Introduction

Australia is on the precipice of change for both the legislative framework and regulatory approach within its sanctions landscape. Stakeholders have made their views clear, with multiple reviews having been concluded by Senate Committees and the Department of Foreign Affairs and Trade (DFAT), opening up potential for change across the board. Already regulatory practice has leaned heavily into compliance and education in response to reviews, with DFAT releasing several publications and tools. These may prove critical to Australian businesses as new AML/CTF obligations come into effect and the AML/CTF regime expands its coverage in 2026.

Although much remains the same at this stage in terms of the enforcement and use of sanctions regimes, there are early signs that the Australian government and regulator may be increasing enforcement actions targeting evasions and breaches. Even now, the government is considering additional regulatory powers and capacity-building methods.

However, the scale continues to be tipped towards opaqueness and away from fairness, with limited (if any) reasoning disclosed for listings; delisting processes remaining as hard as ever to navigate; permits left unrecognised by financial institutions; and the Australian government continuing to embrace and use sanctions in a highly selective and transparently political fashion. Although we will likely see notable legislative reform and regulatory operational changes in the 2025-26 period, it remains to be seen whether they will resolve or exacerbate the ongoing issues.

Reviews, Reviews, Reviews!

A constant theme of the Australian sanctions legal landscape has been reviews.

In January 2023, DFAT announced its review of Australia’s autonomous sanctions framework after 12 years of operations and ahead of the framework expiring on 1 April 2024. This review was ongoing until 30 October 2024, when a five-page report was published summarising stakeholders’ responses to the seven issues. Recognised in this report was the need to streamline and increase guidance on several facets of Australian sanctions regimes. The report is still under consideration by the Australian government.

In February 2025, another review into Australia’s sanctions regime concluded after being conducted by the Foreign Affairs, Defence and Trade Reference Committee (FADT Committee). Having started in July 2024, this review focused on the assessment of consistency and effectiveness of the regime, Australia’s co-ordination with “like-minded states”, and potential uses of frozen/confiscated assets. The report comprised eight recommendations and canvassed a range of views, including:

• the underutilisation, inconsistent application of, and lack of objective reasoning behind Magnitsky-style sanctions;
• concerns that Australia’s sanctions are lagging many months behind allies’ sanctions notwithstanding the same intelligence likely being available; and
• the need for stronger enforcement, including building capabilities to “close loopholes which allow Iran and Russia to evade the financial impact of Australian sanctions” and repurpose such assets.

In March 2025, the Human Rights Subcommittee of the FADT Committee published a report of the amendments made by the Autonomous Sanctions Amendment (Magnitsky-style and Other Thematic Sanctions) Act 2021. The public consultation concluded on 17 January 2025. The Subcommittee made five recommendations, orientated towards increasing transparency and accountability by publishing reasons for listing decisions, expanding the use and basis for Magnitsky-style sanctions criteria, and introducing a humanitarian exception. 

Overall, these reviews noted a serious need to strengthen regulatory monitoring and enforcement capabilities and a strong desire for increased reasoning and challenging processes. If these reports are anything to go by, there may be significant legislative reform ahead, increased regulatory operations for both compliance and enforcement, and more movement in this space than ever before.

AUSTRAC’s AML/CTF Rules

Speaking of law reform, the Australian Parliament amended the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the Amended AML/CTF Act) to introduce tranche 2 reforms on 29 November 2024. Relevantly, these amendments expressly included sanctions law in the ongoing obligations of AUSTRAC-regulated entities in defining “proliferation financing”.

Section 28 of the newly amended legislation requires reporting entities, in undertaking initial customer due diligence of new customers of designated services, to establish on reasonable grounds that (inter alia) “whether the customer, any beneficial owner of the customer, any person on whose behalf the customer is receiving the designated service, or any person acting on behalf of the customer is… a person designated for targeted financial sanctions”. Further, sections 26C and 26D require entities to undertake ML/TF risk assessments before providing designated services. Failure to do so can result in a civil penalty.

On 11 December 2024, AUSTRAC sought feedback on new anti-money laundering and counter-terrorism financing (AML/CTF) rules (AML/CTF Rules), to reflect the impending Amended AML/CTF Act. This initial consultation closed on 14 February 2025. On 19 May 2025, AUSTRAC commenced a second round of public consultation on new AML/CTF Rules.

