What Is AML/CTF Tranche 2?
You know that feeling when you drive up to a toll booth on the highway, pull out your card, and pay the fee, only to look over and see a bunch of four-wheel drives tearing through a dirt track on the side of the road completely free?
That is exactly how the Australian financial sector felt for nearly twenty years.
For decades, banks and casinos stood at the front door, running strict checks on every dollar. Meanwhile, professions like accountants, lawyers, and real estate agents had loopholes.
Tranche 2 is Australia’s second wave of anti-money laundering regulation. It targets the businesses that help, knowingly or unknowingly, people move, hide, or legitimise money.
Here’s a broad look at the sectors and types of businesses that may be affected:
| Industry affected | What Triggers AML Obligations | AUSTRAC Reference |
|---|---|---|
| Real estate agents | Brokering the sale, purchase or transfer of real estate | Table 5 (s 6(5A)) |
| Lawyers | Assisting with entity transfers, holding client funds, creating or restructuring legal arrangements | Table 6 (s 6(5B)) |
| Conveyancers | Assisting in planning or executing property transfers | Table 6 (s 6(5B)) |
| Accountants | Assisting with entity creation/restructuring, equity or debt financing, nominee director roles | Table 6 (s 6(5B)) |
| TCSPs / VASPs | Virtual asset exchange, safekeeping, transfer services | Table 1 (items 46A, 50A-50C) |
| Precious metals dealers | Buying or selling precious metals, stones or products for $10,000+ in cash or virtual assets | Table 2 (s 6(3)) |
What Are Tranche 2 AML Reforms?
Australia’s AML/CTF Tranche 2 reforms extend the country’s anti-money laundering and counter-terrorism financing framework to certain professional and business services that were previously outside the regime.
So, the main motto of these AML Tranche 2 reforms is to make it harder for criminals to use legitimate businesses to hide or move illegal money.
When looking at what is tranche 2 in practice, the changes boiled down to three major structural updates:
- Mandatory Know Your Customer (KYC): You can no longer onboard clients based on a referral or a good vibe. You must formally verify their legal identities using independent sources.
(P.S. Covered CDD in detail in the coming sections) - Ultimate Beneficial Ownership (UBO) Screening: You are required to look completely through complex corporate shells and discretionary trusts to identify the beneficial owners and individuals who ultimately own or control a customer, depending on the customer’s structure and the applicable CDD requirements.
- Reporting Requirements: If you have reasonable grounds to suspect that a matter may be linked to money laundering, terrorism financing or other relevant criminal activity, you may have an obligation to submit a suspicious matter report (SMR) to AUSTRAC
What Are The Penalties For Failing To Comply?
Of course, a simple mistake won’t automatically land you in court, but blatant negligence will cost you dollars of penalties and regulatory action. Depending on the circumstances, this may include infringement notices, enforceable undertakings, civil penalty proceedings or, for the most serious breaches, criminal offences.
Under the Anti-Money Laundering and Counter-Terrorism Financing Act, maximum civil penalties stand at $7.28 million for individuals (20,000 penalty units) and $36.4 million for corporate entities (100,000 penalty units) per violation.
So, as the federal regulator, AUSTRAC expects you to make genuine efforts to understand and meet their obligations. This way you can prepare early and reduce your compliance risks.
When Does Tranche 2 Start And What Is The Compliance Timeline?
The Tranche 2 AML obligations kick in on 1 July 2026. But the countdown started well before that, and if you’re only thinking about it now, you’re already behind a few milestones.
AUSTRAC enrollment for newly regulated entities opened on 31st March 2026, with new businesses required to enrol by 29 July 2026. This is a comfortable buffer until you realise that enrolment is just the administrative step. The real work is building your AML/CTF program, training your staff, and updating your client onboarding processes.
We have chalked out a roadmap for you to make things clear and easy:
| Milestone | Date | What It Means For Your Business |
|---|---|---|
| Royal Assent of Amendment Act | December 2024 | Legislative framework is now law |
| AUSTRAC guidance and starter kits released | 2025-2026 | Industry-specific guidance published on AUSTRAC website |
| AUSTRAC enrolment opens | 31 March 2026 | Newly regulated entities must enrol with AUSTRAC |
| AML/CTF obligations commence | 1 July 2026 | Full compliance required: CDD, reporting, AML/CTF program |
A few entities read that timeline and assume 1 July is the finish line. It’s not. Think of it as opening day, not the deadline. AUSTRAC has been upfront that they don’t expect newly regulated businesses to have a perfect program on day one, but they do have regulatory priorities.
You must:
- have an AML/CTF program;
- have an AML/CTF compliance officer;
- have trained staff; and
- be ready to engage with clients and report suspicious matters.
