Peter Reeves
Partner

Peter is a partner in Gilbert + Tobin’s Corporate Advisory team and leads the Fintech and Web3 practice. He is an expert and market-leading practitioner in fintech and financial services regulation.

Peter advises across a range of areas, including digital platforms and markets, stored value and payments, decentralised finance, digital currency exchanges, digital assets, funds, custody, licensing and traditional financial services.

He advises domestic and off-shore corporates, financial institutions, payment service providers, funds, managers and other market participants in relation to establishing, structuring and operating regulated businesses in Australia.

Vince Battaglia
Special Counsel

Vince is a Special Counsel in our Fintech and Web3 group. Specialising in funds management, Vince is an experienced financial services practitioner with nearly 20 years of providing legal advice to the financial services sector. Vince has extensive experience in both retail and wholesale financial services, and advises a range of domestic and offshore clients including early stage regulated businesses.

Vince specialises in the establishment, promotion, and operation of investment funds, with particular expertise in registered schemes with investment strategies in securities, real estate, credit and alternative assets. He also works with clients to help bring new digital products and services to the Australian market.

Vince has a broad range of experience advising on various financial products, including managed investment products, securities, derivatives, non-cash payment products, superannuation products, life policies and annuities.

The International Asset Management & Investment Funds Review 2026/27

Introduction

In this article, we set out key legislative and regulatory developments in the provision of financial services in Australia, particularly in relation to the primary obligation of requiring an Australian financial services licence to provide financial services in Australia (unless an exemption applies). Each of these developments is significant and reflects a desire by the Australian parliament and the Australian securities and markets regulator, the Australian Securities and Investments Commission (ASIC), to ensure that financial services regulation keeps up and remains relevant in an evolving financial services industry.

1. Current AFS licensing passporting arrangements for offshore fund managers

Offshore fund managers, and other financial services providers, who wish to market their funds and other financial services to Australian financial institutions such as superannuation funds will be pleased to note that there is renewed impetus to legislate for new Australian financial services (AFS) licensing exemptions to facilitate the solicitation of Australian wholesale investors.

For some years, there has been a desire by the Australian government to legislate for statutory exemptions to the AFS licensing regime to facilitate the solicitation of Australian wholesale investors into offshore funds and financial services, however, the reform has been stalled. Following the commencement of the new Australian parliament in July 2025, a new bill, Treasury Laws Amendment (Genetic Testing Protections in Life Insurance and Other Measures) Bill 2025, was introduced to parliament in November 2025. Relevant parts of this bill relating to foreign financial services providers was previously introduced to parliament but never passed. The bill is currently referred to the Senate Economics Legislation Committee with a report due from that committee on 26 February 2026. The new regime set out in the bill is due to commence 12 months after the bill receives Royal Assent.

The bill supports the participation of foreign financial services providers in Australia by providing regulatory certainty through establishing three exemptions from the requirement to hold an AFS licence – the ‘professional investor’ exemption, the ‘comparable regulator’ exemption and the ‘market maker’ exemption. The Bill also fast-tracks the process for foreign financial services providers that apply for an AFS licence by exempting them from the ‘fit and proper person’ test if they are authorised to provide financial services in a comparable overseas regulatory regime.

In the meantime, ASIC extended its transitional AFS licensing relief for foreign financial services providers by an additional 12 months (expiring on 31 March 2027), pending the passage of the above bill. Under ASIC’s current AFS licensing relief, foreign financial services providers may rely on its ‘sufficient equivalence’ relief and ‘limited connection’ relief. Further, foreign financial services providers currently relying on ASIC licensing relief can continue to rely on that relief until 31 March 2027.

ASIC has also extended the commencement of another ‘limited connection’ relief instrument for limited financial services provided by offshore fund managers to a limited type of wholesale investor to 1 April 2027, subject to the passage of the above bill.

2. Payment system modernisation

The regulation of Australia’s payment system is undergoing significant change. Over the past few years there has been extensive consultation by Australian policy makers to reform laws affecting payments and payment service providers in Australia.

2.1. Payment system regulation

The Treasury Laws Amendment (Payments System Modernisation) Act, which received Royal Assent in September 2025, amends the Payment Systems (Regulation) Act 1998 to:

• expand the coverage of the payments regulatory framework to include new and emerging payment systems and participants. In particular:

– the definition of ‘payment system’ covers a broader set of arrangements, including the transmission or receipt of messages that effect, enable, facilitate or sequence the making of payments or the transfer of funds. This would include payment systems that use non-monetary digital assets for payments or provide services that facilitate a payment being made, and ‘three party’ or ‘closed loop’ systems; and

– the definition of ‘participant’ captures all entities involved in the payments value chain, including entities with or without a direct relationship to a payment system. The new definition of participant would extend to entities providing buy-now-pay-later products, digital wallet passthrough services (such as ApplePay and Google Wallet), cash distribution services, and services that facilitate payment in crypto assets (such as payments stablecoins) where such entities provide services that facilitate a range of activities including the making of payments or transfers of funds, that enable the participation of consumers in payment systems (such as Visa or Mastercard schemes);

• provide for new ministerial powers to designate payment systems when it is in the national interest to do so; and
• introduce civil penalty provisions and enforceable undertakings, and increase maximum penalties for certain criminal offences.

