For many registered clubs, the AML/CTF reforms that commenced on 31 March 2026 have required more than simply updating procedures and changing transaction thresholds. They have also broadened the way clubs need to think about financial crime risk.
One important change is the express requirement to identify and assess proliferation financing risk as part of the club’s money laundering and terrorism financing risk assessment.
For most Australian registered clubs, the ultimate proliferation financing risk may well be low. But low risk does not mean the club can ignore it. The club needs to assess the risk, document how it reached its conclusion and ensure its AML/CTF controls are appropriate to that level of risk.
What is proliferation financing?
Proliferation financing, often referred to as PF, relates to financing that enables the proliferation of weapons of mass destruction.
AUSTRAC describes proliferation financing as activity that enables the spread of weapons of mass destruction. Under the reformed AML/CTF framework, reporting entities must consider money laundering, terrorism financing and proliferation financing risks when developing their AML/CTF program. (AUSTRAC)
At first glance, a registered club operating gaming machines in regional or metropolitan Australia may understandably ask:
“What does weapons proliferation have to do with our club?”
In many cases, very little.
However, that is a conclusion the club should reach through a documented risk assessment, rather than simply assuming that proliferation financing could never be relevant.
What changed on 31 March 2026?
The AML/CTF reforms commenced for existing reporting entities, including registered clubs providing designated gambling services, on 31 March 2026. AUSTRAC confirms that the reforms changed AML/CTF program and due diligence requirements for existing reporting entities. (AUSTRAC)
Section 26C of the reformed AML/CTF Act requires a reporting entity’s risk assessment to identify and assess the money laundering and terrorism financing risks it may reasonably face. Importantly, AUSTRAC’s guidance makes clear that this includes proliferation financing risk. (AUSTRAC)
Therefore, clubs reviewing their AML/CTF risk assessments following the reforms should make sure proliferation financing has actually been considered and documented.
This does not necessarily mean creating a completely separate standalone risk assessment. Proliferation financing can form a specific section within the club’s broader ML/TF risk assessment.
What does AUSTRAC expect?
AUSTRAC provides some useful guidance that should give clubs confidence that the assessment can be practical and proportionate.
AUSTRAC says a business is less likely to face proliferation financing risk where it:
- only operates in Australia;
- does not provide designated services to customers located in, or connected with, high-risk jurisdictions;
- does not move money, sensitive goods or dual-use technologies overseas; and
- does not provide services that are particularly relevant to proliferation financing. (AUSTRAC)
These considerations will be particularly relevant to many registered clubs.
For example, a community club that operates solely in NSW, provides gaming services primarily to local members and guests, does not facilitate international transfers and has no involvement with sensitive goods or technology may reasonably determine that its inherent PF exposure is low.
But the important words are “reasonably determine.”
There needs to be evidence that the issue has been considered.
What should a club’s assessment consider?
A proliferation financing assessment does not need to become unnecessarily complicated. It should be proportionate to the nature, size and complexity of the club.
A practical assessment might consider the club’s geographic operations, customer base, gaming and financial services, methods by which funds can enter and leave the club, international exposure, customers with connections to higher-risk jurisdictions, sanctions exposure, unusual transactions and whether the club’s services could potentially be used to move or store value.
The club should also consider AUSTRAC risk information. AUSTRAC specifically expects reporting entities to consider relevant guidance and feedback when identifying and assessing their ML/TF risks, including its national risk assessments and proliferation financing information. (AUSTRAC)
For many clubs, the assessment might ultimately look something like this:
Proliferation Financing Risk – Low
The Club operates solely within Australia and provides designated gambling services from its Australian premises. The Club does not provide international funds-transfer services or services involving sensitive or dual-use goods or technologies. The Club has limited exposure to customers located in or connected with jurisdictions associated with proliferation financing.
While the inherent exposure is considered low, the Club maintains customer due diligence, ongoing customer monitoring, transaction monitoring, enhanced customer due diligence and suspicious matter reporting controls to identify unusual activity or changes in customer risk.