The enrollment deadline for newly regulated businesses was 29 July 2026. If your firm has not yet enrolled, it should address its enrolment obligations with AUSTRAC immediately. Everything else – the program, the training, the client checks, builds on top of that enrolment.
Which Industries Will Be Covered By Tranche 2?
But from 1 July 2026, AUSTRAC’s rules will no longer be a ‘bank and casino’ thing. The reforms will expand the number of businesses regulated by AUSTRAC from around 19,000 to close to 100,000 nationwide.
How? Because all the industries that have traditionally handled high-value transactions or client funds now come under the AML/CTF Act. These newly regulated industries are:
- Real estate professionals involved in property sales and transfers
- Lawyers and legal practitioners providing designated legal services
- Conveyancers handling eligible property transactions
- Accountants and professional advisers providing designated business services
- Trust and Virtual asset service providers (VASPs)
- Dealers in precious metals, precious stones and products (DPMSP)
The reason why these sectors have been included is to avoid criminals from misusing certain professional services to hide the source of funds, move assets, or create a secret source for money-laundering and terrorism-financing risks.
But in all these industries, the core obligations are broadly the same. In the next sections, we will dig into what these obligations actually look like in practice, and what your business should be doing right now to get ready.
What Compliance Requirements Must Tranche 2 Businesses Meet?
So your business is caught by AML Tranche 2. What exactly do you have to do? The obligations under the AML/CTF Act are not a one-off checklist you tick and forget. They are ongoing, and they are risk-based.
Here is an overview of the core obligations that apply across all newly regulated entities under aml/ctf tranche 2:
Step 1: Enrol with AUSTRAC
Newly regulated businesses were required to enrol with AUSTRAC by 29 July 2026. If your business missed the deadline, you should enrol through AUSTRAC Online as soon as possible and contact AUSTRAC if you are unsure how to address your enrolment obligations.
If your business has already been providing designated services without meeting its AML/CTF obligations, you should also consider whether a self-disclosure of non-compliance to AUSTRAC is appropriate. Missing the enrollment deadline does not delay your other obligations, which commenced on 1 July 2026, including requirements relating to your AML/CTF program, customer due diligence, reporting and record keeping.
Sep 2: Develop an AML/CTF program
This is your compliance blueprint. It must cover customer identification, compliance monitoring, employee training, and risk management. AUSTRAC provides program starter kits for each industry.
Step 3: Conduct customer due diligence (CDD)
Before providing a designated service, you must identify and verify your customer. This means collecting identity documents, verifying them against reliable sources, and understanding the nature of the customer’s business and the purpose of the transaction.
Step 4: Report suspicious matters.
If you have reasonable grounds to suspect a customer is engaged in money laundering or terrorism financing, you must submit a suspicious matter report (SMR) to AUSTRAC. This includes situations where you suspect a customer is structuring transactions to avoid the $10,000 reporting threshold.
It is also important to account for the transitional arrangements under AUSTRAC’s 2026 AML/CTF Transitional Rules. These rules allow certain existing reporting entities, in specified circumstances, to continue using applicable customer identification procedures during the transition period through to 31 March 2029. Firms should check whether these transitional provisions apply to their existing customers and customer identification processes.
Step 5: Submit threshold transaction reports (TTRs).
A Threshold Transaction Report (TTR) is currently required for a transaction involving the transfer of $10,000 or more in physical currency. You must submit the TTR to AUSTRAC within 10 business days.
For designated services involving precious metals, precious stones or precious products, the $10,000 threshold can apply to transactions involving physical currency and/or virtual assets, where the relevant statutory conditions are satisfied.
Step 6: Keep records for seven years.
Every CDD document, every transaction record, every report you submit must be retained for at least seven years.
How Should Businesses Prepare For Tranche 2 Compliance?
Here is a roadmap to make implementation of AML Tranche 2 reforms easy:
Step 1: Map your services against the designated services tables
Confirm the reforms apply to your services. Check the designated table. For real estate, Table 5. For precious metals, Table 2 and so on.
Be honest about what you actually do, not just what is on your website.
Step 2: Enrol with AUSTRAC
Enrolment with AUSTRAC opened on 31 March 2026, and the deadline for newly regulated businesses was 29 July 2026. If your firm has not yet enrolled, it should address its enrolment obligations with AUSTRAC immediately.
Step 3: Assess your risks
Identify and assess the money laundering, terrorism financing and proliferation financing risks your business may reasonably face. Your assessment should consider your designated services, customers, delivery channels and the countries you deal with, including any planned services or activities that could increase your risk.
The assessment should also be tailored to the nature, size and complexity of your business and used to develop appropriate AML/CTF policies and customer risk ratings.
