provided to the governing body and the senior manager who approves the program under Act, section 26P	A written report is mandatory and goes to named decision-makers.
Responding to findings	No set process or timeframe	Adverse findings mean the risk assessment and policies must be reviewed and, if needed, updated (Act, sections 26D and 26F; 2025 Rules, ss 5-1, 5-4, 5-10, 5-15). Updates must be documented within 14 days.	Findings cannot sit on a shelf. There is now a clear fix-and-record process.
Board oversight	Oversight by boards and senior management (2007 Rules, Part 8.4)	The governing body must oversee risk assessment and compliance on an ongoing basis (Act, section 26H, a civil penalty provision)	Board oversight is now a direct legal duty in the Act.
Record keeping	Keep a copy of the AML/CTF program (former Act, section 116)	Keep records that show compliance with Part 1A for 7 years after they stop being relevant (Act, section 116)	Keep the report, your evaluator selection notes and records of how findings were fixed.
AFSL item 54 arrangers	Modified program requirements	Act, section 26F(4) does not apply (section 26T(3)(a))	If you only provide item 54 services, no independent evaluation is required.
Transition	Not applicable	Existing entities with a prior review: by the later of 4 years after the last review or 31 March 2027. Tranche 2 entities: no earlier than 1 July 2029.	Check the date of your last review, work out your deadline, and update your policies to match.

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What “moved from the Rules into the Act” means

AML/CTF law works at two levels:

The Act is passed by Parliament. Changing it requires an amending Act.
The Rules are made by the AUSTRAC CEO under section 229 of the Act. AUSTRAC can change them by issuing a new instrument.

Before 31 March 2026, the Act did not mention independent reviews. It required a Part A program that met the requirements in the Rules (former section 84(2)(c)). The review obligation itself sat only in the Rules, in Part 8.6.

From 31 March 2026, the Act itself requires evaluations and sets the 3-year minimum (section 26F(4)(f)). The Rules now fill in the detail. The old 2007 instrument has been renamed the AML/CTF (Class Exemptions and Other Matters) Rules 2007, and Part 8.6 is no longer in it.

In practice, this means three things:

More certainty. The 3-year limit is set by Parliament. AUSTRAC cannot change it alone.
Higher profile. Evaluations now sit alongside the other core program duties in Part 1A of the Act.
A clearer link to enforcement. The obligation connects directly to section 26G (complying with your AML/CTF policies), a civil penalty provision.

This does not mean independent reviews were optional before. The change is about where the rule sits, how firm it is, and how clearly it ties to the penalty provisions.

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Your first evaluation deadline and what to do now

The AML/CTF Transitional Rules 2026 stagger the first round of evaluations:

Existing reporting entities enrolled on 30 March 2026 that have had at least one independent review: the first evaluation is due by the later of 4 years after the most recent review, or 31 March 2027.
Newly regulated (tranche 2) businesses: the first evaluation deadline is no earlier than 1 July 2029.

Practical steps

Find the date of your last independent review and work out your first evaluation deadline.
Update your AML/CTF policies to set the frequency of evaluations, with a short written rationale.
Record how you will select an evaluator who is independent and suitable for your business.
Set out how the report reaches your governing body and approving senior manager, and how findings will be fixed and documented within 14 days.
Book AML/CTF independent evaluation services early. AUSTRAC has noted demand for suitably qualified evaluators, which is one reason for the staggered deadlines.

If you are reviewing your AML/CTF documentation ahead of an independent evaluation, our AML/CTF Business Risk Assessment Template (Australia) can help you document your ML/TF risks and controls.

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How Click Legal can help

Click Legal conducts AML/CTF independent evaluations for reporting entities across financial services, fintech, digital assets and funds management.

Our independent reviews (evaluations) are structured around section 26F(4)(f) of the Act, section 5-10 of the Rules and AUSTRAC’s published expectations.

Each evaluation covers your ML/TF risk assessment, the design of your AML/CTF policies, and sample testing of how they operate in practice.

You receive a written report for your governing body and approving senior manager, with clear findings you can act on.

If your first evaluation deadline is approaching, or you are unsure when it falls, please do not hesitate to contact our AML/CTF independent evaluation lawyers.

Frequently Asked Questions

What replaced the independent review?

The independent evaluation replaced the independent review from 31 March 2026. It covers the whole AML/CTF program rather than Part A alone.

Which law contains the independent evaluation obligation?

Section 26F(4)(f) of the AML/CTF Act requires AML/CTF policies to provide for independent evaluations. Section 5-10 of the AML/CTF Rules 2025 sets out what the evaluation must cover.

How often must an independent evaluation be conducted?

An evaluation must occur at least once every three years. The timing must also suit the nature, size, and complexity of the reporting entity’s business.

What must an independent evaluation examine?

An evaluation must examine the ML/TF risk assessment, the design of the AML/CTF policies, and whether the business manages risks and follows those policies. Section 5-10 of the AML/CTF Rules 2025 sets out these requirements.

Can the AML/CTF compliance officer conduct the evaluation?

No. The AML/CTF compliance officer and compliance team cannot conduct the evaluation. The evaluator must be independent and have suitable knowledge of the business sector and its risks.

Who must receive the evaluation report?

The evaluator must prepare a written report for the governing body and the senior manager who approves the AML/CTF program under section 26P of the AML/CTF Act.

What must happen if the evaluation identifies adverse findings?

The risk assessment and AML/CTF policies must be reviewed and updated where necessary. The AML/CTF Rules 2025 require those updates to be documented within 14 days.

When is the first evaluation due for an existing reporting entity?

An existing reporting entity enrolled on 30 March 2026 must complete its first evaluation by the later of four years after its most recent independent review or 31 March 2027. The applicable date depends on when the last review occurred.

When is the first evaluation due for a tranche 2 business?

A newly regulated tranche 2 business does not have to complete its first evaluation before 1 July 2029. The obligation applies to tranche 2 businesses from 1 July 2026.

Does the evaluation obligation apply to an entity providing only AFSL item 54 services?

No. Section 26F(4) of the AML/CTF Act does not apply to an entity that only provides item 54 services, because of section 26T(3)(a).

What records must be kept about an independent evaluation?

Records showing compliance with Part 1A of the AML/CTF Act must be kept for seven years after they stop being relevant. This includes the report, evaluator selection records and records showing how findings were addressed.

Must AML/CTF policies explain how evaluations will be conducted?

Yes. Section 26G of the AML/CTF Act requires the reporting entity to follow its AML/CTF policies. Those policies should state the evaluation frequency, evaluator selection process, reporting arrangements and process for addressing findings.

Legislation, Rules and AUSTRAC guidance

Legislation

Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), current compilation (see Part 1A, sections 26B to 26P, and section 116)
Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth) (Schedule 1 inserts Part 1A)

Rules

Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 (section 5-10, independent evaluations)
AML/CTF Rules Instrument 2007 (No. 1), Compilation No. 76, pre-reform version (Parts 8.4, 8.6 and 9.6)
AML/CTF (Class Exemptions and Other Matters) Rules 2007, current version (the renamed 2007 instrument)

AUSTRAC guidance

This article is general information only and is not legal advice. It reflects the law as at 8 October 2026. Please seek advice on your own circumstances.

How to Vary Your AFSL to Remove an Unused Authorisation

Hannah Deuk — Mon, 05 Oct 2026 01:59:04 +0000

Introduction

An Australian Financial Services Licence (AFSL) does not authorise every type of financial service. Its scope is limited to the financial services, financial products and client classes stated in the licence, so a product change, market exit or loss of responsible manager expertise may leave an unused authorisation on the AFSL.

The Corporations Act 2001 (Cth) (‘Corporations Act‘) does not generally require an established licensee to remove an authorisation it no longer uses, but unnecessarily broad scope can affect competence, resources, and supervision obligations. This article explains when voluntary narrowing may be appropriate, what an AFSL holder should review, and how to apply to the Australian Securities & Investments Commission (ASIC) to vary or revoke the relevant licence conditions.

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AFSL Authorisation Removal & Licence Narrowing Checker

Quickly assess if you should remove an unused AFSL authorisation or narrow your licence scope—and what to check before applying to ASIC.

Step 1 of 3

Has your business permanently stopped providing the financial service or product covered by the authorisation?

Step 2 of 3

Do any representatives (including authorised reps, employees, or contractors) still rely on this authorisation?

Step 3 of 3

Is your responsible manager coverage and organisational competence aligned with the reduced licence scope?

✅ Ready to Remove Unused AFSL Authorisation

You appear ready to apply for a licence variation to remove this authorisation.

Since your business has permanently exited the relevant service or product, no representatives rely on the authorisation, and your responsible managers cover the remaining scope, you can prepare an application to ASIC via the Regulatory Portal. Ensure you use the exact wording from your AFSL and maintain compliance with all obligations until ASIC confirms the variation.

Note: Lodging the application does not remove the authorisation until ASIC issues written notice.

Key legal references: Section 914A of the Corporations Act 2001 (Cth), Section 912A of the Corporations Act 2001 (Cth), Section 914B of the Corporations Act 2001 (Cth), Section 916A of the Corporations Act 2001 (Cth), Section 911C of the Corporations Act 2001 (Cth).

Speak to a lawyer about your AFSL variation

⚠️ Representatives Still Rely on Authorisation

Some representatives still use this authorisation.

You must ensure all representatives (including authorised reps, employees, or contractors) cease, migrate, or restructure their activities before the AFSL variation takes effect. Under Section 916A(3)(a) of the Corporations Act 2001 (Cth), their authorisation is void if it exceeds your AFSL scope. Carefully review all arrangements and client classifications before proceeding.

Get legal advice on representative arrangements

⚠️ Responsible Manager or Competence Gap

Your responsible manager coverage or organisational competence may not align with the reduced AFSL scope.

Before applying, review which responsible managers support each authorisation and ensure you meet the Section 912A(1)(e) of the Corporations Act 2001 (Cth) competence obligation. If a key-person condition applies, do not remove the responsible manager until the variation is approved by ASIC.

Speak to a lawyer about responsible manager requirements

❌ Not Ready to Remove Authorisation

Your business may not be ready to remove this AFSL authorisation.

If you have not permanently exited the service or product, or still need the authorisation for ongoing obligations, you should not proceed with a licence variation. Consider whether transitional activities or compliance requirements still require the authorisation.

Relevant legal references: Section 914A of the Corporations Act 2001 (Cth), Section 766C of the Corporations Act 2001 (Cth).

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What Does it Mean to Remove an Authorisation From an AFSL

What Does an AFSL Specify

An AFSL specifies the financial services a licensee may provide, and the financial products connected with those services. Under Section 914A(6) of the Corporations Act, the licence must specify the particular financial services, or classes of financial services, the licensee is authorised to provide.

The scope may be limited further by:

product category;
client class; or
the type of dealing or advice activity involved.

Under Section 914A(7), financial services may be specified by reference to particular financial products or product classes. The key question is whether the business still performs any activity within the precise financial service and product combination being considered for removal.

Removing an Authorisation by Variation or Revocation

Removing an unused financial service or product authorisation involves seeking a variation or revocation of the relevant licence condition, rather than cancelling part of the AFSL. Under Section 914A(1) of the Corporations Act, ASIC may impose, vary or revoke conditions on an AFSL.

Under Section 914A(2)(b), ASIC may take that action after the licensee lodges an application in the prescribed form with any required documents. A business that will continue providing at least one financial service requiring its own AFSL will generally be considering a licence variation, not cancellation of the whole AFSL.

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Reasons for Removing an Unused AFSL Authorisation

Business No Longer Provides Authorised Service

An AFSL authorisation is a strong candidate for review when the business has made a genuine strategic decision to stop providing the financial service it covers. A temporary reduction in activity may not justify narrowing the AFSL, particularly if the business may resume the service or still needs the authorisation for existing obligations.

