Franchise Compliance: How to form a "Reporting Group" under Section 10A
Multi-office agencies dread the thought of maintaining 10 or 50 separate AML/CTF programs. The good news: Reporting Groups under Section 10A allow franchises to operate under a single program with a Lead Entity approach.
The problem: Multiple separate programs
Under a strict interpretation, each reporting entity needs its own AML/CTF program. For a franchise network with 20 offices, that could mean:
- 20 separate risk assessments
- 20 separate AML/CTF policies
- 20 separate compliance officers
- 20 separate training programs
This is administratively burdensome, expensive and creates inconsistency across the network.
The solution: Reporting Groups (Section 10A)
The reformed legislation introduces "Reporting Groups" under Section 10A, replacing the old "Designated Business Groups" (DBGs) concept. This allows related entities to operate under a shared compliance framework.
Section 10A: Reporting Groups
A Reporting Group is a group of reporting entities that have notified AUSTRAC they wish to be treated as a group for compliance purposes. Key features:
- Group members share a common AML/CTF program
- One entity acts as the "Lead Entity" with primary responsibility
- Members adopt the Lead Entity's program
- Reporting obligations can be centralised
Important: Shared liability
Both the Lead Entity and member entities retain liability for breaches. Forming a Reporting Group does not shift liability entirely to the Lead Entity. Each member remains responsible for compliance within their operations.
The Lead Entity concept: Section 10A(5)
Under Section 10A(5), the Reporting Group must nominate a Lead Entity. This entity:
Holds the program
The Lead Entity maintains the group AML/CTF program, including the risk assessment and policies. Member entities adopt this program.
Coordinates compliance
The Lead Entity manages training, oversight and program updates for the entire group. A single Compliance Officer can be shared across multiple members under Section 26F(6).
Centralises reporting
Suspicious Matter Reports and other AUSTRAC reporting can be managed centrally by the Lead Entity on behalf of group members.
Two types of Reporting Groups
Business Groups
Formed where there is a control relationship between entities (e.g. parent-subsidiary, corporate group structures).
Elective Groups
Formed by written agreement between entities that wish to be treated as a group (e.g. franchise arrangements).
How this works for franchises
For a real estate franchise network, the typical structure would be:
Franchise Reporting Group Structure
Lead Entity: Franchisor/Head Office
- Develops and maintains the group AML/CTF program
- Appoints a group AML/CTF Compliance Officer
- Provides training materials and oversight
- Manages AUSTRAC reporting and communication
Members: Individual Franchise Offices
- Adopt the group program via Member Entity Addendum
- Implement procedures in day-to-day operations
- Report suspicious matters through the Lead Entity
- Attend training provided by the Lead Entity
- Document any local variations from the group program
Requirements to form a Reporting Group
- Eligibility: Members must be related entities (corporate group, franchise arrangement or similar relationship)
- Notification: The group must notify AUSTRAC of its formation and nominate the Lead Entity
- Program adoption: All members must formally adopt the Lead Entity's program
- Ongoing compliance: The Lead Entity must ensure all members remain compliant
Cost and efficiency benefits
For franchises, this structure offers significant advantages:
- Single program setup: The franchise can get ONE set of AML/CTF program documents and share it legally across all offices
- Centralised expertise: Compliance knowledge sits with the Lead Entity rather than being spread thinly across multiple offices
- Consistent approach: All offices follow the same procedures, reducing risk of non-compliance
- Simplified auditing: AUSTRAC reviews the group program rather than multiple individual programs
Key Takeaway
Section 10A allows franchise networks to form Reporting Groups with a Lead Entity structure. This means one program, one compliance officer and centralised oversight - rather than duplicating effort across every office. The Lead Entity (typically the franchisor) holds the program; members adopt it via addendum. Both lead and member entities retain liability for breaches.
Read our complete Tranche 2 Guide
Key dates, affected sectors, obligations and how to prepare
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