There are also draft amendment regulations to support the above reforms.

2.2. AFS licensing reform for payment services providers

The Commonwealth Treasury recently consulted on exposure draft legislation which is designed to achieve the following outcomes:

• Setting out new, defined types of financial products and financial services provided by payment services providers, and updating the AFS licensing framework as applied to payment services providers to ensure it is tailored to the specific nature of the different payment services providers operating in Australia and the financial products and financial services they provide.
• Setting out new requirements to safeguard payment-related money to ensure payment-related money held by AFS licensees will be available to complete transfers or be returned to the person who is legally entitled to it.

A second tranche of draft legislation will be published for public consultation dealing with the following matters:

• Requiring major stored value facility providers to register with the Australian Prudential Regulation Authority (APRA), and giving new powers to monitor and regulate these entities to manage broader financial stability risks of the Australian financial system.
• Empowering the Minister to make a new, mandatory ePayments Code to bind payment services providers, authorised deposit-taking institutions (ADIs), and payment participants under the Payment Systems (Regulation) Act 1998 to minimum standards of consumer conduct;
• Introducing a streamlined process for managing inactive and dormant money held in major stored value facility accounts to ensure major stored value facilities are able to deal with this type of unclaimed money in a streamlined manner.

It is intended that in 2026 a subsequent tranche of draft legislation will consider further aspects of reform, including common access requirements and an industry standard setting body, and a review and updating of the ePayments Code.

3. Digital assets regulation

In November 2025, the Corporations Amendment (Digital Assets Framework) Bill 2025 was introduced into the Australian parliament. The bill follows a number of public consultations about the regulation of digital assets in Australia. The bill is expected to be further debated in parliament in 2026.

The bill seeks to modernise the regulation of digital assets by (among other things):

• defining core concepts of ‘digital token’, ‘digital asset platform’ and ‘tokenised custody platform’;

subject to limitations, applying Australia’s financial services laws to digital asset platforms and tokenised custody platforms by adding these platforms, where the platform is not a managed investment scheme, to the definition of a financial product in financial services legislation;

• tailoring the meaning of conduct that constitutes the provision of a financial service with respect to digital asset platforms and tokenised custody platforms;
• subject to exemptions, requiring persons providing relevant financial services in relation to digital asset platforms and tokenised custody platforms to hold an AFS licence authorising them to perform the financial service, with general obligations applying to the AFS licensee; and
• in addition to general obligations, applying specific obligations to issuers of digital asset platforms and tokenised custody platforms, including minimum asset-holding standards, platform rules and tailored disclosure obligations

The bill will also introduce a number of exemptions to the AFS licensing requirement.

4. ASIC’s foray into increased regulation of wholesale funds

For more than a year, ASIC has devoted considerable enforcement and surveillance resources to monitor and take action against operators of retail and wholesale private credit funds. In this context, ASIC has stated that it will lobby for law reform to increase the statutory obligations of operators of wholesale funds generally (regardless of the fund’s investment strategy and asset class).

4.1. Surveillance of and guidance regarding private credit funds

Through its surveillance of the market for private credit funds over the past year, and its engagement and consultation with industry, the Australian Securities and Investments Commission (ASIC) has developed in ASIC Report 820 and ASIC Report 823 principles ‘for sound private credit practices’ which it says are ‘also relevant to wider private markets’. These principles are:

• Responsible entities and trustees are stewards of other people’s money and need to make decisions that are fair and in investors’ best interests.
• Responsible entities and trustees are to ensure that they have sufficient human, financial and technological resources in running their funds.
• Investors should have access to timely, transparent information on investment strategy, exposures, valuations, risks and fees.
• Design and distribution practices are to be fair, transparent and appropriately targeted for investors.
• Fees and costs are fair and transparent, giving investors and borrowers a clear view of total costs.
• Conflicts of interest are to be identified, disclosed and effectively managed or avoided.
• Governance structures, processes and people are to promote sound decision-making, compliance and accountability.
• Asset valuations, and therefore unit pricing and performance fee calculations, are to be fair, timely and transparent, with robust governance.
• Liquidity risk is to be effectively disclosed and managed, avoiding structural mismatches, with fair redemption terms aligned to portfolio liquidity.
• Credit risk is to be effectively managed across loan origination, portfolio construction, monitoring, impairment, default and repayment.

ASIC expects fund managers operating retail or wholesale private credit funds to review their practices against the above principles and has flagged further enforcement action for misconduct and poor practices. ASIC’s surveillance of the credit funds industry is continuing, and has stated that it will now focus on fees, margin structures and conflict-of-interest management in wholesale private credit funds, and distribution of private credit funds to retail clients through direct and advised channels.

In relation to managing conflicts of interest, ASIC also recently updated its guidance in ASIC Regulatory Guide 181. This was ASIC’s first update of this guide in more than twenty years. The guidance emphasises ASIC’s view that dealing with conflicts of interest is not only a statutory requirement of AFS licensees but also a matter of good corporate governance.

