What is a "Legal Arrangement" Under the AML/CTF Act?
The term "legal arrangement" appears throughout the Table 6 designated services (Items 2, 4, 6, 7, 8 and 9). Unlike the everyday use of "arrangement," this is a precisely defined statutory term under section 5 of the AML/CTF Act.
This article provides general information only. It is not legal advice. Always take advice specific to your circumstances.
The Statutory Definition (s 5)
Section 5 of the AML/CTF Act defines "legal arrangement" as meaning:
- •An express trust (other than a testamentary trust)
- •A partnership
- •A joint venture
- •An unincorporated association
- •A similar legal arrangement that exists under the law of a foreign country
What IS a Legal Arrangement
Australian Structures
- • Unit trusts
- • Discretionary trusts (family trusts)
- • Self-Managed Superannuation Funds (SMSFs)
- • Fixed trusts
- • Bare trusts
- • General partnerships
- • Limited partnerships (unincorporated)
- • Joint ventures
- • Unincorporated associations (clubs, societies)
Foreign Equivalents
- • Fiducie (France, Luxembourg)
- • Treuhand (Germany, Austria, Switzerland)
- • Fideicomiso (Latin America, Spain)
- • Waqf (Islamic endowment)
- • Anstalt (Liechtenstein)
- • Stiftung (German foundation)
- • Common law trusts from other jurisdictions
- • Foreign partnerships and JVs
What is NOT a Legal Arrangement
The following are not "legal arrangements" under s 5 and therefore do not trigger the designated services that reference this term:
- ✗Service agreements
- ✗Royalty agreements
- ✗Licensing deals
- ✗Employment contracts
- ✗Commercial contracts generally
- ✗Testamentary trusts (expressly excluded)
- ✗Lease agreements
- ✗Loan agreements
- ✗Distribution agreements
- ✗General commercial "arrangements"
Where "Legal Arrangement" Applies in Table 6
| Item | Designated Service | How "Legal Arrangement" Applies |
|---|---|---|
| Item 2 | Transfer of company, business, trust etc | Transferring beneficial ownership in a "body corporate or legal arrangement" |
| Item 4 | Equity/debt financing | Raising capital for a "body corporate or legal arrangement" |
| Item 6 | Creation/restructure | Creating or restructuring a "body corporate or legal arrangement" |
| Item 7 | Nominee director etc | Acting as trustee, partner, or power of attorney of a "legal arrangement" |
| Item 8 | Nominee shareholder | Acting as nominee for a "body corporate or legal arrangement" |
| Item 9 | Registered office | Providing address for a "body corporate, legal arrangement or business" |
A Note on Drafting: "Arrangement" in Other Contexts
The word "arrangement" appears in several places throughout the AML/CTF Act, which can create confusion. The narrow "legal arrangement" definition in section 5 should not be confused with:
Section 37A - Reliance Arrangements
This section allows reporting entities to rely on CDD performed by third parties under certain conditions. The "arrangement" here refers to the agreement between entities for CDD reliance - completely different from the structural "legal arrangement" in s 5.
Other uses of "arrangement"
The Act uses "arrangement" in various contexts to describe agreements, plans, or understandings between parties. These are not the same as the s 5 "legal arrangement" which specifically means trusts, partnerships, JVs and unincorporated associations.
When you see "legal arrangement" in Table 6 designated services, it refers ONLY to the s 5 definition. A commercial "arrangement" or a s 37A "reliance arrangement" does NOT trigger these services.
Key Takeaway
When determining whether a designated service applies, remember that "legal arrangement" is a narrow statutory term limited to trusts, partnerships, JVs, unincorporated associations, and their foreign equivalents. It does not extend to general commercial agreements or contracts.
This distinction matters for scoping your compliance obligations. A service involving a discretionary trust will trigger different designated services than one involving a simple service agreement.
Read our complete Tranche 2 Guide
Key dates, affected sectors, obligations and how to prepare
Disclaimer: This article is general information only. It is not legal, financial or compliance advice. HeadStart Docs™ provides free compliance documents, not legal services.
We do not guarantee the accuracy of information provided. Obligations may apply depending on your designated services. Always confirm your specific requirements with a qualified adviser.
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