Common situations include:

permanently discontinuing a financial product;
withdrawing from a client segment; or
identifying product classes inherited from a business model the business no longer operates.

Simplifying Compliance & Governance

Under Section 912A(1)(e) of the Corporations Act, an AFSL holder must maintain competence to provide the financial services covered by its licence. ASIC explains in Regulatory Guide (RG) 105.5–RG 105.8 that it assesses this organisational competence by looking at the knowledge and skills of the people who manage the financial services business, whom ASIC refers to as ‘responsible managers’. Removing a genuinely redundant authorisation can therefore bring the AFSL’s scope closer to the expertise retained by the organisation and make responsible manager coverage easier to assess.

Subject to Section 912A(4), Section 912A(1)(d) requires an AFSL holder to have adequate financial, technological and human resources available to provide the financial services covered by its licence and carry out its supervisory arrangements. Narrowing the AFSL may therefore bring the authorised scope closer to the resources maintained by the business.

To assist with reviewing ongoing AFSL requirements, you can download our free AFSL Compliance Guide on Core Obligations for AFS Licensees.

Business Restructures & Strategy Changes

A review of the AFSL may be appropriate when licensed activities move to another entity within the corporate group or when a corporate authorised representative network ends. These changes may leave the existing licence broader than the activities the licensee will continue to provide.

An AFSL review can also support a proposed transaction, investment, or sale. Regulatory due diligence may raise questions about organisational competence and compliance infrastructure if the business holds authorisations that it no longer has the people or resources to support.

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Things to Review Before Removing an Authorisation

Current & Planned Business Activities

The licensee should map each AFSL authorisation against its actual and expected activities. The review should separate:

financial service;
financial product;
client class; and
capacity or activity involved.

A proposed removal of a dealing authorisation should be tested across the full transaction lifecycle. Section 766C(1) of the Corporations Act treats conduct like acquiring, issuing, varying or disposing of a financial product as dealing. Section 766C(2) also treats arranging for another person to engage in that conduct as dealing, unless the arranging conduct amounts to providing financial product advice. The licensee should therefore consider activities that continue after a business line stops accepting new clients.

Depending on the circumstances, disposing of financial products or arranging continuing transactions may constitute dealing under Section 766C, subject to the exceptions in that section. As a practical matter, licence narrowing should wait until the licensee is satisfied that the authorisation is not needed for continuing or transitional conduct.

Representatives & Client Arrangements

An authorisation is not unused merely because the licensee’s internal team no longer relies on it. The licensee should check whether an authorised representative, corporate authorised representative, employee, contractor or another representative still depends on the relevant AFSL authority.

Where representatives continue using the authorisation, their activities will ordinarily need to cease, migrate or be restructured before the AFSL variation takes effect. Under Section 916A(3)(a) of the Corporations Act, an authorised representative’s authorisation is void to the extent that it purports to authorise a financial service that is not covered by the licensee’s AFSL. Before removing retail-client authority, the licensee should also determine whether future clients can properly be treated as wholesale clients under Sections 761G and 761GA of the Corporations Act and any applicable regulations.

Responsible Managers & Organisational Competence

The licensee should identify which responsible managers support each authorisation and assess whether the remaining group collectively covers the AFSL scope that will remain after the variation. This review should account for the financial services and products covered by the licence, consistent with the Section 912A(1)(e) competence obligation.

A responsible manager should not be removed merely because management has decided to relinquish an authorisation, especially in cases where a responsible manager is named in a key-person licence condition. The existing AFSL should remain supported while ASIC considers the variation, because the current licence scope continues to apply until the relevant change takes effect.

Our Responsible Manager Competence and Development Policy Template (AFSL) helps you document how responsible manager competence is mapped to your authorisations and kept current.

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How to Apply for Removing an AFSL Authorisation

Identify the Authorisations to Be Removed

The business should define the financial services, financial products and other permissions it intends to retain, rather than marking isolated words for deletion from the AFSL. This approach helps identify the precise licence conditions that need to be varied or revoked.

The review should use the exact wording on the AFSL, not internal descriptions such as “funds” or “advisory”. The proposed future scope should be checked against the activities the business and its representatives will continue to perform.

Provide the Required Information to ASIC

The application is made through the ASIC Regulatory Portal using the ‘Vary authorisations and conditions of an Australian financial services licence’ transaction, and AFSL variation and application lawyers can assist with preparing the application. Under Section 914A(2)(b) of the Corporations Act, a licensee may apply in the prescribed form for ASIC to impose, vary or revoke a licence condition, accompanied by any documents required by the regulations.

ASIC may request information about:

the business;
proposed financial services and products; and
the processes and procedures supporting compliance with the licensee’s general obligations.

ASIC’s current application guidance requires fit-and-proper-person information for licence variations. Separately, Section 914B(2) empowers ASIC to refuse a variation if the fit-and-proper requirement is not satisfied.

Under Section 914B(3), ASIC may request specified information, an audit report or a statement about material changes, and Section 914B(6) provides that an application is taken to have been withdrawn if the requested material is not lodged within the specified time.

When Does the Removal Take Effect

Lodging an application under Section 914A(2)(b) of the Corporations Act does not itself alter the AFSL. Under Section 914A(1), ASIC varies a licence condition by giving written notice to the licensee, so the existing authorisation remains on the licence unless and until ASIC gives effect to the variation.

The business should not treat the authorisation as removed merely because the application has been submitted. However, the AFSL holder does not have to continue providing a service merely because the authorisation remains on its licence. If it continues to provide that service as part of a financial services business, Section 911A(1) of the Corporations Act requires the service to be covered by an AFSL unless an exemption applies.

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Consequences of Narrowing Your Australian Financial Services Licence

Impact on Future Business Activities

Once ASIC varies the relevant authorisation condition under Section 914A(1) of the Corporations Act, the removed financial service can no longer be provided in reliance on that AFSL.

If the licensee later wishes to resume the activity, it will need to determine whether the service is covered by another applicable exemption or apply under Section 914A(2)(b) of the Corporations Act for ASIC to vary the relevant authorisation condition again. That application may involve additional fees, responsible manager competency evidence and supporting documents.

Impact on Compliance Arrangements

After an authorisation is removed, the licensee should review websites, financial services guides and compliance manuals that describe its regulatory status. Section 911C(d) of the Corporations Act prohibits a person from holding out that its conduct or proposed conduct is within its authority in relation to a particular financial services licensee when that is not the case.

A licence variation does not, by itself, extinguish liabilities or obligations arising from earlier conduct. Whether a complaint, remediation obligation, insurance notification or other historic requirement continues will depend on the underlying statutory provision, licence condition or contractual obligation. As a practical matter, policies, registers, representative authorities and internal controls should therefore be reviewed to separate ongoing-business requirements from records and controls retained for historic activity.

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Conclusion

Removing an unused AFSL authorisation defines the legal scope within which a licensee and its representatives may provide financial services. Before applying under Section 914A of the Act, the business should review each service, product, representative and legacy obligation, complete any wind-down, and confirm that its remaining scope matches its intended operations and available expertise.

For help reviewing a proposed AFSL variation, contact Click Legal’s AFSL application and variation lawyers in NSW. Our team can assist with the licence-scope review, ASIC application process and identify key internal checks before lodging.

Frequently Asked Questions

Can you remove an authorisation from an AFSL?

Yes, an AFSL holder can apply to ASIC to vary or revoke the relevant licence conditions under Section 914A(2)(b). Those conditions specify the financial services and products the AFSL holder may provide.

Why would an AFSL holder narrow its licence scope?

An AFSL holder may narrow its licence after discontinuing a product, leaving a market, restructuring its operations or losing the expertise supporting an authorisation. A narrower scope can also better reflect the business’s actual activities and competence arrangements.

How do you remove an unused AFSL authorisation?

You apply through the ASIC Regulatory Portal using the transaction for varying the authorisations and conditions of an Australian financial services licence. ASIC may require information about the proposed changes, business activities and compliance processes.

Do you need ASIC approval to remove an AFSL authorisation?

Yes, ASIC must vary or revoke the relevant condition under Section 914A. Lodging an application does not change the AFSL, so the existing authorisation remains in place until ASIC’s variation takes effect.

Can you add an authorisation back later?

Yes, but the AFSL holder will ordinarily need to apply to ASIC for another licence variation. The application may require additional fees, responsible manager competency evidence and supporting material.

Does removing an authorisation reduce AFSL compliance obligations?

It may simplify some compliance arrangements, but it does not automatically remove every obligation. Under Sections 912A(1)(g) and 912A(2) of the Act, retail-client dispute resolution obligations may continue for the financial services the AFSL holder still provides.

What happens to authorised representatives when an authorisation is removed?

Authorised representatives cannot continue relying on an authorisation that is being removed. Their activities will usually need to cease, move to another structure or be reorganised before the AFSL variation takes effect.

Is an AFSL holder legally required to remove unused authorisations?

No, the Act does not generally require an established licensee to remove an authorisation merely because it is temporarily unused. The AFSL holder must still meet the Section 912A(1)(e) competence obligation for the financial services covered by the licence.

Should you remove an authorisation before winding down a business line?

No, the AFSL holder should usually retain the authorisation until all continuing and transitional activities are complete. Arranging transactions, disposing of products or completing existing client instructions may still require the authorisation.

What Is Dealing in a Financial Product and When Do You Need an AFSL for It

Hannah Deuk — Mon, 05 Oct 2026 01:54:28 +0000

Introduction

Under Section 766C of the Corporations Act 2001 (Cth) (‘Corporations Act‘), “dealing in a financial product” covers more than buying or selling. It includes applying for or acquiring, issuing, underwriting securities or interests in managed investment schemes, varying, disposing of, and arranging for another person to undertake those activities.

Businesses must classify their conduct accurately because the type of dealing can affect whether an Australian Financial Services Licence (AFSL) or particular authorisation is required. This article explains the distinction between direct dealing, arranging to deal and excluded conduct, while separating those questions from the licensing analysis.

Interactive Tool: Check If You’re Dealing in a Financial Product

Are You Dealing in a Financial Product? Quick Checker

Find out in minutes whether your business conduct is likely to be classified as ‘dealing in a financial product’ under the Corporations Act 2001.

What is your main involvement with the financial product?

Are you acting on your own behalf as the issuer of your own financial products?

Is your conduct limited to routine administrative, clerical, or cashier work?

✅ Likely Dealing in a Financial Product

Based on your answers, your conduct is likely to be classified as dealing in a financial product under Section 766C of the Corporations Act 2001 (Cth). This includes applying for, acquiring, issuing, underwriting, varying, or disposing of a financial product as principal or agent, or arranging for another person to do so. You may require an Australian Financial Services Licence (AFSL) or a variation to your existing authorisations.

It is critical to check that your AFSL covers both the activity and the type of financial product involved.

Section 766C of the Corporations Act 2001 (Cth)
Section 911A of the Corporations Act 2001 (Cth)

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⚖️ Arranging May Be Dealing – Seek Legal Advice

If you are arranging for another person to deal in a financial product, this may also be classified as dealing under Section 766C(2) of the Corporations Act 2001 (Cth), unless your conduct is limited to providing financial product advice. The distinction between arranging and advice is subtle and depends on the degree of involvement and value added to the transaction.

Careful analysis is required to determine if your activities require AFSL authorisation.

Section 766C(2) of the Corporations Act 2001 (Cth)
ASIC Regulatory Guide 36.38

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⚠️ Advice Only – Different AFSL Requirements Apply

If you only provide financial product advice (recommendations or opinions intended to influence decisions about financial products), this is not dealing but is still regulated under Section 766B of the Corporations Act 2001 (Cth). You may still need an AFSL authorisation for providing advice, and the requirements differ from those for dealing or arranging.