4.2. ASIC’s desired law reform for wholesale fund managers

In Report 823, ASIC recommends law reform ‘to strengthen the wholesale funds regime’ by:

• Requiring wholesale fund operators to notify ASIC of wholesale schemes in operation.
• Extending the retail funds requirement to prepare and lodge annual audited financial reports to include wholesale funds.
• Extending the statutory duties of responsible entities of registered schemes (regarding fiduciary-like obligations) to include wholesale fund operators.
• Requiring retail and wholesale fund operators to notify ASIC and investors of significant events on a timely basis (including when redemptions are suspended).

ASIC also recommends law reform to have additional powers to collect data from fund managers about wholesale funds. Further, ASIC will continue to advocate for amendments to the wholesale client tests to increase the current financial thresholds.

These proposed reforms, if implemented in legislation, will be significant because they will cut across all types of wholesale funds and will not be limited to credit funds.

5. Anti-money laundering law reforms

Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) laws are currently in transition.

5.1. New legislative framework

In December 2024, the Anti-Money Laundering and Counter- Terrorism Financing Amendment Act 2024 received Royal Assent. The legislation significantly amended or reformed the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the AML/ CTF Act), the Anti-Money Laundering and Counter- Terrorism Rules Instrument 2007 (No.1) and associated regulations, and repealed the Financial Transaction Reports Act 1988.

The reforms were designed to ensure that Australia’s AML/CTF regime meets international standards set by the Financial Action Task Force (FATF) by ensuring that other categories of higher-risk services recommended by FATF are regulated by Australia’s AML/CTF regime, namely real estate professionals, professional service providers including lawyers, accountants and trust and company service providers, and dealers in precious stones and metals (so-called ‘Tranche Two’ entities). The amending legislation was also designed to simplify the law and modernise it to reflect changing business structures, technologies and illicit financing methodologies.

There are new rules to operationalise and supplement the amended AML/CTF Act. The Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 provide supplementary detail to obligations set out in the amended AML/CTF Act. The Anti-Money Laundering and Counter-Terrorism Financing (Class Exemptions and Other Matters) Rules 2007 (Class Exemption Rules), which renames and amends the Anti-Money Laundering and Counter- Terrorism Rules Instrument 2007 (No.1), sets out the surviving exemptions to the application of the amended AML/CTF Act. Both sets of rules come into effect in different stages in accordance with the staged commencement of the amended AML/CTF Act as set out in the timetable below.

5.2. Key reforms

Commencing on 31 March 2026, the amendments to the AML/CTF Act include the following:

• Changes to the requirements regarding AML/CTF programs by enacting outcomes-focussed obligations, including clarifying obligations for Australian companies operating overseas through a foreign branch of an Australian reporting entity, or a foreign subsidiary of an Australian parent company.
• Reframing and clarifying the core requirements for initial customer due diligence and ongoing customer due diligence, clarifying when enhanced customer due diligence must be applied, and streamlining the circumstances when simplified customer due diligence may be applied.
• Simplifying and modernising the framework for electronic funds transfer instruction obligations, designated remittance arrangements and international funds transfer instruction reporting purposes by replacing the previous funds transfer chain concept with an updated and simplified value transfer chain.
• In line with FATF recommendations, the current regulation of digital currency to fiat (government-issued) currency exchanges is expanded to include additional services provided by ‘virtual asset’ service providers.

The newly reworded ‘tipping off’ offence framework is designed to be more flexible for reporting entities seeking to share information for legitimate purposes, including within reporting groups to manage risk and prevent further crime.

5.3. Key dates

Key commencement and end dates include the following:

• On 31 March 2025, changes to the ‘tipping off’ offence commenced.
• On 31 March 2026, AML/CTF obligations begin for current reporting entities and (subject to our comment below) newly regulated virtual asset service providers.
• On 31 March 2026, Tranche Two entities may enrol with the Australian Transaction Reports and Analysis Centre (AUSTRAC) as reporting entities.
• On 1 July 2026, Tranche Two entities become regulated under the AML/CTF Act.
• On 31 March 2031, current exemptions in the Class Exemption Rules are automatically repealed.

AUSTRAC also states that it will roll out sector-specific guidance on and from January 2026.

5.4. Possible deferral of commencement

As at 19 January 2026, we understand that AUSTRAC and the Department of Home Affairs will be announcing a deferral of certain obligations to allow industry more time with which to comply with the amended AML/CTF Act. The deferred obligations are expected to include customer due diligence provisions and international value transfer reporting requirements (likely deferred until 2029). It is also expected that existing reporting entities will be afforded more time to notify AUSTRAC of an AML/CTF compliance officer, and existing remitters will be automatically migrated into the new remittance and virtual asset service provider regimes.

6. Conclusion

The above suite of legislative and regulatory reforms do not deal with all current and proposed reforms affecting the financial services industry. For example, in July APRA released a consultation paper proposing changes to its ADI licensing framework to streamline the process and support new entrants better. ASIC is also undertaking a range of initiatives to provide a more targeted regulation of digital assets. Offshore financial services providers should seek professional legal advice before providing financial services in Australia as the industry is highly regulated.