Proliferation financing: General information for Australian businesses

Tranche 2 expands AML/CTF obligations to include proliferation financing (PF) risks. This article provides general information about what PF means and how it relates to AML/CTF programs.

What is proliferation financing?

Proliferation financing refers to the act of providing funds or financial services that are used, in whole or in part, for the development, acquisition, manufacture, possession, transport, transfer, or use of nuclear, chemical, or biological weapons, their means of delivery, and related materials.

In simpler terms, it involves financial activity that supports the spread of weapons of mass destruction (WMDs).

Why PF matters under Tranche 2

Under the AML/CTF Amendment Act 2024, reporting entities are required to identify, mitigate and manage not just money laundering (ML) and terrorism financing (TF) risks, but also proliferation financing (PF) risks. This is often referred to as "ML/TF/PF" throughout the legislation and regulatory guidance.

For businesses affected by Tranche 2, this means:

• Risk assessments typically consider PF alongside ML and TF
• AML/CTF programs generally address all three risk types
• Sanctions screening may include checks against proliferation-related lists
• Suspicious matter reporting may include PF-related concerns

Sanctions connection

Australia maintains sanctions regimes that target proliferation activities. These sanctions are administered by the Department of Foreign Affairs and Trade (DFAT) and may include:

• Targeted financial sanctions against designated individuals and entities
• Country-specific sanctions programs
• UN Security Council sanctions

Businesses may consider sanctions screening as part of their approach to managing PF risk. The DFAT Consolidated List includes designations related to weapons proliferation.

Questions businesses may consider

When thinking about proliferation financing in the context of your AML/CTF program, some questions to consider discussing with your adviser include:

• How does PF risk apply to my specific designated services?
• What sanctions lists are relevant to my business?
• How should I document PF considerations in my risk assessment?
• What screening processes are appropriate for my customer base?
• How do I recognise potential PF red flags in my sector?
• What training should staff receive about PF risks?

Documentation considerations

Businesses commonly address PF in their AML/CTF documentation in the following ways:

Further resources

For official information about proliferation financing and Australia's sanctions regime, refer to:

Read our complete Tranche 2 Guide

Key dates, affected sectors, obligations and how to prepare