Section 766B of the Corporations Act 2001 (Cth)
Section 911A of the Corporations Act 2001 (Cth)

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✅ Excluded: Own-Account Issuer

If you are dealing only on your own behalf as the issuer of your own financial products, your conduct may be excluded from the definition of dealing under Section 766C(3) of the Corporations Act 2001 (Cth). However, this exclusion does not apply to agents acting for principals or to all types of transactions. Review the specific exclusions and seek legal advice to confirm your position.

Section 766C(3) of the Corporations Act 2001 (Cth)

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✅ Excluded: Routine Administrative Work

If your conduct is limited to routine administrative, clerical, or cashier work, it is generally excluded from the definition of dealing under Section 766A(3) of the Corporations Act 2001 (Cth) and ASIC Regulatory Guide 36.52. However, if you perform tasks beyond basic admin, you may still be caught by the dealing provisions.

Section 766A(3) of the Corporations Act 2001 (Cth)
ASIC Regulatory Guide 36.52

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❌ Unclear – Seek Specialist Legal Advice

Your situation does not clearly fit the standard categories of dealing, arranging, or advice. The classification of your conduct under the Corporations Act 2001 (Cth) can be complex and depends on the details of your activities.

We recommend you seek tailored legal advice to clarify your AFSL obligations and avoid regulatory risk.

Corporations Act 2001 (Cth)

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Meaning of Dealing in a Financial Product under the Corporations Act

Applying for or Acquiring a Financial Product

Section 766C(1)(a) of the Corporations Act provides that applying for or acquiring a financial product constitutes dealing. The provision applies whether the conduct occurs as principal or agent.

Dealing can arise at an early stage of a transaction, before ownership or rights under the financial product have passed to the applicant. A person who submits an application for a managed investment interest, or acquires an existing financial product, may therefore be dealing under Section 766C(1)(a) of the Corporations Act.

Issuing a Financial Product

Section 766C(1)(b) of the Corporations Act provides that issuing a financial product constitutes dealing.

Under Section 761E(2), a financial product is generally issued when it is first issued, granted or otherwise made available to a person, subject to the product-specific rules in that section. The issuer's role may involve offering or marketing a product, but those activities are not, by themselves, the statutory test for issue. For Section 766C(1)(b), the relevant question is whether the product has been issued within Section 761E.

Underwriting Securities or Managed Investment Interests

Section 766C(1)(c) of the Corporations Act treats underwriting as dealing where the relevant product is a security or an interest in a managed investment scheme.

This limb is confined to those product categories. It does not refer to underwriting every type of financial product. The capacity in which each participant acts should be examined, because Section 766C(1)(c) of the Corporations Act applies to the underwriting of the specified securities or interests.

Varying a Financial Product

Section 766C(1)(d) of the Corporations Act provides that varying a financial product constitutes dealing. A variation may involve changing the terms of an existing financial product, rather than issuing a new product.

The analysis does not necessarily end when the financial product has been issued or acquired. A person who brings about a variation may need to consider Section 766C(1)(d) of the Corporations Act, while an intermediary that facilitates the change may need to consider whether Section 766C(2) of the Corporations Act applies.

Disposing of a Financial Product

Section 766C(1)(e) of the Corporations Act provides that disposing of a financial product constitutes dealing. Selling or transferring an existing financial product can fall within this limb.

The relevant conduct may involve the holder, an authorised agent, or another intermediary. An agent dealing for a client must be assessed separately from the client's own conduct, because Section 766C(1) of the Corporations Act expressly applies to conduct undertaken as principal or agent.

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What Does Arranging to Deal Mean

When Does Conduct Amount to Arranging

Under Section 766C(2) of the Corporations Act, arranging for another person to apply for, acquire, issue, underwrite, vary or dispose of a financial product is also dealing. The provision can apply even when the intermediary does not complete the transaction itself.

The Australian Securities and Investments Commission (ASIC) explains in Regulatory Guide (RG) 36.38 that arranging involves negotiating for, or bringing into effect, a dealing in a financial product. Separately, RG 36.42–RG 36.46 explains that whether conduct amounts to arranging is a question of degree and identifies factors such as whether the intermediary's involvement is sufficiently important to the transaction and whether it significantly adds value.

As a result, a platform that merely provides access may be treated differently from one that:

acts as a key intermediary whose involvement is important to bringing about the transaction;
negotiates terms or otherwise significantly adds value to the transaction; or
routes orders or takes other steps that bring the financial product transaction into effect.

Arranging to Deal Versus Financial Product Advice

Section 766C(2) of the Corporations Act excludes conduct from the arranging limb where the relevant actions amount to providing financial product advice. Financial product advice is defined by Section 766B(1) of the Corporations Act as a recommendation, statement of opinion or report intended, or reasonably regarded as intended, to influence a decision about a financial product.

The distinction concerns the character of the conduct being assessed. A recommendation about whether a person should acquire a financial product may be financial product advice, while completing or facilitating the later acquisition may separately involve dealing or arranging under Section 766C of the Corporations Act.

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When Is Conduct Not Treated as Dealing in a Financial Product

Dealing on Your Own Behalf

Under Section 766C(3) of the Corporations Act, a person is taken not to deal in a financial product when dealing on their own behalf, whether directly or through an agent or representative. The exception applies where the person is an issuer of financial products and the transaction relates to one or more of that issuer's own products.

However, an agent does not receive the principal's exclusion. Under Section 766C(3A) of the Corporations Act, an agent dealing for a principal is not treated as acting on the agent's own behalf merely because the transaction is an own-account transaction for the principal.

Other Excluded Conduct

Several other exclusions may prevent conduct from being treated as dealing. For example, under Section 766A(3) of the Corporations Act, conduct is not the provision of a financial service if it is done in the course of work of a kind ordinarily done by clerks or cashiers. ASIC states in RG 36.52 that this type of work is generally routine, administrative, processing or receipting in nature.

The exclusions also include:

Under Section 766C(2A), providing a crowd-funding service.
Under Section 766C(4), transactions by specified governments and public authorities, bodies corporate, unincorporated bodies and CCIVs where the transaction relates only to securities of that entity or, for a government, debentures, stocks or bonds issued or proposed to be issued by that government. Section 766C(5) limits the Section 766C(4)(c) exclusion for certain entities carrying on an investment business.
Under Section 766C(6), transactions by a sub-underwriter that relate only to the sub-underwriting.
Under Section 766C(7), conduct prescribed by the Corporations Regulations 2001 (Cth) ('Corporations Regulations').
- Regulation 7.1.29(3)(f), read with Regulation 7.1.29(1), addresses certain arranging in relation to interests in self-managed superannuation funds.
- Regulation 7.1.29(3)(g), read with regulation 7.1.29(1), addresses specified administrative preparation of registration or transfer documents.
- Regulations 7.1.34, 7.1.35 and 7.1.35A contain further exclusions relevant to dealing.

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Practical Examples of Dealing in a Financial Product

Product Issuer Example

A responsible product provider issuing a managed investment interest, insurance product or another financial product may be dealing under Section 766C(1)(b) of the Corporations Act. A later change to the product's rights or obligations may also involve dealing by varying the financial product under Section 766C(1)(d) of the Corporations Act.

The specific statutory framework for the issuer and financial product must be examined. A company issuing its own securities may also need to consider the exclusion in Section 766C(4) of the Corporations Act, including the limitation in Section 766C(5) for certain investment businesses.

Adviser or Intermediary Example

An adviser who has authority to bind a client and acquires a financial product in the client's name may be dealing as the client's agent under Section 766C(1) of the Corporations Act.

An adviser who does not itself acquire the product but takes steps that amount to arranging for the client to acquire it may be dealing under Section 766C(2). ASIC explains in RG 36.49 that dealing as agent is not itself arranging, although a person acting as agent may also engage in separate conduct that amounts to arranging.

Further, recommendation about acquiring the financial product may also amount to financial product advice under Section 766B(1).

Investment Platform or FinTech Example

An investment platform that receives a customer's order and routes it to another broker may be arranging for the customer to acquire or dispose of a financial product under Section 766C(2) of the Corporations Act. The platform does not need to execute the final trade for arranging to become relevant, which may raise questions about whether a fintech needs an AFSL.

A platform that facilitates an application, disposal, or variation should be assessed by reference to its actual role and level of involvement, as discussed above.

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Why the Type of Dealing Matters for AFSL

Dealing as Principal Versus Arranging

The capacity in which a business acts affects how its conduct is classified. Direct dealing under Section 766C(1) of the Corporations Act may be undertaken as principal or agent, while arranging under Section 766C(2) applies where a business does not complete the transaction itself but helps bring it about. The distinction should be reflected when assessing whether an AFSL authorisation covers the service being provided.

Financial Product Categories

An AFSL authorisation must cover both the relevant dealing activity and the type of financial product involved.

Section 911A(1) of the Corporations Act requires a person carrying on a financial services business to hold an AFSL covering the financial services provided, subject to the exemptions in Section 911A(2) and any other applicable exemption. Separately, ASIC's AFS licence application framework distinguishes dealing under Section 766C(1) from arranging under Section 766C(2) and requires applicants to select the relevant dealing subtypes and financial product authorisations, as part of the AFSL application process.

A business should not rely only on having an AFSL. Its authorisations should be checked against the financial product categories it applies for, acquires, issues, varies, disposes of or arranges for another person to deal with. If the scope is unclear, it is prudent to seek advice from AFSL lawyers in NSW.

Once your authorisations are confirmed, our Compliance Framework Template (Australia) helps you document how compliance with them will be monitored.

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When Should a Business Review Its AFSL Authorisations

As a practical compliance step, a business should review its AFSL authorisations when its products, transaction functions or customer processes change. Changes that may affect the classification of its conduct include:

adding a new financial product;
moving from referrals to processing transaction instructions; and
changing the role of an adviser, agent, or platform.

The review should assess whether the business is dealing directly under Section 766C(1) or arranging under Section 766C(2) of the Corporations Act. Click Legal's Free AFSL Compliance Guide on Core Obligations for AFS Licensees can help you assess core obligations and authorisation requirements.

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Common Mistakes When Assessing Dealing Activities

A common error is treating dealing as limited to buying or selling a financial product. In fact, Section 766C(1) of the Corporations Act also covers applying for, acquiring, issuing, underwriting specified products, varying and disposing of a financial product.

Businesses may also overlook the difference between arranging and providing financial product advice: arranging another person's transaction under Section 766C(2) of the Corporations Act can itself be dealing. In addition, the own-account exclusion in Section 766C(3) of the Corporations Act should not be assumed to protect an agent, because Section 766C(3A) treats the agent's conduct separately.

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Practical Steps for Assessing Whether You Are Dealing

Assessing a financial product activity requires the business to work through the relevant conduct and licensing questions in sequence:

Identify whether the facility or interest is a financial product.
Check whether the conduct involves applying for, acquiring, issuing, underwriting, varying or disposing of the financial product under Section 766C(1) of the Corporations Act.
Identify whether the business acts for itself, as principal, as agent or as another intermediary.
Consider whether the conduct arranges another person's transaction under Section 766C(2) of the Corporations Act.
Check crowd-funding, own-account, agent, sub-underwriting and other applicable exclusions.
Assess whether the activity also involves advice or another financial service.
Confirm whether the relevant AFSL authorisations cover the financial service and financial product.

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Conclusion

"Dealing in a financial product" under the Corporations Act includes applying for, acquiring, issuing, underwriting specified products, varying and disposing of a financial product, as well as arranging for another person to undertake those activities. Correct classification requires businesses to distinguish direct dealing, arranging, excluded conduct and the separate question of whether their AFSL authorisations cover the relevant financial service and product.

For businesses reviewing their model or transaction processes, contact Click Legal's AFSL lawyers for clear guidance on dealing activities and AFSL authorisations.

Frequently Asked Questions

What does dealing in a financial product mean?

Dealing in a financial product covers applying for, acquiring, issuing, underwriting specified products, varying, disposing of, or arranging for another person to do these things under Section 766C of the Corporations Act.

What activities are covered by Section 766C?

