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In November 2024, the Australian Parliament passed the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Amendment Bill, marking a significant milestone in the country’s regulatory landscape. The reforms strengthen Australia's AML/CTF regime, enabling more effective deterrence, detection, and disruption of criminal activities such as money laundering, terrorism financing, and proliferation financing. Importantly, the reforms also bring Australia into closer alignment with international standards set by the Financial Action Task Force (FATF).
A major element of the legislation is the extension of AML/CTF obligations to so-called ‘Tranche 2’ entities. These include lawyers, accountants, real estate professionals, financial planners and dealers in precious metals and stones, who will be regulated by AUSTRAC from 1 July 2026.
What do Tranche 2 reforms mean for small and medium businesses?
While the expansion of regulatory coverage is a positive and necessary development, the implementation of AML/CTF programmes across Tranche 2 sectors will present considerable challenges for small and medium-sized businesses that have historically operated outside the scope of such regulation.
Experience from other jurisdictions suggests that smaller firms frequently struggle to implement robust compliance frameworks. In New Zealand, for example, similar reforms introduced several years ago revealed that many smaller law firms sought the least costly compliance solutions, often resulting in minimal or inconsistent application of AML/CTF measures.
In Australia, early indications from AUSTRAC suggest that a number of small businesses are not yet taking steps to implement appropriate systems. This highlights a key concern: the scalability of AML/CTF compliance solutions does not always equate to accessibility, particularly for small entities that lack the budget, in-house expertise, or infrastructure required to adopt enterprise-grade platforms.
Is the future of Tranche 2 flexible compliance models?
Traditional subscription-based AML technology solutions may not be feasible for many smaller entities. There is increasing demand for more flexible models, such as pay-per-click or pay-per-screen services, which allow firms to access compliance tools in a more cost-effective and usage-based manner.
Previous efforts to introduce shared or aggregated services—such as Singapore’s attempt to launch a “KYC as a Service” model—have had limited success. While some aggregators, intermediaries that offer centralised compliance services (like KYC) to multiple businesses, but they haven’t yet become a widely used solution in the market. have emerged to fill this space, the broader market continues to lack widely adopted, affordable compliance solutions tailored to the unique needs of smaller firms.
Without these options, there is a risk that many Tranche 2 entities will either delay implementation or rely on suboptimal approaches, undermining the effectiveness of the reforms.
Building simplicity into complexity
One of the welcomed goals of the Australian government in introducing Tranche 2, is to simplify and clarify compliance requirements, making it easier for entities to understand and fulfill their obligations.
The modernisation of Australia’s AML/CTF regime is also intended to reflect evolving business models, technologies, and criminal methodologies. By addressing these changes, the reforms can help ensure the long-term resilience and adaptability of the AML/CTF framework.
How to prepare for Tranche 2
As the July 2026 deadline approaches, Tranche 2 businesses should begin preparing now.
- Familiarising with obligations: Entities newly subject to regulation must understand AUSTRAC’s requirements, including ongoing customer due diligence, suspicious matter reporting, and AML/CTF program development.
- Assessing current capabilities: Even where some controls are in place, firms should evaluate whether these are sufficient under the new legal framework.
- Exploring fit-for-purpose solutions: Smaller firms may benefit from compliance models that allow for flexible, usage-based access to technology and expertise.
- Investing in workforce development: Building internal knowledge and capabilities will be critical. This may include training existing staff or engaging external advisors with relevant experience.
- Technology will be key to meeting Tranche 2 obligations efficiently. RegTech can streamline tasks like monitoring, ID checks, and reporting — especially for smaller firms needing scalable, cost-effective tools.
Australia's implementation of Tranche 2 reforms is a meaningful and necessary evolution of its AML/CTF regime. However, the ultimate success of these reforms will depend not only on the strength of the regulatory framework but also on the ability of all affected entities — large and small — to adopt and sustain effective compliance measures.