The proposed draft AML/CTF Rules:

• introduce a requirement for AUSTRAC-regulated reporting entities to develop, maintain, and comply with AML/CTF policies to address the Autonomous Sanctions Act 2011 (Cth) or the Charter of the United Nations Act 1945 (Cth) in the provision of their designated services; however, there is an exception to developing such a policy if the risk of proliferation financing is low and otherwise appropriately managed (on this point, DFAT released a new advisory note on low-risk sectors in June 2025);
• retains a discrete and temporary exception for the obligation to establish whether a customer was a politically exposed person or designated for targeted financial sanctions; this temporary exception is subject to certain requirements, including that commencement of the services “is essential to avoid interrupting the ordinary course of business”, but also that the “AML/CTF policies [are implemented] to mitigate and manage the associated risks”; and
• expressly inserts ongoing customer due diligence and monitoring obligations related to sanctions to reflect the Amended AML/CTF Act.

Failure to develop sanctions-related policies, as well as to comply with these policies, will result in a civil penalty.

In their current form, the draft AML/CTF Rules represent a marked shift from the official role sanctions policies played for AUSTRAC-regulated reporting entities. However, the actual impact in practice remains to be seen given that many entities likely already incorporated proliferation financing risks into their AML/CTF policies or had self-standing sanction policies.

Increase in Regulatory Guidance

In the wake of the DFAT report in July 2024, which recognised many stakeholders calling for DFAT to “increase its use of guidance notes and FAQs”, DFAT has published a deluge of guidance and advisory notes. This material addresses both general and specific sanction-related issues and is critical in light of not only sanctions law but also the formalisation of sanctions-related AML/CTF responsibilities.

The guidance notes cover a broad range of topics across commercial activity, industry sectors, and general compliance. These include artificial intelligence and quantum technology; cyber and ransomware payments; digital currency exchanges; fintech and the DeFi sectors; employment; the finance industry; maritime; remittance service providers; government employees; and universities.

The advisory notes are more targeted in scope, intended to assist stakeholders in identifying and understanding their sanctions risks by outlining typologies that may be relevant to their risk assessments. Accordingly, these will be the starting point for any AUSTRAC-regulated entity (see AUSTRAC’s AML/CTF Rules above). The new advisory notes include topics such as Russian sanctions evasion, the Australian export sector, the information technology sector and touring companies, and musicians and sports professionals.

Finally, for further assurance, DFAT released two tools:

• Sanctions Compliance Toolkit (SCT): This is a comprehensive guidance document that explains Australia’s sanctions regulations through practical case studies in two parts. The first provides an overview of how to identify sanctions risks; the second outlines how regulated entities can manage those risks effectively.
• Risk Assessment Tool (RAT): This is a structured questionnaire designed to help regulated entities and legal professionals conduct an initial assessment of whether their activities may be subject to sanctions risk.

Absence of Enforcement Action

From compliance to enforcement; or rather, a lack thereof. Without published statistics, it is difficult to determine trends, including in the use of Section 19 notices and enforcement proceedings. According to the Office of the Director of Public Prosecution’s 2024 Annual Report, there were no charges under the Sanctions Act, leaving R v Choi (No 10) (2021) as the only reported law enforcement case in Australia.

This stands in sharp contrast with other jurisdictions.

Australia’s lack of enforcement actions may be due to resources, a preference for a co-operative approach by the Australian Sanctions Office (ASO), or acknowledgment that the sanctions regimes are new and untested ‒ giving rise to such cases as Tigers Realm Coal Limited v Commonwealth of Australia (2024) (“Tigers Realm”), where the business continued to operate for approximately 18 months, despite the ASO assessing such operations as being prohibited. In respect of this case, the ASO is reportedly still considering enforcement options. However, as of July 2024, the relevant Australian Securities Exchange (ASX)-listed company was delisted and the sale of its assets was complete, pending President Putin’s approval.

An emerging thread from the recent reviews was the need to increase monitoring and enforcement capabilities, particularly against assets in Australia and evasion tactics. 

Multilateral Sanctions Monitoring Team

In March 2025, Russia vetoed the renewal of the mandate of the Panel of Experts (PoE) under the Security Council Committee established pursuant to resolution 1718. The PoE was responsible for reporting on North Korea’s non-compliance with sanctions.

In response, Australia has joined Canada, France, Germany, Italy, Japan, the Netherlands, the Republic of Korea, New Zealand, the United Kingdom, and the United States to establish a member state-led Multilateral Sanctions Monitoring Team (MSMT) to monitor and report on North Korea’s sanctions non-compliance.