Step 4: Build your AML/CTF program
Develop and document an AML/CTF program specific to your business and its risks. Your program should include your ML/TF risk assessment and the policies, procedures, systems and controls you will use to manage those risks and meet your AML/CTF obligations.
Appoint an AML/CTF compliance officer to oversee day-to-day compliance, and have the program approved by a senior manager. You must also review and update the program as circumstances change and periodically conduct an independent evaluation of it.
For a practical overview of what your program should cover, see AUSTRAC’s AML/CTF program quick guide.
Step 5: Set up client checks
Create a clear process for customer due diligence (CDD) so you can identify and verify customers, understand who you are dealing with and assign appropriate customer risk ratings.
Your process should also cover enhanced checks for higher-risk customers, ongoing customer due diligence, politically exposed persons (PEPs), targeted financial sanctions and, where required, the source of a customer’s funds or wealth.
Step 6: Train your team
Identify which roles in your business require AML/CTF training and personnel due diligence. Assess the skills, knowledge, expertise and integrity of relevant personnel, and provide appropriate training so they understand their AML/CTF responsibilities.
Your team should know how to identify money laundering, terrorism financing and proliferation financing risks, recognise suspicious activity and follow your business’s procedures when concerns arise.
Step 7: Test and review your AML/CTF program
Arrange an independent evaluation of your AML/CTF program to check whether your risk assessment and policies meet the relevant requirements and whether your controls are effectively managing your ML/TF risks.
Your AML/CTF policies should set out how often these evaluations will occur based on the nature, size and complexity of your business. At a minimum, an independent evaluation must be conducted at least once every three years, subject to applicable transitional arrangements.
What Money Laundering Risks Do Professional Service Providers Face?
Someone trying to hide dirty money doesn’t always walk into a bank with a suitcase of cash. They might buy property through a company, move money through a trust, or use a series of legitimate-looking transactions to make illegal funds appear clean.
Yes, professional service providers aren’t expected to investigate every client. But they are expected to know who they’re dealing with, understand whether something looks unusual and ask more questions when the risk is higher.
That’s where a risk-based approach comes in.
A long-standing local business client who you have known for years is a very different proposition to a new overseas client with multiple beneficial owners and an urgent property purchase. The checks shouldn’t be identical because the risks aren’t.
What Is The Difference Between Tranche 1 And Tranche 2?
To understand Tranche 2 AML Australia, it helps to understand what came before it. Tranche 1 has been in place since 2006 and covers the financial sector’s most obvious players…the bankers, insurance companies, superannuation funds, credit unions, etc. These are the businesses that handle money as their core function. It made sense to regulate them first because they process enormous volumes of transactions every day.
But Tranche 2 expands the regulatory net to the professions that facilitate transactions and manage assets, even though handling money is not their primary purpose. The key conceptual shift is from regulating entities that directly move money to recognising that AML/CTF obligations can also apply to businesses whose designated services enable money to be moved, hidden, or integrated into the legitimate economy.
Here’s a difference between the two:
| Point of difference | Tranche 1 | Tranche 2 |
|---|---|---|
| Industries covered | Banks, casinos, financial institutions, money transfer businesses, insurance companies | Lawyers, accountants, conveyancers, real estate agents, TCSPs, VASPs, precious metals dealers |
| Approximate entities | ~19,000 reporting entities | ~100,000 entities |
| Regulatory focus | Who moves money | Who enables money to be moved, hidden, or legitimised |
| Designated services | Deposit-taking, lending, insurance, gambling, remittance | Brokering real estate, entity transfers, holding client funds, creating trusts, precious metals sales |
| Key legislation | AML/CTF Act 2006 (original) | AML/CTF Amendment Act 2024 (amending the 2006 Act) |
Want to Know How We’re Preparing for Tranche 2? Talk to our team to discuss how we’re preparing for the new
Frequently Asked Questions About AML/CTF Tranche 2
What Is AML/CTF Tranche 2 Meaning?
AML/CTF Tranche 2 is the next phase of Australia’s anti-money laundering laws. It brings industries like accounting, legal services, real estate and conveyancing under the AML/CTF regime.
What Is The Major Difference Between Tranche 1 And Tranche 2?
Tranche 1 applied mainly to banks, financial institutions and gambling businesses. Tranche 2 extends similar AML/CTF obligations to designated professional services that were previously outside Australia’s AML/CTF regime.
When Does AML/CTF Tranche 2 Start in Australia?
AML/CTF Tranche 2 obligations for newly regulated businesses commence on 1 July 2026. From this date, businesses providing designated services must meet applicable requirements such as customer due diligence, maintaining an AML/CTF program, record-keeping, and reporting suspicious matters.
