Risk Assessment Webinar (For New Reporting Entities)

Tranche 2 Compliance Pressure

Australia's anti-money laundering and counter-terrorism financing (AML/CTF) framework is undergoing its most significant expansion in years. Long criticised by the Financial Action Task Force (FATF) for leaving 'gatekeeper' professions outside its reach, the country has now legislated Tranche 2 reforms that capture lawyers, accountants, conveyancers, trust and company service providers, real estate agents, and others providing designated services.

The Anti-Money Laundering and Counter-Terrorism Financing Amendment Act passed in 2024, with the detailed AML/CTF Rules 2025 tabled in Parliament on 29 August 2025 after public consultations. These rules set out practical requirements, including mandatory money laundering/terrorism financing (ML/TF) risk assessments that entities must conduct to identify and mitigate their exposure.

For the newly regulated Tranche 2 entities—estimated at 80,000 to 90,000 businesses—obligations commence on 1 July 2026. Enrolment with AUSTRAC opens on 31 March 2026, with a deadline to notify by 29 July 2026 under transitional arrangements. Existing reporting entities face earlier changes from 31 March 2026, but the spotlight is on the influx of new entrants who have historically operated without these controls.

The stakes are high. Risk assessments form the foundation of AML/CTF programs, informing customer due diligence, transaction monitoring, and suspicious matter reporting. Failure to implement them properly exposes businesses to civil penalties that can reach millions of dollars, potential criminal liability in severe cases, and AUSTRAC enforcement actions including enforceable undertakings or licence restrictions in regulated sectors.

A key tension lies in balancing compliance costs against business operations. Many affected entities are small professional firms without dedicated compliance teams, and AUSTRAC has released starter kits and guidance to ease the burden, acknowledging that perfection is not expected on day one. Yet the reforms also introduce proliferation financing risk assessments, adding complexity amid geopolitical concerns.

The timing aligns with Australia's upcoming FATF mutual evaluation, underscoring pressure to demonstrate effective coverage of high-risk sectors previously vulnerable to exploitation for laundering proceeds from crime or financing proliferation.