Australia has announced thatits decision to participate in the MSMT is driven by the need to address North Korea’s ongoing pursuit of weapons of mass destruction and malicious cyber activities.

Alumina Decision: Sweeping Scope of Sanctions

A long-standing issue in terms of the Australian sanctions regime has been understanding the scope of targeted financial sanctions. This has been identified as a strong issue of concern in need of regulatory and potentially legislative clarification.

One of the most important legal developments in the Australian sanctions landscape is the landmark judicial guidance provided by the Federal Court of Australia in Alumina and Bauxite Company Ltd v Queensland Alumina Ltd (2024) FCA 43 (“Alumina”). The case concerned the permissibility of the supply parties relying on the force majeure provisions to terminate the supply arrangement early in light of Australian sanctions against Russia.

For the sake of brevity, certain Australian sanctions offences may be triggered where the designated person or country receives a benefit or good as a “direct or indirect” result of someone supplying a good/service to the person, country, or a third party (see Regulations 4, 12 and 14). There was (and remains) no legislative or regulatory guidance on how to interpret “direct or indirect”.

According to the Alumina decision, whether the goods immediately result in ‒ or eventually (no matter the additional steps or actions in the supply chain) result in ‒ the good or benefit to the designated person or country, there would be an offence. In doing so, the court openly acknowledged that there was the “possibility that a person may engage in a transaction that initially is not a sanctioned supply, but which subsequently becomes a sanctioned supply” due to “events that occur after the transaction has been undertaken”.

This decision was affirmed by the Full Federal Court of Australia dismissing Alumina and Bauxite Company Ltd’s appeal in November 2024. The Court once more expressly recognised that “at the time of the supply, sale or transfer in para (a), it may not be possible to determine whether or not the supply, sale or transfer is a ’sanctioned supply’”.

Of course, one should be able to avoid penalties under the sanctions regime if any supplier obtains a permit for their operations or if a (body corporate) supplier takes reasonable precautions and exercises due diligence at the time the initial supply is made, or even if a (individual) supplier makes the initial supply while mistaken as to a relevant fact (eg, they are deceived about who is the end user). The Full Federal Court acknowledged that this finding “may seem surprising at first blush”; however, the “potential harshness… is ameliorated” by these aforementioned factors.

Nevertheless, suppliers are still left without a clear idea of the scope of the laws and possible offences and are at the mercy of the regulatory body in terms of enforcement action. This not only impacts liability under criminal and corporate law but also obligations under contract.

Where suppliers are investigated by the ASO in respect of their compliance, they will be significantly reliant upon:

• their best efforts regarding due diligence and compliance programmes;
• their ability to obtain and follow (in a technical sense) permits, which may also have interpretation issues; and
• as a last resort, the ASO’s discretion to avoid the cost and time of an investigation (and perhaps trial) in such scenarios.

This serves as a warning for all suppliers who are subject to Australian sanctions law on the importance not only of undertaking reasonable precautions and due diligence in their business operations, including applying and obtaining a permit where there is any identified risk, but also of the need to always ensure force majeure clauses can properly respond to changes in sanctions law.

Permits in Practice

Publication but continued limited use

An important non-legislative development is in the publication of general permits. Since the inception of the autonomous regimes, the Minister of Foreign Affairs (“the Minister”) has had the power to make general permits to allow conduct that would otherwise be prohibited by sanctions. In July 2023, for the first time, the ASO published the existing general permits concerning certain IP, legal services, tax, and oil and petroleum price caps on their website. Some of these permits had been issued as early as 25 May 2022. Previously, each individual and entity would have to make an application for a permit, without knowing if a general permit existed.

It remains the responsibility of each individual seeking to rely on the general permit to “read the terms of the permit carefully” and report to the ASO that they intend to rely on the permit. For any conduct falling outside these permits, entities must engage with the ASO and apply for an individual permit. The ASO estimates the standard waiting time as three months. Such a length of time can lead to significant consequences for the financial industry and other businesses ‒ the impact of which is compounded, given the lack of notice before sanctions are imposed.

There is still a distinct lack of general permits seen as key in other jurisdictions, such as for humanitarian reasons or for an orderly wind-down of existing business activities and contractual obligations. The impact of the latter is compounded by the lack of authoritative guidance on the sanctions regimes, as illustrated by arguments progressed in the Alumina and the Tigers Realm cases.

