Adapting director liability to modern AML/CTF compliance: risks and regulatory implications in Australia

In Australia, breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) have traditionally placed liability on corporations. Recent shifts in regulatory practice, however, have introduced the ‘extended stepping stones’ approach, which holds directors and officers personally accountable for failing to manage AML/CTF risks effectively. Although the AML/CTF Act does not explicitly impose personal liability on directors and officers, the Australian Securities and Investments Commission (ASIC) is leveraging section 180 of the Corporations Act 2001 (Cth) to pursue such a claim, as demonstrated in the high-profile case against Star Entertainment Group directors and executives. This article examines the implications of this approach, exploring the potential impact on legal, economic, and social dimensions and underscoring the delicate balance between enhancing director and officer liability and ensuring effective regulatory compliance.