Section 766C(1) of the Corporations Act covers applying for or acquiring, issuing, underwriting securities or managed investment scheme interests, varying, and disposing of a financial product.

Is issuing a financial product considered dealing?

Yes. Issuing a financial product is dealing under Section 766C(1)(b) of the Corporations Act.

Is varying a financial product considered dealing?

Yes. Varying a financial product, including changing its terms, is dealing under Section 766C(1)(d) of the Corporations Act.

What does arranging to deal mean?

Arranging means negotiating for, or bringing about, another person's application for, acquisition, issue, underwriting, variation, or disposal of a financial product. Section 766C(2) of the Corporations Act treats this as dealing unless the conduct amounts to financial product advice or an exclusion applies.

Is dealing on your own behalf regulated?

Dealing on your own behalf is generally excluded under Section 766C(3) of the Corporations Act. The exclusion does not apply to an issuer dealing in its own financial products, and an agent cannot rely on the principal's exclusion under Section 766C(3A).

Do you need an AFSL to deal in financial products?

You generally need an Australian financial services licence if you carry on a financial services business involving dealing. Section 911A(1) of the Corporations Act requires a licence covering the relevant financial services, subject to applicable exemptions.

Does administrative assistance count as arranging to deal?

No, not when the conduct is routine work ordinarily done by clerks or cashiers. Section 766A(3) of the Corporations Act excludes that conduct from being a financial service, provided the work is purely administrative.

Can order routing amount to arranging a deal?

Yes. Routing an order to bring about the acquisition or disposal of a financial product can amount to arranging under Section 766C(2) of the Corporations Act, even if another entity executes the transaction.

AFSL v ACL: Which Licence Does Your Business Need?

Hannah Deuk — Sat, 03 Oct 2026 04:18:45 +0000

Introduction

Businesses offering financial advice, dealing in financial products, lending, credit assistance or broking may need an Australian Financial Services Licence (AFSL), an Australian Credit Licence (ACL), or both. The correct choice depends on the particular products and activities, not the label used for the business.

This article covers the activities regulated under each regime, the difference between financial services and credit activities, and alternative authorised representative, credit representative and exemption arrangements. It also explains how start-ups, FinTechs, lenders and brokers can assess the authorisations required before operating.

Interactive Tool: See If Your Business Needs an AFSL, ACL or Both

AFSL or ACL Licence Checker

Unsure if your business needs an AFSL, ACL, or both? Answer a few questions to clarify your licensing obligations before you launch or expand.

What is your business’s main activity?

Do you act as an intermediary, broker, or referrer (connecting clients to lenders or product providers)?

Are you operating under your own licence, or as a representative of another licensee?

✅ You likely need an AFSL

Based on your answers, your business is engaged in financial services activities that generally require an Australian Financial Services Licence (AFSL).

Under Section 911A of the Corporations Act 2001 (Cth), providing financial product advice, dealing, or operating a financial services business requires an AFSL unless an exemption applies.

It is critical to assess your exact activities and products to ensure you have the correct authorisations and comply with ongoing obligations, including those in Section 912A(1) of the Corporations Act 2001 (Cth).

Section 911A of the Corporations Act 2001 (Cth)
Section 912A(1) of the Corporations Act 2001 (Cth)
Section 766A of the Corporations Act 2001 (Cth)

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✅ You likely need an ACL

Your business appears to be engaging in regulated credit activities that generally require an Australian Credit Licence (ACL).

Section 29 of the National Consumer Credit Protection Act 2009 (Cth) prohibits engaging in credit activities without an ACL, unless an exemption or representative arrangement applies.

Be aware that mortgage brokers, credit brokers, and intermediaries may also need an ACL under Sections 6–9 of the National Consumer Credit Protection Act 2009 (Cth).

Section 29 of the National Consumer Credit Protection Act 2009 (Cth)
Sections 6–9 of the National Consumer Credit Protection Act 2009 (Cth)

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⚖️ You may need both an AFSL and an ACL

Your business model involves both financial services and regulated consumer credit activities.

Section 911A of the Corporations Act 2001 (Cth) and Section 29 of the National Consumer Credit Protection Act 2009 (Cth) require separate licences for each regime.

FinTechs and multi-product businesses often need both licences, and exemptions or representative arrangements may apply in limited cases. It is essential to review each activity and product to determine your obligations.

Section 911A of the Corporations Act 2001 (Cth)
Section 29 of the National Consumer Credit Protection Act 2009 (Cth)

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⚠️ You may qualify for an exemption or representative arrangement

If you act solely as a representative or referrer and do not provide regulated advice or credit assistance, you may be exempt from holding your own AFSL or ACL.

Section 911A(2)(a) of the Corporations Act 2001 (Cth) and Section 64 of the National Consumer Credit Protection Act 2009 (Cth) allow certain exemptions, but strict conditions apply.

It is vital to confirm that all exemption requirements are met before relying on this approach.

Section 911A(2)(a) of the Corporations Act 2001 (Cth)
Section 64 of the National Consumer Credit Protection Act 2009 (Cth)

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❌ Unable to determine your licensing needs

Your answers do not provide enough detail to determine whether you require an AFSL, ACL, both, or an exemption.

The correct licensing position depends on the specific activities, products, and business structure.

We recommend seeking tailored legal advice before commencing operations.

Speak to a lawyer for tailored licensing advice

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What Is an Australian Financial Services Licence

Activities That Require an AFSL

Under Section 911A of the Corporations Act 2001 (Cth) (‘Corporations Act‘), a business providing financial services in Australia must hold an AFSL covering the financial services it offers, unless an exemption applies.

Section 766A identifies activities that can constitute financial services, including:

providing financial product advice;
dealing in a financial product;
making a market for a financial product;
operating a registered scheme; and
providing a custodial or depository service.

Section 766A(1)(da), (ea), (eb) and (ec) also identifies operating the business and affairs of a corporate collective investment vehicle (CCIV), providing a crowd-funding service, providing a claims handling and settling service, and providing a superannuation trustee service as financial services. Section 766A(1A) separately provides that the provision by a trustee company of a traditional trustee company service constitutes a financial service.

Types of Financial Products

Section 763A of the Corporations Act defines a financial product as a facility through which a person makes a financial investment, manages financial risk or makes non-cash payments. Section 764A(1) of the Corporations Act 2001 (Cth) identifies specific things that are financial products, including:

shares;
bonds;
interests in managed investment schemes;
derivatives;
life insurance;
general insurance;
superannuation; and
margin lending facilities.

In practice, the product and the service being provided determine whether an AFSL authorisation is required. Businesses reviewing their licensing position can also refer to our free AFSL Compliance Guide on Core Obligations for AFS Licensees for information about core AFSL obligations.

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What Is an Australian Credit Licence

What Is a Credit Activity

Under Section 29 of the National Consumer Credit Protection Act 2009 (Cth) (‘NCCP Act‘), a business engaging in regulated credit activities will generally need an ACL, unless an exemption or alternative authorisation applies.

Sections 6–9 of the NCCP Act define credit activities and credit services. Section 6(1) includes:

being a credit provider under a credit contract;
being a lessor under a consumer lease;
being a mortgagee or beneficiary of a guarantee in the circumstances specified in Section 6(1);
exercising specified rights or obligations of a credit provider, lessor, mortgagee, or beneficiary of a guarantee; and
providing a credit service.

Under Section 7, a credit service includes:

providing credit assistance, as defined in Section 8; or
acting as an intermediary, as defined in Section 9

Does an ACL Only Apply to Lenders

An ACL is not limited to businesses that provide loans directly. Mortgage brokers, credit brokers and other intermediaries may also need an ACL when they assist consumers to obtain credit or connect them with a credit provider.

Under Sections 7 and 8 of the NCCP Act, credit assistance includes suggesting or helping a consumer obtain a particular credit contract or consumer lease. Referrals may also be regulated credit activities depending on what the business does. Regulation 25 of the National Consumer Credit Protection Regulations 2010 (Cth) (‘NCCP Regulations‘) provides exemptions for certain referrals where the relevant conditions are met.

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Understand the Difference Between an AFSL & an ACL

Financial Products V Consumer Credit

An AFSL generally relates to financial products and financial services — the services identified in Section 766A of the Corporations Act, discussed above. An ACL relates to regulated consumer credit activities under the NCCP Act.

The correct licence depends on the particular product and activity, not simply on how the business describes itself.

Different Licence Authorisations & Obligations

An AFSL and an ACL provide different authorisations. An AFSL does not automatically authorise regulated consumer credit activities, while an ACL does not automatically authorise financial product advice, dealing, market making, or other financial services.

The obligations also differ. Section 912A(1) of the Corporations Act sets out the general obligations of an AFS licensee, including requirements relating to efficient, honest and fair conduct, conflicts of interest, compliance, competence and representative training.

Section 47(1) of the NCCP Act imposes similar general obligations on credit licensees. Responsible lending requirements apply separately under Chapter 3 where relevant, including Sections 115–123 for credit assistance and Sections 128–133 for credit providers.

For AFSL holders, our Compliance Framework Template (Australia) provides a structured starting point for documenting how these obligations are monitored and met.

To understand the specific duties that may apply to an AFSL business, download the AFSL Compliance Guide (Free) – Core Obligations for AFS Licensees.

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Practical Steps to Determine Which Licence Your Business Needs

Step 1: Identify What Your Business Actually Does

Start by mapping each product, service and customer-facing activity. In particular, record what the business offers, who receives it, and what the business does during each stage of the customer relationship.

The review should cover activities such as:

providing advice or recommendations;
dealing in, issuing or arranging financial products;
providing credit or a consumer lease;
suggesting or assisting with a particular credit contract; and
referring or connecting a consumer with a credit provider.

A business label does not decide whether an AFSL or ACL is required. Instead, the actual activities performed determine which licensing obligations may apply.

Step 2: Determine Whether It Is a Financial Service or Credit Activity

Compare each mapped activity with the relevant statutory definitions: the financial services identified in Section 766A of the Corporations Act and the credit activities identified in Section 6 of the NCCP Act, both discussed above. An activity may require an AFSL, an ACL or both, depending on the product and services involved.

Step 3: Check Whether an Exemption or Representative Arrangement Applies

A business should check whether it can operate without holding its own licence. Under Section 911A(2)(a) of the Corporations Act, a person may be exempt from holding an AFSL when providing a financial service as the representative of a person whose AFSL covers that service or who is otherwise exempt from the licensing requirement. Section 911B also applies to representatives.

Credit businesses may operate as credit representatives under Section 64 of the NCCP Act. Separate exemptions may also apply to particular activities. These include certain document and information activities under Regulation 24(6) and (8), and certain referral activities under Regulation 25 of the NCCP Regulations.

Exemptions can have specific conditions, so businesses should confirm the applicable AFSL and ACL requirements with financial services lawyers for AFSL and ACL licensing advice before providing the service. A business relying on one should confirm that every applicable requirement is met before providing the service.

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Why a FinTech May Need Both AFSL and ACL

FinTech & Multi-Product Businesses

Providing financial services may require an AFSL under Section 911A(1) of the Corporations Act and regulated consumer lending can be a credit activity under Section 6(1) of the NCCP Act. A FinTech or financial services business may need both an AFSL and an ACL if it provides financial services and engages in regulated credit activities. The assessment depends on the products offered, and the activities performed, rather than the business label.

A business could combine one of the following with consumer lending or credit assistance:

investment services;
non-cash payment facilities; or
financial product advice.

Margin Lending & Other Overlapping Areas

Some products require careful classification because they may relate to both financial services and credit activities. Margin lending is treated as a financial product and regulated under Sections 764A(1)(l) and 761EA of the Corporations Act, separately from the NCCP Act.

A business offering a margin lending facility should therefore assess the financial services it provides and its AFSL authorisations. An ACL may also be relevant if the business separately engages in regulated credit activities under the NCCP Act.

The presence of a lending feature does not, by itself, determine which licensing regime applies.

