AML/CTF Tranche 2: New Regulations Explained
by Dario Sabljak | 03 February 2026
Anti-money laundering (AML) and counter-terrorism financing (CTF) laws and regulations are designed to stop criminals from using legitimate business sectors to hide illicit funds or finance violent causes. Traditional AML/CTF regimes focused primarily on financial institutions such as banks and credit providers. However, criminals have increasingly exploited gaps in regulation, particularly in professional services like law, accounting, and real estate, where high-value transactions and trust structures are common.
In response, the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth) (AML/CTF Amendment Act) was enacted in Australia to expand the AML/CTF regime to a broader class of businesses and professions known as ‘Tranche 2 entities.’ These reforms aim to close regulatory gaps, align domestic law with international standards (including those of the Financial Action Task Force (FATF)), and strengthen the overall integrity of the financial system.
What Are Tranche 2 Entities?
The term ‘Tranche 2 entities’ refers to businesses and professional service providers previously outside the AML/CTF regulatory perimeter but now captured under the expanded regime. Specifically, Tranche 2 entities include:
Real Estate Professionals: real estate agents, buyers’ agents, property developers, etc.
- Legal Professionals: lawyers, conveyancers, legal service providers, etc.
- Accountants and Accounting Firms.
- Trust and Company Service Providers: consultancies that form or manage trust and company structures (including businesses that arrange for resident directors, nominee shareholders and virtual offices).
Dealers in Precious Metals and Stones: entities trading in high-value goods.
Key Features of the New AML/CTF Regime
From 1 July 2026, the AML/CTF regime will apply to Tranche 2 entities in addition to traditional reporting entities. Registration and compliance obligations begin when an entity provides a designated service under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) that triggers AML/CTF requirements.
1. New Designated Services
The introduction of new ‘designated services’ is a significant change. Rather than naming specific businesses, the law defines services (e.g. assisting with property transactions or setting up trust structures) that, when provided, bring the provider into the AML/CTF regime. This approach aims to better capture risky activities regardless of the legal form of the business.
2. Mandatory Enrolment and Registration
Once an entity begins providing a designated service in Australia, it must enrol with AUSTRAC within 28 days of providing the designated service. Enrolment formally brings the entity under regulatory oversight.
Enrolment typically requires:
Basic business data (structure, key personnel, services).
Contact and operational details.
Declaration of designated services offered.
Enrolment must be kept up to date, with business updates reported to AUSTRAC within 14 days of the update taking place.
Registration is separate to the enrolment process and is an extension required to be completed specifically by virtual asset service providers and money remittance businesses.
3. AML/CTF Program and Risk Management
Every Tranche 2 entity must develop and maintain a documented AML/CTF program tailored to its business. This program must reflect a risk-based approach including identifying, assessing, and mitigating the entity’s exposure to money laundering and terrorism financing risks. Key components include:
Risk Assessment: Understanding unique business risks (customers, services, geography).
Policies and Procedures: Clear directions for customer due diligence (CDD), record-keeping, reporting, and escalation.
Systems and Controls: Operational systems to implement the policies.
Independent Evaluation: External evaluation of the AML/CTF program at least every two to three years.
This risk-based model gives entities flexibility but also places a greater onus on them to justify their approach and ensure it is effective.
4. Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD)
Under the new regime, CDD is a core requirement for Tranche 2 entities. CDD includes:
Verifying the identity of clients and, where applicable, beneficial owners (the natural persons who ultimately own or control the client).
Collecting information on customer purpose, nature of business, and source of funds.
Ongoing monitoring of transactions and behaviours.
Entities must also apply EDD in higher risk situations, for example, when dealing with politically exposed persons (PEPs), unusual complex structures, or products prone to misuse.
5. Reporting Obligations
Once enrolled as a reporting entity, Tranche 2 businesses must comply with suspicious matter reporting and transaction reporting obligations. This includes:
Suspicious Matter Reports (SMRs): Reporting transactions or activities suspected to be related to money laundering or terrorism financing.
Threshold Transaction Reports (TTRs): Reporting certain large cash transactions above a specified amount (e.g., AU$10,000).
Other regulatory reports, such as international value transfer service reports when relevant.
Timely reporting is a central part of the AML/CTF system, allowing regulators and law enforcement to identify and investigate criminal activity.
6. Record-Keeping Requirements
Entities must retain accurate and complete records of:
Customer identification and verification documentation.
Risk assessments and AML/CTF program documentation.
Staff training and compliance activities.
Reports submitted to regulators.
Typically, records must be kept for at least seven years, enabling effective supervision and audit.
Practical Impacts for Affected Businesses
1. New Compliance Culture
Tranche 2 entities will need to build or significantly expand compliance capabilities. Many professional practices (law firms, accounting firms, real estate agencies) have never been subject to formal AML/CTF supervision. They now need:
Dedicated AML compliance officers.
Staff training on AML/CTF obligations.
Integration of compliance into client engagement processes.
2. Regulatory Engagement and Preparation
Businesses should start preparing now for the commencement dates:
31 March 2026 — Enrolment opens for Tranche 2 entities.
1 July 2026 — Full AML/CTF obligations take effect.
Failing to enrol or implement adequate AML/CTF systems can result in penalties under the AML/CTF Act, regulatory scrutiny, and reputational harm.
Why the Reforms Matter
The expansion of AML/CTF obligations to Tranche 2 entities represents a significant regulatory shift. It reflects broader global trends where policymakers are:
Closing loopholes that allowed non-financial sectors to be used for laundering illicit funds.
Aligning domestic law with FATF standards and international best practice.
Strengthening overall financial system integrity by making all significant financial intermediaries part of the defense against crime.
The reforms also acknowledge that criminals adapt quickly, exploiting sectors previously unregulated. Bringing these sectors into the AML/CTF regime empowers regulators, law enforcement, and businesses themselves to better detect and deter financial crime.
How We Can Help
Adria Group is well placed to assist Tranche 2 entities in navigating the new AML/CTF regime and meeting their expanded regulatory obligations. We provide end-to-end support, including assessing whether your services are captured as designated services, advising on enrolment and registration requirements, and designing tailored, risk-based AML/CTF programs that align with your business operations. We also assist with customer due diligence frameworks, beneficial ownership identification, staff training, and ongoing compliance governance. We also support clients in conducting independent evaluations, ensuring compliance is both practical and proportionate to risk.
Contact us today for a free consultation on 1800 955 816 or [email protected].
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