The wording should, of course, reflect the actual circumstances of the individual club.
Low risk doesn’t mean “no action”
This is an important distinction.
AUSTRAC specifically states that where an entity has reasonably assessed its proliferation financing risk as low, it does not need separate PF-specific policies if its existing AML/CTF policies appropriately manage that risk.
However, the PF risk assessment still needs to be documented within the AML/CTF program. (AUSTRAC)
If the club assesses its proliferation financing risk as medium or high, the position changes. AUSTRAC says the reporting entity must develop and maintain AML/CTF policies to manage and mitigate that risk. (AUSTRAC)
This reinforces one of the central principles of the 2026 reforms: AML/CTF compliance should be risk-based, rather than applying exactly the same controls to every reporting entity and every customer. AUSTRAC has expressly stated that it does not expect a “one size fits all” approach. (AUSTRAC)
Don’t forget customer monitoring
Proliferation financing also needs to be considered in the club’s ongoing customer due diligence arrangements.
From 31 March 2026, clubs must comply with the new ongoing CDD requirements. AUSTRAC states that customer monitoring must appropriately identify, assess, manage and mitigate money laundering, terrorism financing and proliferation financing risks that the reporting entity may reasonably face. (AUSTRAC)
For a club, this means proliferation financing should not simply become a paragraph inserted into the risk assessment and then forgotten.
The club’s monitoring framework should be capable of responding if something changes—for example, if information about a customer, jurisdiction, transaction pattern or source of funds creates a different risk profile.
The Board and Compliance Officer should know about the change
This should also be treated as a governance issue.
The AML/CTF Compliance Officer should ensure the club’s risk assessment has been reviewed against the post-31 March 2026 requirements and that proliferation financing has been properly considered.
Senior management should understand the assessment because the AML/CTF program must be approved by a senior manager, while the governing body has oversight responsibilities for the club’s AML/CTF compliance framework. (AUSTRAC)
For clubs, a sensible approach would therefore be to record the updated assessment, the PF risk rating, the reasons supporting that rating, any additional controls required and evidence that the revised AML/CTF program has been appropriately considered through the club’s governance arrangements.
A simple five-step approach for clubs
For most clubs, this does not need to become another complicated compliance exercise:
- Review the existing AML/CTF risk assessment and confirm that proliferation financing is specifically considered.
- Assess the club’s exposure, including geography, customers, designated services, transactions, international connections and relevant AUSTRAC risk information.
- Document the PF risk rating – for example, low, medium or high – and clearly explain why that rating has been selected.
- Review existing controls such as CDD, transaction monitoring, ECDD, suspicious matter reporting and ongoing customer monitoring to determine whether they adequately manage the identified risk.
- Review and update the assessment when circumstances change, rather than treating it as a one-off exercise. AUSTRAC requires AML/CTF programs to be reviewed and updated as risks and circumstances change. (AUSTRAC)
The key message for registered clubs
For many clubs, proliferation financing is unlikely to become one of their highest AML/CTF risks.
But that isn’t the point.
The requirement is to demonstrate that the club has identified the potential risk, assessed how relevant it is to the club, documented its reasoning and implemented controls proportionate to that risk.
A statement saying “proliferation financing isn’t relevant to our club” without demonstrating how that conclusion was reached is unlikely to represent a strong risk-based assessment.
A better position is:
“We considered the risk, assessed our exposure, documented why it is low and confirmed that our existing controls appropriately manage it.”
That is a much stronger compliance position – and much easier for the Compliance Officer, Board or an independent evaluator to demonstrate if AUSTRAC ever asks the question.
For further guidance, see AUSTRAC’s guidance on identifying and assessing ML/TF risks and AUSTRAC’s guidance on AML/CTF policies and proliferation financing.
If your club needs assistance reviewing its AML/CTF risk assessment, proliferation financing risk or broader AML/CTF compliance requirements, contact CHD Partners through our Contact Us page.