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Consequences of Operating Without the Required Licence

Providing regulated financial services without the required AFSL is a contravention of Section 911A(1) of the Corporations Act and can result in both civil and criminal liability. Section 911A(5B) makes the contravention a civil penalty provision, with pecuniary penalties available under Section 1317G. A contravention of Section 911A(1) is also an offence under Section 1311(1), with Schedule 3 providing for a maximum penalty of five years’ imprisonment.

Providing regulated credit activities without an ACL or valid authorisation under the NCCP Act can also lead to penalties and enforcement action. Section 29(1) prohibits engaging in a credit activity without an ACL authorising that activity and provides for a civil penalty of 5,000 penalty units. Under Section 29(2), a contravention can also be a criminal offence carrying up to two years’ imprisonment. Section 29(3) provides a defence in specified circumstances for employees, directors, and credit representatives acting within an appropriately licensed principal’s authority.

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Common AFSL & ACL Licensing Mistakes

Licensing errors often arise when a business assesses its name or main commercial purpose instead of the activities it performs. Common mistakes include:

assuming an AFSL authorises regulated consumer credit activities;
assuming an ACL authorises financial product advice or dealing;
overlooking brokers, intermediaries, and referral activities;
failing to check the specific authorisations on an AFSL or ACL; and
relying on an exemption without confirming that all conditions are satisfied.

A business should also check whether its representatives have the correct authority. An exemption or representative arrangement may apply only to specified activities, products, or circumstances.

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Conclusion

An AFSL covers financial services involving products such as investments, insurance and superannuation, while an ACL covers regulated consumer credit activities. The correct authorisation depends on the products and activities your business performs, and some businesses may need both licences or may qualify for an authorised representative, credit representative or exemption arrangement.

For advice on your licensing position, contact Click Legal to request legal advice about your business activities and authorisation requirements. Click Legal’s financial services lawyers for AFSL and ACL licensing advice can help assess whether your business needs an AFSL, an ACL, both licences or an alternative arrangement under the Corporations Act and the NCCP Act.

Frequently Asked Questions

What is the difference between an AFSL and an ACL?

An AFSL covers financial services involving financial products, such as advice and dealing. An ACL covers regulated credit activities, such as lending, credit assistance and broking.

Does an AFSL cover lending?

No, an AFSL does not automatically authorise regulated consumer lending. Consumer credit activities generally require an ACL, while margin lending is regulated under Chapter 7 of the Corporations Act.

Does an ACL cover financial advice?

No, an ACL does not authorise general or personal financial product advice. That advice is a financial service requiring an AFSL unless an applicable exemption or representative arrangement applies.

Can a business need both an AFSL and an ACL?

Yes, a business may need both licences if it provides financial services and regulated consumer credit services. Each licence only covers the activities authorised under its own regime.

Do mortgage brokers need an ACL?

Mortgage brokers generally need an ACL to arrange home loans. They may instead act as a credit representative of an Australian credit licensee.

Can I operate under another business’s AFSL or ACL?

Yes, some businesses can operate as an authorised representative under an AFSL or as a credit representative under an ACL. The arrangement must cover the activities the business provides.

How do I know which licence my FinTech needs?

Map your FinTech’s products, services and customer interactions to identify whether they involve financial services, credit activities or both. Check the relevant authorisations and any exemption or representative arrangement.

Are loans to property developers regulated under the NCCP Act?

Loans to companies for property development are not subject to the credit legislation. A loan to a natural person for residential property investment is regulated under the NCCP Act if the relevant conditions apply.

What are the penalties for operating without the correct licence?

Operating without a required AFSL or ACL can lead to fines, legal repercussions and business suspension. Section 911A of the Corporations Act requires a financial services business to hold an AFSL unless an exemption applies.

Gerard Duffy’s Permanent ASIC Ban: Fit & Proper Lessons for AFSL Holders and Responsible Managers

Hannah Deuk — Sat, 03 Oct 2026 04:14:11 +0000

Introduction

On 3 June 2026, the Australian Securities & Investments Commission (ASIC) permanently banned former Brite Advisors responsible manager Gerard Duffy from providing financial services after finding reason to believe he was not fit and proper. ASIC cited his failure to disclose and manage an actual, perceived or potential conflict of interest, and responses during Section 19 examinations that indicated a lack of integrity and honesty.

The decision gives Australian financial services licence (AFSL) holders a case study in fit and proper standards, conflict management and responsible manager oversight. It explains what the ban means for appointing and monitoring responsible managers without suggesting that Duffy was banned because he held that role or that responsible managers personally assume a licensee’s obligations under Section 912A of the Corporations Act 2001 (Cth) (‘Corporations Act‘).

Interactive Tool: Check If Your Responsible Manager Meets ASIC’s Standards

AFSL Responsible Manager Fitness & Conflict Checker

Quickly assess if your Responsible Manager arrangements meet ASIC’s fit and proper standards and conflict requirements under the Corporations Act.

Are you assessing a current or proposed Responsible Manager for your AFSL?

Has the Responsible Manager disclosed all external roles and potential conflicts of interest (including employment, consulting, or directorships)?

Are you satisfied that the Responsible Manager has enough available time and the required honesty, integrity, and sound judgement?

✅ Your Responsible Manager Arrangements Appear Compliant

Well done! Your Responsible Manager arrangements align with ASIC’s fit and proper requirements under Section 913BB and conflict management obligations under Section 912A(1)(aa) of the Corporations Act 2001 (Cth). Continue to review and document external roles, conflicts, and ongoing suitability, especially when business circumstances change.

For advanced compliance, consider regular reviews against ASIC’s RG 105 and RG 181.

Section 912A(1)(aa) of the Corporations Act 2001 (Cth)
Section 913BB of the Corporations Act 2001 (Cth)
Section 920A(1)(d) of the Corporations Act 2001 (Cth)

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⚠️ Gaps in Conflict Disclosure or Suitability – Action Needed

Warning: ASIC expects AFSL holders to maintain up-to-date conflicts registers and to ensure Responsible Managers are fit and proper at all times. Undisclosed external roles or integrity concerns can expose your licence to regulatory action, including banning orders under Section 920A of the Corporations Act 2001 (Cth). Immediate review and remediation is recommended.

Consider independent legal advice to address gaps and update your compliance framework before ASIC scrutiny.

Section 912A(1)(aa) of the Corporations Act 2001 (Cth)
Section 920A(1)(d) of the Corporations Act 2001 (Cth)
ASIC Regulatory Guide 181 (RG 181.63, RG 181.75–RG 181.78)

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❌ Serious Concerns – High Risk of ASIC Action

Critical alert: If a Responsible Manager has undisclosed conflicts, integrity issues, or lacks available time, your AFSL may be at risk. ASIC can issue permanent bans (as in the Duffy case) and take enforcement action under Section 920A and Section 912A of the Corporations Act 2001 (Cth).

Immediate legal intervention is strongly recommended to protect your licence and business.

Section 912A(1)(aa) of the Corporations Act 2001 (Cth)
Section 920A(1)(d) of the Corporations Act 2001 (Cth)
Australian Securities and Investments Commission Act 2001 (Cth)

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Why ASIC Permanently Banned Gerard Duffy

Undisclosed Conflict of Interest

Gerard Duffy had overlapping roles involving Brite Advisors Pty Ltd (Brite) and the Australian Financial Complaints Authority (AFCA). ASIC’s records show that he worked for AFCA from 6 April 2021 to 15 July 2025, while also holding roles with Brite, including as a consultant from 22 July 2022 to October 2023.

Mr Duffy failed to disclose his relationship with Brite to AFCA. As a result, ASIC found that he had “failed to disclose and manage an actual, perceived or potential conflict of interest“. This finding was relevant to ASIC’s conclusion that he was “not a fit and proper person“.

Duffy’s Responses During ASIC Examinations

Under Section 19(1)–(2) of the Australian Securities and Investments Commission Act 2001 (Cth) (‘ASIC Act‘), where ASIC on reasonable grounds suspects or believes that a person can give information relevant to a matter it is investigating, or is to investigate, under Division 1 of Part 3, ASIC may by written notice require the person to give reasonable assistance and appear for examination on oath or affirmation and answer questions.

ASIC examined Mr Duffy in October 2021 and July 2022 about Brite’s affairs. However, Mr Duffy’s responses did not disclose his employment with AFCA, even though he was employed there from 6 April 2021. ASIC found that omitting this information indicated a lack of integrity and honesty, contributing to its conclusion that he was not a fit and proper person.

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Understanding the Fit & Proper Standard for AFSL Holders

ASIC’s Fit & Proper Test

ASIC describes fitness and propriety in the financial services context as requiring a person to conduct themselves with “honesty, integrity and sound judgement“. For the statutory assessments to which it applies, Section 913BB(1)–(2) of the Corporations Act requires ASIC to have regard to specified matters when applying Section 913BA(1) or considering a banning order under Section 920A(1)(d), including:

whether the person’s AFSL has been suspended or cancelled; or
whether they have been subject to a banning or disqualification order.

ASIC must also consider matters such as disqualification from managing corporations, links to a refusal or failure to give effect to an AFCA determination, insolvency-related events and any conviction for an offence within the last 10 years. Section 913BB of the Corporations Act also requires ASIC to consider information from State or Territory authorities and any other matter ASIC considers relevant.

Implications of ASIC’s Banning Order

Under Section 920A(1)(d) of the Corporations Act, ASIC may make a written banning order if it has reason to believe that a person is not fit and proper. As per Section 920B(1)(a)–(e), a banning order may prohibit a person from:

providing any or specified financial services;
controlling an entity that carries on a financial services business;
performing any function involved in carrying on a financial services business; or
performing specified functions involved in carrying on such a business.

Applying the Section 920A(1)(d) power described above, Gerard Duffy’s permanent ban took effect on 3 June 2026. It prevents him from providing financial services, controlling an entity that carries on a financial services business, or performing any function involved in that business.

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Role of a Responsible Manager

Ensuring Organisational Competence

Under Section 912A(1)(e) of the Corporations Act, an AFS licensee must maintain the competence to provide the financial services covered by its licence. RG 105 explains that ASIC assesses this organisational competence by examining the knowledge and skills of the responsible managers who manage the financial services business.

A responsible manager should have direct responsibility for day-to-day decisions about the ongoing provision of financial services. RG 105.36 requires appropriate knowledge and skills for the financial services and products connected with each responsible manager’s role, while RG 105.39–RG 105.48 require the responsible managers collectively to cover all financial services and products under the licence. The obligation remains with the licensee; a responsible manager does not personally assume the licensee’s obligations under Section 912A of the Corporations Act.

Ongoing Fitness, Competence & Availability

ASIC’s RG 105.38 states that, when nominating responsible managers, the licensee needs to ensure they are fit and proper, and RG 105.26 requires consideration of whether they have sufficient time to fulfil their responsibilities.

An AFS licensee must continue assessing whether its responsible managers remain suitable for their roles. The assessment should take account of the responsible manager’s overall business commitments, including:

roles with other AFS licensees;
directorships;
employment; and
consulting work.

A person may have appropriate knowledge and skills but still lack enough available time to carry out the responsible manager role effectively.

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Practical Lessons AFSL Holders Should Learn From the Duffy Ban

Before Appointing a Responsible Manager

An AFS licensee should assess a proposed responsible manager’s fitness, competence, experience and external interests before making a nomination. ASIC’s current responsible manager transaction requirements require the following supporting documents when adding a new responsible manager:

a Statement of Personal Information;
a criminal history check;
information about the responsible manager’s competence, including relevant roles during the past 10 years;
copies of qualification certificates; and
if the person has lived outside Australia for more than 12 months during the past 10 years, overseas bankruptcy and police certificates.

A criminal history check must be no more than 12 months old. The assessment should also consider whether the responsible manager has outside employment, consulting arrangements, directorships or other roles that could create a conflict or limit the time available for significant day-to-day decisions, which are important considerations when hiring the right responsible manager.

