Background
Bano Pty Ltd and Australian Settlements Limited (BCAU) were parties to a Master Services Agreement under which BCAU provided settlement and processing services to Bano, including access to Australian payment clearing systems (NPP and BECS). BCAU, a reporting entity under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), issued two suspension notices: one on 10 June 2026 under contract clause 15.3 (suspension to protect BCAU’s interests) and another on 3 July 2026 under clause 15.4 (suspension for material breach). Bano sought urgent interlocutory relief to restrain the operation of these notices before commencing formal proceedings.
The background revealed significant AML/CTF compliance concerns. Banking Circle Group (BCAU’s parent company) had rejected Bano as a client in 2024 due to a weak control framework. Following its acquisition of BCAU in August 2025, Banking Circle conducted a comprehensive AML/CTF review of BCAU’s existing clients. A transaction review covering October 2025 to January 2026 identified incomplete payment data (missing beneficiary addresses for approximately 4% of transactions), a predominantly high-risk client base (65% cryptocurrency firms), and understaffing issues (six onboarding analysts for approximately 40,000 customers). An onsite review in February 2026 further identified no independent AML audit since November 2023, only 55 suspicious activity reports filed over 12 months despite high-risk activities, and concerns about Bano processing cryptocurrency transactions without BCAU’s prior written approval as required by the contract.
Of particular concern to BCAU was the “double-nesting” structure of Bano’s payment flows: Bano’s institutional clients issued virtual accounts to their underlying customers, resulting in payment information that obscured the identity of Bano’s actual client, leaving BCAU unable to identify and monitor the intermediary. This structure prevented meaningful transaction monitoring and exposed BCAU to regulatory liability under AML/CTF laws and NPP Product Rules requiring Banking Circle to satisfy itself that identified institutions maintain appropriate compliance frameworks.
The Court’s Holding
Justice Goodman dismissed Bano’s application for an interlocutory injunction. The court found that Bano had established only a weak prima facie case. The evidence demonstrated genuine concerns about Bano’s AML/CTF compliance framework, including deficient customer due diligence processes, inadequate transaction monitoring capabilities, insufficient staffing for the risk profile, and processing of high-risk cryptocurrency transactions without BCAU’s approval—all constituting potential material breaches of the contract’s obligations under clause 31.5 and the AML/CTF Laws themselves.
Critically, the balance of convenience favored refusing the injunction. BCAU faced substantial regulatory and counterparty risks by continuing to provide services to Bano: as a reporting entity and direct NPP participant, BCAU could face civil penalties under the AML/CTF Act, suspension from the NPP (affecting all of BCAU’s clients), and counterparty action if transactions processed through BCAU were found to violate AML/CTF obligations. These systemic risks to BCAU’s regulatory status and business exceeded any prejudice to Bano from the suspension. Additionally, Bano proved unable to satisfy its undertaking as to damages—the entity offered to provide security could not demonstrate sufficient assets or creditworthiness, and any security proffered was found inadequate to protect BCAU against the potential liability it would incur by maintaining the service.
Key Takeaways
- Payment processors owe primary responsibility for AML/CTF compliance; regulatory obligations to manage ML/TF risks override contractual performance obligations when compliance cannot be satisfied.
- Double-nesting in payment flows—where intermediaries obscure the identity of underlying transaction participants—creates visibility gaps that regulators and scheme operators view as unacceptable compliance risks.
- Courts assess the balance of convenience in injunction applications by weighing the regulatory and counterparty exposure faced by the respondent against the applicant’s business interruption; when the respondent faces potential civil penalties and access suspension from critical payment infrastructure, the balance typically favors the respondent.
- A weak prima facie case combined with unfavorable balance of convenience makes interlocutory relief unlikely, even where business continuity is at stake.
Why It Matters
This decision establishes important boundaries on contractual performance in the payments industry: AML/CTF compliance obligations are non-negotiable and override service continuity commitments when a payment processor identifies genuine financial crime risks. For Bano and similarly situated fintech payment platforms, the ruling emphasizes that rapid scale-up of high-risk client bases (especially cryptocurrency operations) without proportional investment in compliance infrastructure—particularly due diligence, transaction monitoring, and staffing—creates genuine suspension risk. BCAU’s concerns about 65% cryptocurrency clients with only six onboarding analysts and 55 SAR filings annually were treated as substantive regulatory red flags, not technical nitpicks.
For payment processors and their customers more broadly, the decision reinforces that NPP scheme rules and AML/CTF regulatory regimes vest scheme operators with broad suspension powers when client risks threaten the integrity of the payment network. The court’s acceptance of BCAU’s systemic risk argument—that Bano’s compliance deficiencies could trigger regulatory action affecting all downstream clients—signals that courts will defer to payment processor judgments about client risk when the processor is subject to direct regulatory oversight and scheme participation rules. Customers of payment processors should expect increasingly rigorous AML/CTF compliance reviews, particularly in high-risk sectors, and should build sufficient compliance infrastructure to withstand such scrutiny.