Electronic Funds Transfer Instruction

What is an electronic funds transfer instruction

AUSTRAC defines an electronic funds transfer instruction, usually shortened to EFTI, as an instruction for the transfer of money controlled by a customer to another person where the transfer instruction is carried out or passed on electronically, and the transfer is within the same financial institution or between financial institutions.

In practical terms, an EFTI is the message that causes money to move electronically from a payer to a payee. It is not the same thing as the customer’s contract, invoice, or reason for payment. It is the payment instruction that the financial institution accepts and processes.

How EFTI works in the Act

The AML and CTF Act sets out detailed concepts of person to person electronic funds transfer instructions, including how an ordering institution and beneficiary institution are identified in different scenarios. This is captured in sections 8 and 9 of the Act and the related definitions in section 5.

A useful detail in the legislation is that, in certain same institution scenarios, the ordering institution may also be known as the beneficiary institution for the purpose of making the money available to the payee. This helps explain why transfer roles can look confusing in internal reports unless staff use the correct legal language.

Why EFTI matters for Australian AML and CTF compliance

EFTIs matter for three reasons.

First, they are the foundation of electronic payments, which are a key channel used by criminals to move value quickly.

Second, EFTIs drive reporting obligations in the current regime. AUSTRAC explains that an international funds transfer instruction, or IFTI, includes instructions accepted in Australia for money to be made available in another country or accepted in another country for money to be made available in Australia. AUSTRAC also explains that an IFTI E is a type of EFTI sent to or received from another country.

Third, EFTIs are central to the reform direction. The Home Affairs overview of the Amendment Act explains that the Act streamlines existing concepts of funds transfer and designated remittance arrangements into a single value transfer chain, and replaces IFTI reporting with an updated international value transfer service reporting concept, with transitional rules to preserve IFTI for a period while systems are updated.

EFTI and the shift to value transfer chains

The key reform point is that Australia is modernising how it treats payments, regardless of technology. The Amendment Act’s stated intent is to facilitate the passage of key information about the transfer across a value transfer chain.

For Tranche 2 businesses, this is relevant even if you are not a bank or remittance provider. Why. Because you will often rely on payment evidence when assessing source of funds, understanding transaction purpose, and deciding whether something looks suspicious. As payment transparency improves, regulators will expect your file notes to make sense against what the payment trail actually shows.

It also helps staff understand the travel rule logic. FATF standards on payment transparency require that required originator and beneficiary information accompanies a wire transfer or related message throughout the payment chain, and that financial institutions monitor for missing information and take appropriate measures.

Examples of EFTI in plain English

Example 1: Domestic bank transfer

A customer instructs their bank to transfer money to another person’s account at the same bank or a different bank. That instruction is carried out electronically, so it is an EFTI.

Example 2: International transfer reportable as IFTI E

A customer instructs a bank in Australia to send money to a beneficiary overseas, or a bank overseas sends money into Australia. AUSTRAC describes IFTI E as a type of EFTI for transfers sent to or received from another country. 

Example 3: Complex settlement chain

A customer pays a deposit into a trust account, then funds are moved to settlement. The professional service provider is not creating the EFTI, but your matter file should still identify who paid, who received, and whether the payment path makes commercial sense.

Best practice for Tranche 2 teams when EFTI evidence appears in files

1. Record the payment story clearly. Capture payer, payee, amount, date, and why the payment is happening. Then attach the evidence. This simple discipline prevents confusion later when transactions are reviewed.

2. Use correct transfer role language when it matters. If a matter is higher risk, document the ordering institution and beneficiary institution where you can identify them from the banking evidence. This aligns with AUSTRAC’s transfer role framing used across its reporting guidance.

3. Treat missing information as a risk signal, not a paperwork gap. FATF payment transparency standards expect monitoring for missing originator or beneficiary information and risk based action. The same thinking should apply to your acceptance decisions when payment evidence is incomplete.

4. Stay alert to reform driven changes in terminology. The system is moving towards value transfer concepts and updated reporting over time. If your templates are written in a way that assumes the old language forever, they will age badly.

Common challenges

• Staff rely on screenshots that do not show sender and recipient details clearly.
• Payment evidence is filed, but the file note does not explain why the payment route makes sense for the client and matter.
• Teams confuse “proof of transfer” with “proof of legitimacy”, especially when funds move through multiple accounts.

Final Thoughts on EFTI

Electronic funds transfer instruction is a technical term with practical value. It helps you describe payments accurately, understand what a payment record actually represents, and prepare for the modernised value transfer and payment transparency direction under the AML and CTF Amendment Act 2024.