Ongoing Monitoring & Conflict Disclosures

RG 105.10 expects an AFS licensee to review organisational competence regularly and whenever its responsible managers or business activities change. The licensee should maintain and update each responsible manager’s knowledge and skills, and keep records of its reviews and governance steps.

Our Responsible Manager Competence and Development Policy Template (AFSL) helps you document how responsible managers’ competence and suitability are reviewed over time.

Section 912A(1)(aa) of the Corporations Act requires the licensee to have adequate arrangements for managing conflicts of interest within the scope of that provision. RG 181.60–RG 181.63 explains that those arrangements should identify and assess relevant conflicts, respond to them, and include appropriate documentation and record keeping.

Responding When Fitness or Integrity Concerns Arise

An integrity concern should prompt the AFS licensee to reassess whether it can continue relying on the responsible manager for organisational competence. The review should consider the person’s:

fitness;
available time;
external roles;
conflicts; and
the effect of any change on the financial services covered by the licence.

Regulation 7.6.04(1)(b) of the Corporations Regulations 2001 (Cth) requires an AFS licensee to lodge prescribed particulars with ASIC within 10 business days where a matter entered in the register of financial services licensees changes and the change is not a direct consequence of an act by ASIC. ASIC’s responsible manager notification process applies this requirement to changes to responsible managers.

The notification allows ASIC to assess whether the change affects organisational competence. Click Legal’s free AFSL Compliance Guide on Core Obligations for AFS Licensees can assist licensees reviewing these ongoing governance steps.

Outside Employment & Competing Roles

External employment and consulting arrangements can create actual, perceived or potential conflicts of interest. Section 912A(1)(aa) of the Corporations Act requires an AFS licensee to have adequate arrangements for managing conflicts of interest that may arise wholly or partly in relation to activities undertaken by the licensee or its representatives in providing financial services as part of their financial services business. ASIC provides further guidance on identifying actual and potential conflicts in its Regulatory Guide (RG) 181.29–RG 181.32.

As explained above, ASIC found that Gerard Duffy failed to disclose and manage the conflict involving his overlapping Brite and AFCA roles, contributing to its finding that he was not a fit and proper person.

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What AFSL Holders Should Monitor

RG 181.63 states that licensees should document identified conflicts and the actions taken, for example through a conflicts register. In that context, an AFSL holder should monitor a range of matters, including:

maintaining accurate conflict registers;
reviewing responsible manager external interests; and
checking that disclosures remain complete when roles or relationships change.

To formalise how conflicts are recorded and managed, our Conflicts of Interest and Related Party Transactions Policy Template (AFSL) offers a structured starting point that covers related party dealings.

A responsible manager’s employment, directorships, consulting work and other business roles may affect how the licensee assesses a conflict.

ASIC’s current RG 181.75–RG 181.78 states that disclosure is one mechanism for managing conflicts and often, disclosure alone may be insufficient. Its effectiveness depends on the facts and circumstances, including:

the materiality or seriousness of the conflict;
the nature of the financial service; and
the needs of the affected party.

Our Free Conflicts of Interest Management Guide for AFSL & ACL Holders can assist licensees in reviewing competing roles and recording how conflicts are managed.

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Conclusion

The Gerard Duffy case shows why AFSL holders should assess each responsible manager’s honesty, integrity, sound judgement, external roles and conflicts of interest. Effective oversight requires licensees to identify and manage conflicts, review responsible manager suitability, and keep records supporting their organisational competence.

For AFSL holders reviewing these arrangements, contact Click Legal’s lawyers about AFSL compliance services to help assess your governance processes. Their regulatory law experience can help your business address responsible manager issues and manage compliance tasks with greater confidence.

Frequently Asked Questions

What is a responsible manager under an AFSL?

A responsible manager is a person directly responsible for major day-to-day decisions about an AFSL holder’s ongoing financial services. The licensee relies on its responsible managers to demonstrate organisational competence under RG 105.

Does a responsible manager have to be fit and proper?

Yes, an AFSL holder must ensure each nominated responsible manager is fit and proper. RG 105 states that this includes appropriate honesty, integrity and sound judgement.

What does ASIC consider when assessing fitness and propriety?

ASIC must consider the matters in Section 913BB of the Corporations Act when assessing fitness and propriety. These matters include past licence suspension or cancellation, banning orders, disqualification from managing corporations and convictions for offences within the last 10 years.

Can a responsible manager have another job?

Yes, a responsible manager can have other roles if they have enough time to perform their responsibilities. RG 105 requires the licensee to consider other employment, directorships and business commitments.

What conflicts should a responsible manager disclose?

A responsible manager should disclose any actual, perceived or potential conflict of interest. This can include outside employment, overlapping relationships or competing roles that could affect their ability to act honestly and fairly.

Can ASIC permanently ban a responsible manager?

Yes, ASIC can permanently ban a person under Section 920A(1)(d) of the Corporations Act if it has reason to believe the person is not fit and proper. Section 920B(2) permits a prohibition to apply permanently, including to a former responsible manager such as Gerard Duffy.

How long does an AFSL holder have to notify ASIC of a change in responsible managers?

An AFSL holder must notify ASIC within 10 business days after adding or removing a responsible manager. This requirement also applies to other changes covered by ASIC’s responsible manager notification process.

What happens if a responsible manager fails to disclose a conflict of interest?

ASIC may regard an undisclosed and unmanaged conflict as evidence of a lack of honesty and integrity. That finding may support a conclusion that the person is not fit and proper and lead to a permanent banning order under the Corporations Act.

Can a banned responsible manager appeal an ASIC decision?

Yes, a person banned by ASIC can apply to the Administrative Review Tribunal for review of the banning decision. Gerard Duffy has that right following ASIC’s decision.

Credit Pricing Compliance for ACL Holders: Interest, Fees and the 48% Annual Cost Rate Cap

Hannah Deuk — Sat, 03 Oct 2026 03:35:14 +0000

Introduction

Credit pricing compliance for Australian Credit Licence (ACL) holders involves more than the advertised interest rate. The National Consumer Credit Protection Act 2009 (Cth) Schedule 1 (‘National Credit Code‘) regulates interest calculations, certain credit fees and charges, and the cost of credit contracts.

The 48% annual cost rate is a separate statutory measure, not a general interest rate cap. This article explains how the rules apply to credit providers, including interest calculations, fee limits, pricing disclosures and product-specific exclusions.

Interactive Tool: Check If Your Credit Pricing Meets the 48% Cap

Credit Pricing Compliance Checker for ACL Holders

Instantly check if your credit product pricing, fees, and interest rates comply with the National Credit Code and the 48% annual cost rate cap.

Is your credit contract for a product type that is subject to the 48% annual cost rate cap?

Does your pricing calculation include all credit cost amounts (interest, fees, charges, markups, and third-party costs)?

Is interest calculated only on the unpaid daily balance (not the original principal or full contract amount)?

✅ Your Credit Pricing Structure Appears Compliant

Based on your answers, your credit contract is subject to the 48% annual cost rate cap, includes all required cost amounts, and applies interest only to the unpaid daily balance.

Under Section 32A(1) and Section 32B of the National Credit Code (Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth)), this approach aligns with statutory requirements.

However, compliance should be confirmed by a legal review of your actual contract documents and pricing systems.

Legal References:

Section 32A(1) of the National Credit Code (Cth)

Section 32B of the National Credit Code (Cth)

Section 28 of the National Credit Code (Cth)

Australian Securities and Investments Commission v Walker Stores Pty Ltd (In Liquidation) [2026] FCA 665

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⚖️ Your Product May Be Excluded from the 48% Cap

Your credit contract appears to be a small amount, low cost, bridging finance contract, or ADI product.

These are excluded from the 48% annual cost rate cap under Section 32A(4) of the National Credit Code (Cth).

However, other pricing and disclosure rules still apply, and you must ensure compliance with all relevant provisions.

Legal References:

Section 32A(4) of the National Credit Code (Cth)

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⚠️ Potential Compliance Risk: Not All Costs Included

Your pricing calculation does not include all required credit cost amounts.

This may result in a breach of Section 32B of the National Credit Code (Cth), as all fees, charges, and prescribed amounts must be included in the annual cost rate calculation.

Failure to comply can expose you to significant penalties, as seen in the Snaffle case.

Legal References:

Section 32B of the National Credit Code (Cth)

Australian Securities and Investments Commission v Walker Stores Pty Ltd (In Liquidation) [2026] FCA 665

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❌ Non-Compliant Interest Calculation Detected

Interest must be calculated on the unpaid daily balance, not the original principal or a flat contract amount.

Applying a flat-rate or charging interest on the full contract amount is a breach of Section 28 of the National Credit Code (Cth) and was a key compliance failure in the Snaffle case, resulting in substantial penalties.

Legal References:

Section 28 of the National Credit Code (Cth)

Australian Securities and Investments Commission v Walker Stores Pty Ltd (In Liquidation) [2026] FCA 665

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National Credit Code Requirements Applicable to Consumer Credit Providers

Credit Contracts Subject to the National Credit Code

Section 5(1) of the National Credit Code applies to credit provided to a natural person or strata corporation where the credit is wholly or predominantly for personal, domestic or household purposes. It also applies to credit used to purchase, renovate or improve residential property for investment purposes, or to refinance credit provided for those purposes.

Subject to the extended application of the National Credit Code to buy now pay later and low cost credit contracts under its Sections 13B–13C, Section 5(1)(c) requires that a charge is or may be made for providing the credit. Section 5(1)(d) requires the credit provider to provide the credit in the course of a business of providing credit, or as part of or incidentally to another business, carried on in the relevant jurisdiction.

Product-specific rules may differ. For example, Section 27A of the National Credit Code excludes small amount credit contracts from the interest-charge division, while Section 32A(4) excludes certain products from the 48% annual cost rate cap discussed below.

Disclosure Requirements for Credit Providers

Under Section 17 of the National Credit Code, a credit contract document must disclose key pricing information. For credit contracts other than small amount credit contracts, Section 17(4) requires the annual percentage rate or rates and how each rate applies. Section 17(5) requires the method used to calculate interest charges and the frequency of debiting those charges.

For a credit contract besides a low cost credit contract, Section 17(7) requires the contract document to state:

the repayment amounts, or the method for calculating them;
the number and frequency of repayments where ascertainable;
the total repayment amount where ascertainable and the statutory seven-year condition is met; and
the first repayment date where ascertainable;

For a low cost credit contract where more than one repayment is to be made, Section 17(7A) separately requires the contract document to state:

the repayment frequency; and
where ascertainable, the amount, number, and total amount of repayments; or
if the repayment amount is not ascertainable, the method for calculating that amount.

However, under Section 17(6A), where a low cost credit contract does not impose interest charges, Sections 17(4)–(6) do not apply, and the contract document must instead state that no interest charges are payable.

Under Section 17(8), it must identify credit fees and charges, when they are payable, their amount, or calculation method where ascertainable, and the total amount payable where ascertainable.

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How ACL Holders Must Calculate Interest & Manage Fees

Calculating Interest on the Unpaid Balance

Under Section 28(1) of the National Credit Code, the maximum interest charge is generally determined by applying the applicable daily percentage rate to the unpaid daily balances. Section 28(2) also permits an interest charge for a month, quarter or half-year to be calculated by applying the relevant proportion of the annual percentage rate to the average unpaid daily balances. ‘

Unpaid balance’ and ‘unpaid daily balance’ are defined in Section 27(1). The unpaid balance is the difference between amounts credited and debited under the credit contract, while the unpaid daily balance is measured at the end of each day.

A flat interest rate cannot be applied to the full purchase cost for the entire contract term. As repayments reduce the unpaid balance, the amount used to calculate interest must also reduce.