Gap between law and banking policies

A subsisting trend among certain banks operating in Australia is that their sanction policies and practices do not account for permits. Accordingly, although an entity may have obtained a permit or fall under a general permit to allow for dealings with designated persons, the bank continues to prevent transactions relating to the engagement.

This gap undermines the effectiveness of permits and has serious ramifications that permits try to address. By way of example, failure to recognise the general permit allowing transactions that are required by Russian tax law will result in serious consequences for any individual or entity who has tax obligations and may even impact their position under Australian law should there be any correlative aspects, such as foreign tax credits. Another example is the failure to recognise the general permit allowing the provision of legal services. Prevention of payment may lead to:

• the denial of legal services crucial to ensuring the sanctions regime is accurate and fair; and
• the abrogation of certain individuals’ human rights.

This issue was left unexamined by the Senate’s latest inquiry, remaining in the “too hard” basket. Designated individuals are left at the whim of the financial institutions, relying on banks to prepare and implement policies that properly accommodate permits. The practical difficulties of the banks in doing so are only exacerbated by the piecemeal and fractured nature of the domestic and global sanctions system and growing obstacles in challenging listings.

Areas of Focus

Russia-Ukraine situation

Australia has continued imposing sanctions in respect of the ongoing Russia-Ukraine situation. On 18 June 2025, for the first time, the Minister of Foreign Affairs, Penny Wong, sanctioned 60 vessels linked to “Russia’s shadow fleet”. The Minister stated that these vessels “enable the illicit trade of Russian oil and other sanctioned goods”.

Complementing this ongoing use of sanctions concerning the Russia-Ukraine situation, DFAT has released further Russian-related guidance, including general export goods and Russia-origin petroleum gases, oil, and refined petroleum products.

Russia was a repeating theme in the recent reviews into the sanctions regimes, with calls for increased targeting of Russian assets and closing the loopholes that allow Russia to circumvent the sanctions against goods to and from Russia. If anything, Russia and its intermediaries are shaping up to be the stone against which Australia may best sharpen its sanctions regimes so as to improve their efficacy.

Israel-Palestinian conflict

In July 2024, the International Court of Justice (ICJ) issued a non-binding advisory opinion on the legal consequences arising from Israel’s policies and practices in the occupied Palestinian territory. Five days after the opinion, the Australian government imposed Magnitsky-style sanctions on seven Israeli individuals and one organisation for “settler violence”.

On 10 June 2025, the Honourable Penny Wong, along with the Foreign Ministers of Canada, New Zealand, Norway, and the United Kingdom announced sanctions against far-right Israeli politicians, Itamar Ben-Gvir and Bezalel Smotrich for inciting violence against Palestinians in the West Bank. This was formally enacted the next day with Magnitsky-style sanctions against these individuals for serious violations and serious abuses of human rights.

Although the recent Australian Senate inquiries recognised the lack of sanctions arising from the Israel-Palestinian conflict as a point of serious inconsistency in the application of Australian sanctions law, the Australian government continues to move slowly in comparison to other ongoing situations.

Cyber sanctions

Australia continues to pursue its co-ordinated approach with its allies in sanctions against transnational cybercrime, with continuing co-ordinated international investigative and law enforcement efforts, resulting in the simultaneous sanctioning of entities.

This was seen in 2024 with Operation Cronos, a co-ordinated law enforcement action against the LockBit ransomware group and comprised the efforts of Australia, the UK, the USA, France, Germany, Switzerland, Japan, Sweden, Canada, and the Netherlands – with Finland’s support. This resulted in Australia imposing its first and second cyber sanctions against Aleksandr Ermakov and Dmitry Yuryevich Khoroshev. DFAT has labelled this 18-month investigation and resultant sanctioning as “best practice methodology”.

Since then, additional cyber sanctions have been imposed against three Russian nationals who were identified as senior personnel of the Evil Corp cybercrime group in October 2024, as well as against a Russian entity, ZServers, and five other Russian nationals on 12 February 2025 who were accused of being cybercriminals involved in the compromise of Medibank and the theft of almost ten million health insurance records of Australians in 2022.

Relatedly, on 3 February 2025, the Australian government imposed, for the first time, counter-terrorism financing sanctions on an entity based entirely online: the white supremacist terrorist network Terrorgram. The Australian government reiterated its commitment to “disrupting the activities of terrorists and violent extremists and preventing them from recruiting and radicalising people online”.

As cyber-attacks are increasing and DFAT continues to develop their sanctions methodology, there may be a correlating uptick in sanctions ‒ specifically those under the Magnitsky-style regulations.