Australia’s charity regulator, the Australian Charities and Not for profits Commission (ACNC), is on high alert as public pressure mounts to address terrorist financing and money laundering.

Australia’s not‑for‑profit (NFP) and charity sector proudly provides critical humanitarian and community services both at home and abroad. Further, with a combined revenue exceeding $200 billion, their role within the Australian economy is significant. However, these attributes are not without their risks, as the ACNC is all too aware. Of particular concern to the ACNC at present is the risk that charities and NFPs may have legitimately raised funds intercepted or diverted to extremist groups, or that their assets may be misused for the purpose of terrorism financing or other illegal activities.

It is imperative that charity and NFP boards understand these risks, and have appropriate policies, procedures, systems and controls in place to prevent issues arising, and respond when issues do arise.  We outline the risks facing charities and NFPs, and set out some information on the ACNC’s anti-money laundering and counter-terrorism financing (AML/CTF) expectations, the risks of non-compliance, and practical suggestions to protect against these risks within charity or NFP organisations.

Why are charities and not-for-profits at risk?

Charities and NFPs often operate in challenging contexts that present elevated risks of money laundering and terrorism financing (ML/TF). Many charities operate in, or send funds to, conflict zones and other unstable regions, making both service delivery and the upholding of robust governance structures and financial controls more difficult. This risk is amplified by high rates of cash transactions, use of alternative remittance systems, and processing large volumes of small transactions, all of which increase susceptibility to misuse by bad‑faith actors.

In light of these risks, the ACNC has recently intensified its scrutiny of how charities and NFPs manage funds, with a particular focus on the risks of money laundering and terrorism financing, especially in international operations. It has also sought additional funding and stronger powers from the Federal Government to better police terrorism financing and other criminal wrongdoing within the sector.

The ACNC’s focus comes in addition to the upcoming major reforms to Australia’s AML/CTF regime.  These reforms, which are set to commence on 1 July 2026, will require a broader range of entities to comply with mandatory reporting requirements to Australia’s AML/CTF regulator, Australian Transaction Reports and Analysis Centre (AUSTRAC). Some charities and NFPs may be caught by these reforms, depending on the services they provide. The new regime is designed to improve the framework, strengthen oversight on high-risk services, and require new entities to adopt risk-based compliance and implement strict customer due diligence. These developments are part of an overall tightening of AML/CTF regulation in Australia. 

The reformed regulatory landscape, coupled with continuing close cooperation between AUSTRAC and the ACNC, means that all charities and NFPs can expect increased regulatory expectations, even those who do not provide designated services (and are not AUSTRAC reporting entities). For non-reporting entities and reporting entities alike, the ACNC will remain vigilant in monitoring the use of charitable funds, ensuring that such funds are used solely for charitable purposes, and monitoring for ML/TF risks through that lens. The ACNC’s focus is likely to be particularly acute for charities and NFPs which work in high-risk environments.

Charities that are members of the Australian Council for International Development (ACFID) or are accredited by the Department of Foreign Affairs and Trade (DFAT) under the Australian NGO Cooperation Program face additional obligations, including those set out under the ACFID Code of Conduct. This Code provides a complementary governance framework that can assist charities to meet the ACNC’s expectations and help mitigate risks related to the misuse of funds for organisations working in the development and humanitarian action sector. 

What the ACNC expects from charities

Under the ACNC External Conduct Standards, charities must take reasonable steps to ensure that resources sent overseas, including funds, services, personnel, and assets, are used consistently with the organisation’s charitable purpose and character. Meeting this expectation requires appropriate internal controls over the transfer and use of resources outside Australia, active monitoring and documentation of how third parties apply funds, and governance and oversight mechanisms tailored to offshore activities.

At a practical level, the ACNC warns that charities cannot rely on goodwill alone, and they must be able to evidence compliance to the ACNC or other regulators on request.

Risks of non‑compliance

  • Non-compliance exposes charities and NFPs, and their directors and officers, to serious consequences, including:

  • Revocation of charity status.

  • Loss of tax concessions and DGR endorsement, with consequential financial impacts and potential winding up.

  • Reputational harm, including loss of public trust.

  • Criminal liability for the charity/NFP and those of its directors, officers and employees who are involved in contraventions of AML/CTF and/or proceeds of crime legislation.

  • Civil and criminal liability for directors and officers who breach their duties under the Corporations Act 2001 (Cth).

Practical governance measures for ML/TF risks

The strongest protection against the risk of terrorism financing or money laundering for charities and NFPs is effective governance and practical controls.

Charities seeking effective governance for overseas operations should:

  • Ensure they have a documented, fit-for-purpose risk assessment tailored to operating jurisdictions, delivery partners and programs.

  • Ensure there is someone within the organisation with responsibility for risk and seek external advice where appropriate.

  • Put in place clear and practical policies and procedures, with clear reporting lines and effective systems for monitoring compliance with policies and procedures and regularly reviewing their effectiveness.

  • Map funds and activity flows.

  • Review and update these processes often.

Practical steps charities and NFPs can take to implement good governance include:

  • Keeping clear records of decisions and their rationale.

  • Having defined roles and explicit approval thresholds for overseas payments with two-person authorisation.

  • Having baseline policies that address anti-fraud and anti-corruption (as well as broader matters addressed in the ACNC External Conduct Standards such as protection of vulnerable individuals).

Policies should be underpinned by procedures that set out practical steps for screening, approvals, monitoring and escalation, and should include checklists, named owners and timelines for each step.

Furthermore, staff and volunteers should receive targeted training to recognise red flags, such as requests for cash, unusual payment routing, or inconsistencies in beneficiary data. Staff should also have an accessible list of red flags and clear reporting channels to ensure they know how to escalate concerns.

These measures both reduce compliance risk and support operational transparency and accountability.