Limitations on Default Interest

Section 30(2) of the National Credit Code permits a higher default rate only within defined limits. The higher rate must:

apply because of a payment default;
relate only to the amount in default; and
operate only while the default continues.

A credit contract cannot provide for different rates merely because the debtor is in default without meeting those conditions. In addition, the contract document must state whether a default rate may apply, identify the rate, and explain how it will be applied under Section 17(11).

Rules Governing Prohibited & Third-Party Fees

Section 31(1) of the National Credit Code allows regulations to identify credit fees or charges that are prohibited. It does not establish one universal cap for every fee, and subsection 31(1) does not apply to small amount credit contracts.

Section 32(2) limits a third-party fee to the ascertainable amount paid or payable by the credit provider to the third party. If that amount cannot be established when the debtor pays, any later difference must be refunded or credited under Section 32(3). Discounts, rebates and other allowances received by the credit provider or a related body corporate must be considered under Section 32(4).

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Understanding the 48 Percent Annual Cost Rate Cap for Credit Providers

How the Annual Cost Rate is Calculated

Section 32B of the National Credit Code sets the method for calculating the annual cost rate.

The calculation uses:

the amount of credit provided;
the timing and amount of repayments; and
any credit cost amounts payable by the debtor.

Credit cost amounts may include credit fees and charges, certain fees paid for introductions or services connected with providing credit, and other prescribed amounts. As a result, the annual cost rate is a separate statutory measure from the contractual interest rate because it also considers fees, charges and repayment timing.

Exemptions to the 48 Percent Cap

The 48% cap does not apply to every credit contract. Section 32A(4) of the National Credit Code excludes contracts where:

the credit provider is an authorised deposit-taking institution (ADI);
the contract is a low cost credit contract;
the contract is a small amount credit contract; or
the contract is a bridging finance contract.

Therefore, as a practical implication, the product classification should be checked before applying the cap, because different credit products may be subject to different statutory pricing rules.

Managing Pricing Changes After the Contract Begins

Section 32AA(1) of the National Credit Code addresses later changes to pricing. A credit provider contravenes this provision if an increase to the annual percentage rate or a prescribed amount would have caused the annual cost rate to exceed 48% when calculated as at the date the contract was entered into. The relevant prescribed amounts are identified in Regulation 79AC of the National Consumer Credit Protection Regulations 2010 (Cth) (‘NCCP Regulations‘).

Section 32AA(1) applies to contracts other than small amount credit contracts and bridging finance contracts, and does not apply where the credit provider is an ADI. Accordingly, as a best practice, pricing changes should be tested against the annual cost rate calculation before they are introduced.

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How Pricing Structures Breach the Cap & Enforcement Lessons from Snaffle

Breaching the Cap Despite Low Interest Rates

A credit contract may exceed the 48% annual cost rate even where its stated interest rate is below 48%, because the calculation under Section 32B includes the amount of credit, repayments, and credit cost amounts.

An inflated cash price, excessive markup or delivery fee can increase the cost attributed to the goods before interest is applied. As a result, the pricing structure may produce an annual cost rate above 48%, even where the separate interest rate appears modest. For this reason, the stated interest rate should not be assessed without examining the full cost of the credit contract.

The Snaffle Case Study on Inflated Prices & Overcharging

In Australian Securities and Investments Commission v Walker Stores Pty Ltd (In Liquidation) [2026] FCA 665 (‘Snaffle‘), the Federal Court found that Walker Stores, trading as Snaffle, entered three sample credit contracts with annual cost rates exceeding 48%, contrary to Section 32A(1) of the National Credit Code.

The Court accepted the ‘cash price construction’ and, on the facts of those contracts, applied the first limb of the ‘cash price’ definition in Section 204(1)—the lowest price that a cash purchaser might reasonably be expected to pay for the goods from the supplier—rather than Walker Stores’ inflated stated price. The Court also found that interest had been calculated on the total contract amount instead of the unpaid balance across 38,562 contracts.

Under Section 167 of the National Consumer Credit Protection Act 2009 (Cth) (‘NCCP Act‘), with the applicable maximum pecuniary penalty governed by Sections 167A–167B, the Federal Court ordered Walker Stores to pay $33.5 million in pecuniary penalties for its Section 24(1) contraventions, comprising:

$1.5 million for the contraventions involving Sections 24(1) and 32A(1); and
$32 million for the contraventions involving Sections 24(1) and 28.

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Identifying Common Credit Pricing Mistakes

Credit providers can create compliance risk by assessing only the advertised interest rate, making ACL compliance services for credit providers relevant when reviewing broader pricing and disclosure obligations. Other frequent errors include:

applying a flat-rate methodology that results in interest charges exceeding the maximum permitted by Section 28;
failing to calculate the annual cost rate under Section 32B;
assuming the 48% cap applies to every credit product, despite the exclusions in Section 32A(4); and
treating fees, charges or markups incorrectly.

Contract documents should also match the pricing method used by the credit provider. The Snaffle proceedings show the risks of using a calculation system that differs from the methodology described to customers.

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Practical Compliance Steps for ACL Holders

Legal and product teams can assess a credit product through a focused review:

confirm the product classification and applicable exclusions;
review the pricing model against Sections 17, 28 and 32A of the National Credit Code;
test interest and annual cost rate calculations using representative contracts;
audit systems to confirm interest is applied to the unpaid daily balance;
review fees, charges and any third-party amounts;
check that disclosures reflect the actual pricing methodology; and
record and remediate identified errors.

Where your credit products are subject to the design and distribution obligations, our Product Design and Review Policy Template (DDO | Australia) helps you document target markets and review triggers.

Teams managing wider regulatory obligations can download the Conflicts of Interest Management Guide (AFSL & ACL Holders) from Click Legal.

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Conclusion

Credit pricing compliance requires ACL holders to assess more than the stated interest rate, including interest on the unpaid daily balance, permitted fees and charges, disclosure obligations, and the separate 48% annual cost rate measure under the National Credit Code. The Snaffle decision shows that incorrect calculations and pricing structures can result in substantial penalties, adverse publicity orders and consumer harm.

For support with reviewing your credit pricing systems, contracts and disclosures, contact Click Legal to discuss ACL compliance services for credit pricing and disclosures. Our regulatory lawyers can help identify potential compliance issues and support a focused review of your obligations under the National Credit Code.

Frequently Asked Questions

What is the 48 percent annual cost rate cap?

Section 32A(1) of the National Credit Code prohibits a credit provider from entering into a credit contract with an annual cost rate above 48%. The annual cost rate is calculated under Section 32B.

Is the annual cost rate the same as the interest rate?

No, the annual cost rate is a separate statutory measure under Section 32B. It includes credit cost amounts such as fees and charges, as well as the timing of repayments.

Does the 48 percent cap apply to every credit provider?

No, Section 32A(4) excludes ADIs, low cost credit contracts, small amount credit contracts and bridging finance contracts.

How must interest be calculated under the National Credit Code?

Section 28(1) of the National Credit Code generally limits interest charges by reference to the applicable daily percentage rate and unpaid daily balances, while Section 28(2) permits specified monthly, quarterly or half-yearly calculations using average unpaid daily balances. A flat-rate methodology that produces interest exceeding the Section 28 maximum is not permitted.

Can fees cause a credit contract to exceed the 48 percent cap?

Yes, fees and charges can increase the annual cost rate because Section 32B(3) includes credit cost amounts in the calculation. A contract may exceed 48% even where its stated interest rate is lower.

What happens if a credit provider overcharges interest?

Overcharging interest can breach Section 28 and lead to penalties and adverse publicity orders. In Snaffle, the Federal Court ordered a $33.5 million pecuniary penalty.

What is the statutory cash price test for instalment sales?

Under Section 204(1) of the National Credit Code, the cash price is the lowest price that a cash purchaser might reasonably be expected to pay for the goods or services from the supplier or, where they are not available for cash or are available for cash only at the same or a reasonably similar price to the credit price, their market value.

Are there restrictions on default interest rates?

Yes, Section 30(2) permits a higher rate only after a payment default, on the amount in default and while the default continues.

What must be disclosed in a credit contract document?

Section 17 of the National Credit Code requires key pricing information, including the annual percentage rate, interest calculation method, repayment details and credit fees and charges. Certain contracts must also disclose the cash price and amount of credit.

What Is AML/CTF Transaction Monitoring & How to Build Effective Monitoring Rules

Hannah Deuk — Sat, 03 Oct 2026 03:29:43 +0000

Introduction

Australian reporting entities must monitor customers receiving designated services to identify, assess, manage and mitigate money laundering, terrorism financing and proliferation financing (ML/TF/PF) risks. Transaction monitoring focuses on unusual customer transactions and behaviour, including activity that may lead to a suspicious matter reporting (SMR) obligation.

Effective monitoring rules and monitoring scenarios should reflect the business’s risks and circumstances and may use manual or automated processes. This article covers risk-based thresholds, alerts and reviews, while distinguishing an alert that prompts investigation from an SMR obligation.

Interactive Tool: See If Your Alert Requires an SMR

AML/CTF Transaction Monitoring Rule Checker

Quickly assess if your transaction monitoring rules meet Australian AML/CTF legal standards and identify when an alert may trigger a Suspicious Matter Report (SMR) obligation.

What type of transaction or behaviour triggered your alert?

Has your review identified a legitimate explanation for the activity?

Does the suspicious activity relate to terrorism financing, money laundering, or another criminal offence?

✅ No SMR Required – Document Your Review

You have identified a legitimate explanation for the unusual transaction or behaviour. Under Section 30(5) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), an unusual transaction does not automatically trigger a Suspicious Matter Report (SMR) obligation. Document your assessment and continue monitoring as required by your AML/CTF program.

Section 30(5) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)
Section 30(2)(a) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)

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⚠️ Further Assessment Needed – Consider Enhanced Due Diligence

You have not found a legitimate explanation, but the activity does not clearly relate to terrorism financing, money laundering, or another criminal offence. Apply enhanced customer due diligence (ECDD) as required by Section 32(a) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) and continue monitoring. If new information arises, reassess for SMR obligations.

Section 32(a) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)
Section 30(5)(d) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)

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❌ SMR Required – Suspicion on Reasonable Grounds

Your review has not identified a legitimate explanation and the activity may relate to terrorism financing, money laundering, or another criminal offence. You must submit a Suspicious Matter Report (SMR) to AUSTRAC within the statutory timeframe under Section 41(1) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth). For terrorism financing, the SMR must be lodged within 24 hours; for other matters, within 3 business days.

Section 41(1) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)
Section 30(2)(a) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)

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⚖️ Need Help Interpreting the Rules?

AML/CTF transaction monitoring and SMR obligations are complex and fact-specific. For tailored guidance, contact Click Legal’s AML/CTF lawyers to review your scenario and ensure your program meets AUSTRAC requirements.

Section 30 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)
Rule 6-35 of the Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 (Cth)

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This tool provides general information only and does not constitute legal advice. AML/CTF obligations are complex and fact-specific. Contact Click Legal’s AML/CTF Law Lawyers for advice tailored to your circumstances.

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What Is AML/CTF Transaction Monitoring For Australian Reporting Entities

Section 30(1) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (‘AML/CTF Act‘) requires a reporting entity to monitor customers receiving designated services to appropriately identify, assess, manage and mitigate the ML/TF/PF risks it may reasonably face. Under Section 30(2)(a), a reporting entity providing designated services through a permanent establishment in Australia must also monitor unusual customer transactions and behaviours that may give rise to an SMR obligation.

Rule 6-35 of the Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 (Cth) (‘AML/CTF Rules‘) specifies the monitoring that is taken to comply with Section 30(2)(a), including monitoring for unusual transactions and behaviours that may give rise to the matters in Sections 41(1)(d)–(j).

For the purposes of Section 30, Section 30(5)(a)–(d) of the AML/CTF Act expressly provides that unusual transactions and behaviours include the following:

large or complex transactions;
unusual transaction patterns;
activity with no apparent economic or lawful purpose; or
conduct inconsistent with what the reporting entity knows about the customer, relationship, risk, source of funds or source of wealth.

An unusual transaction does not automatically mean illegal conduct, so the reporting entity should assess whether there is a legitimate explanation and whether further action is required.

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What Must Reporting Entities Monitor For

Unusual Transaction Size or Frequency

A reporting entity should assess whether the size, frequency, or pattern of a customer’s transactions is consistent with the customer’s profile and expected activity. A high transaction volume may be ordinary for one customer but unusual for another, depending on the customer’s circumstances, the designated service and the business relationship.

Monitoring may identify the following:

unusually large or complex transactions;
large cash deposits or withdrawals;
rapid transfers; or
activity inconsistent with the customer’s previous transaction history.

Section 5-12 of the AML/CTF Rules requires a reporting entity’s AML/CTF policies to enable timely review of material relevant to reportable matters under Section 41 of the AML/CTF Act. This ensures a determination is made as soon as practicable as to whether the reporting entity suspects on reasonable grounds any matter in Sections 41(1)(d)–(j). Accordingly, a transaction monitoring alert prompts assessment; it does not itself establish that an SMR obligation has arisen.

Structuring & Threshold Avoidance

AUSTRAC guidance identifies transactions that appear structured to avoid threshold transaction reporting obligations as an indicator that may warrant further investigation.

Under Section 5 of the AML/CTF Act, a ‘threshold transaction’ includes a transaction involving the transfer of physical currency of at least $10,000, and other indicators include:

frequent structured cash payments;
multiple transactions where one transaction would be sufficient;
cash deposits made across different branches or ATMs; and
several low-value international transfers.

Section 43(2) requires a reporting entity to report a threshold transaction to the AUSTRAC CEO within 10 business days. Separately, Section 142 creates an offence concerning two or more non-reportable transactions conducted, or caused to be conducted, in a manner or form for the sole or dominant purpose of avoiding threshold transaction reporting requirements.

These patterns should be assessed alongside the customer’s profile, transaction history and stated purpose.

High-Risk Jurisdictions & Parties

AUSTRAC guidance identifies transactions involving high-risk countries or regions, sanctioned persons and other unexpected counterparties as examples that may warrant further investigation. Politically exposed person (PEP) status and high-risk jurisdiction exposure may also affect customer ML/TF risk and enhanced CDD obligations under Section 32 of the AML/CTF Act.

Reporting entities may also consider activity involving persons or entities linked through open-source information to criminal activity, terrorism or sanctions concerns. A single indicator may not establish suspicious activity, so the transaction and surrounding customer circumstances require further assessment.

Transactions With No Apparent Economic Purpose

Section 30(5)(c) of the AML/CTF Act expressly includes transactions and behaviours that have no apparent economic or lawful purpose within the meaning of unusual transactions and behaviours. Section 30(5)(d) also covers activity inconsistent with what the reporting entity reasonably knows about the customer, the nature, and purpose of the business relationship, the customer’s ML/TF risk and, where relevant, the customer’s source of funds or source of wealth.

Relevant activity may include:

unnecessarily complex transfers;
rapid movement of funds between multiple accounts;
transfers involving third parties without an apparent commercial reason; or
legal entity structures, corporate vehicles or trust arrangements used without an apparent commercial reason or in a way that may obscure ownership.

Higher-Risk Customers & Services

Under Section 32(a) of the AML/CTF Act, a reporting entity must apply enhanced CDD measures appropriate to the customer’s ML/TF risk where the customer’s ML/TF risk is high.

AUSTRAC guidance separately states that higher-risk customers may require more intensive transaction monitoring than lower-risk customers. Depending on the customer’s ML/TF risk, this may include:

additional alerts to review activity more closely; and
more frequent manual reviews of transactions.

In addition, the monitoring approach should reflect the nature, size, and complexity of the business and the designated services it provides. Furthermore, changes in a customer’s ML/TF risk during the business relationship should inform how their activity is monitored.

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Practical Tips To Build & Test Effective Transaction Monitoring Rules

Manual vs Automated Transaction Monitoring

Neither Section 30 of the AML/CTF Act nor Section 6-35 of the AML/CTF Rules prescribes manual or automated transaction monitoring. Transaction monitoring may be manual, automated or a combination of both. Section 26F(1)(c) requires the reporting entity’s AML/CTF policies, procedures, systems and controls to be appropriate to the nature, size, and complexity of its business.

Manual transaction monitoring may involve trained personnel reviewing transactions at scheduled intervals, comparing activity with the customer’s history and escalating unusual activity for further review.

Automated transaction monitoring may be appropriate where transaction volumes make manual review ineffective and software can identify unusual patterns, large transactions, activity spikes, possible structuring, high-risk jurisdictions or sanctioned parties. AUSTRAC expects automated monitoring where transactions cannot effectively be monitored manually.

Identify Relevant Risk Scenarios

Start with the business’s ML/TF risk assessment and identify customer transactions or behaviour that may require review. Australian Transaction Reports and Analysis Centre’s (AUSTRAC) industry-specific suspicious activity indicators, such as that for the banking sector, can help identify relevant scenarios involving ML/TF/PF and other criminal activity.

Relevant scenarios may include:

unusual transaction patterns;
large or complex transactions;
structured activity;
unexplained international transfers;
high-risk jurisdictions;
sanctions concerns; and
behaviour inconsistent with a customer’s profile.

The indicators should be relevant to the business, its customers and the designated services it provides.

Our AML/CTF Red Flag Indicators Sheet Template is a practical reference for identifying indicators that can be built into your monitoring scenarios.

Set Appropriate Thresholds & Triggers

A transaction monitoring rule should use information that may indicate unusual activity. Relevant factors can include:

transaction amount and frequency;
transaction velocity and patterns;
countries, regions, and counterparties involved; and
changes in customer behaviour or activity.

The business’s ML/TF risk assessment should guide the thresholds and triggers. An alert should identify activity that requires further review, rather than treating every transaction above a fixed amount as suspicious.

For a checklist to support AML/CTF compliance work, see AML/CTF Compliance Checklist (Free).

Managing False Positives & Missed Activity

Customer monitoring should be checked regularly to confirm that alerts identify unusual transactions and behaviour and that staff respond appropriately. Reviews should assess whether the business has enough customer information, whether relevant activity generates alerts and whether identified issues are addressed promptly.

A business should adjust rules that generate excessive irrelevant alerts without weakening coverage of the risks identified in its ML/TF risk assessment. Alert reviews, investigation steps, decisions, and rule changes should be documented.

Responding to Emerging Risks

Transaction monitoring should be updated when the business identifies new indicators of criminal activity or when AUSTRAC publishes relevant indicators or ML/TF risk information. Changes in services, customer behaviour or the business’s risk assessment may also require monitoring scenarios to be revised.

Changes should be approved by relevant senior managers where they may affect AML/CTF compliance. The business should check that updates do not affect reporting obligations, use assurance processes while changes are made and document the updated monitoring measures.

Avoid Generic Rules & Fixed Monetary Thresholds

Monitoring rules should be based on the business’s ML/TF risk assessment, customer information, transaction data and the nature of its designated services. A single rule applied to every customer can miss activity that is unusual for a particular customer while generating unnecessary alerts for others.

Fixed monetary thresholds should not be the only basis for transaction monitoring. The size, frequency, pattern, velocity, geography, and counterparties involved may all be relevant when identifying unusual transactions and behaviour. Excessive irrelevant alerts should be addressed without weakening coverage of the identified ML/TF risks.

Alert Review & Escalation

A transaction monitoring alert signals activity that requires assessment; it does not establish that suspicious activity or illegal conduct has occurred. Depending on its alert review findings, the business may:

review or update KYC information and the customer’s ML/TF risk;
apply enhanced customer due diligence measures;
escalate the matter to senior managers or an AML/CTF compliance officer; or
decide whether to continue providing designated services.

The alert, review steps, decisions, and reasons for the response should be documented. These records help show how the business responded to unusual transactions and behaviour.

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When Does a Transaction Monitoring Alert Require an SMR

A transaction monitoring alert does not automatically require an SMR. An alert identifies activity that requires further assessment. An SMR obligation arises only where the reporting entity forms a suspicion on reasonable grounds and the requirements of Section 41(1) of the AML/CTF Act are satisfied.

The reporting entity should therefore review the customer, transaction, or behaviour that generated the alert and consider the available information, including the customer’s profile, transaction history, ML/TF risk, business relationship and any apparent economic or lawful purpose for the activity.

Where the assessment results in a suspicion on reasonable grounds and the requirements of Section 41(1) are satisfied, the reporting entity must submit an SMR to the AUSTRAC CEO:

within 24 hours after forming the suspicion where the suspected matter concerns TF, including where the service appears preparatory to a TF offence or information concerning the service may be relevant to investigating or prosecuting such an offence;
within 3 business days after the day the suspicion is formed where the suspicion concerns false identity, suspected tax evasion or other criminal offending, proceeds-of-crime enforcement, or ML, including where the service appears preparatory to a ML offence or information concerning the service may be relevant to investigating or prosecuting ML; or
within 5 business days after the day the suspicion is formed for those non-TF matters where the reporting entity reasonably believes that some, but not all, of the information required in the report may be protected by legal professional privilege and the privilege belongs to another person.

Accordingly, transaction monitoring should be designed to identify activity requiring investigation, rather than treating every unusual transaction or alert as automatically reportable.

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Conclusion

AML/CTF transaction monitoring requires reporting entities to monitor customers and their behaviour in a way that identifies, assesses, manages and mitigates ML/TF/PF risks. A sound approach uses risk-based thresholds, monitoring scenarios and alerts suited to the business, while recognising that an alert prompts review and an SMR obligation arises only when Section 41 of the AML/CTF Act is met.

To apply these requirements to your business, contact the AML/CTF compliance lawyers at Click Legal for clear regulatory guidance on transaction monitoring, customer risk and AML/CTF processes. Our regulatory lawyers can help you develop monitoring measures suited to your business and respond appropriately when unusual activity is identified.

Frequently Asked Questions

What is AML transaction monitoring?

AML transaction monitoring is the ongoing review of customer transactions and behaviour to identify, assess, manage and reduce ML/TF/PF risks. It may identify unusual activity requiring further investigation.

Is transaction monitoring mandatory in Australia?

Yes. Section 30(1) of the AML/CTF Act requires reporting entities to monitor customers receiving designated services.

Does transaction monitoring have to be automated?

No. Transaction monitoring may be manual, automated or a combination of both, depending on the nature, size, and complexity of the business. Automated monitoring may be needed where transaction volumes cannot be effectively reviewed manually.

What should transaction monitoring rules look for?

Monitoring rules should identify unusually large or complex transactions, unusual transaction patterns, activity without an apparent economic or lawful purpose, and conduct inconsistent with the customer’s profile, risk, or source of funds.

Does every transaction monitoring alert require an SMR?

No. An alert requires investigation, while a SMR is required only when the reporting entity forms a suspicion on reasonable grounds meeting the conditions in Section 41(1) of the AML/CTF Act.

How often should transaction monitoring rules be reviewed?

Reporting entities should regularly check that monitoring measures work effectively and as intended. They should update them when new criminal activity indicators emerge or the business’s ML/TF risk assessment changes.

What is the difference between an alert and an SMR?

An alert is an internal notification that unusual activity requires investigation. An SMR is a report to the AUSTRAC CEO when the suspicion requirements in Section 41(1) of the AML/CTF Act are met.

How does customer risk impact transaction monitoring?

Customer risk determines the intensity of transaction monitoring. Higher-risk customers may require more alerts and more frequent manual reviews under the risk-based monitoring approach described by AUSTRAC.

What records must be kept for transaction monitoring?

Records must show compliance with ongoing customer due diligence obligations, including customer transactions, the customer’s ML/TF risk assessment and decisions about monitoring.