What is Tranche 2 AML/CTF?

Background

Australia's Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act 2006 has regulated financial institutions — banks, remittance providers, and gambling services — since 2007. These are known as Tranche 1 reporting entities.

Tranche 2 extends AML/CTF obligations to a new set of industries — collectively known as gatekeeper professions or designated non-financial businesses and professions (DNFBPs). These are sectors that criminals commonly exploit to launder money or finance terrorism:

• Real Estate Professionals — agents brokering property sales and purchases, and developers selling their own properties
• Legal Practitioners — solicitors and barristers providing conveyancing, trust and company services, and other designated services
• Accountants — professionals providing trust and company formation, administration, and related financial structuring services
• Conveyancers — non-lawyer practitioners assisting with property transfers
• Dealers in Precious Metals, Stones and Jewellery — buying and selling gold, silver, platinum, gemstones, and jewellery products

Why these industries?

Real estate, professional services, and precious goods are attractive to criminals because they:

• Store and move value — property appreciates, gold retains value, and professional structures can move funds across borders
• Enable layering — complex trust and company structures can obscure the origin and ownership of funds
• Involve large cash transactions — physical currency can enter the financial system through property settlements, trust accounts, and precious goods purchases
• Provide legitimacy — using professional gatekeepers lends an appearance of legitimacy to transactions involving illicit funds

Australia's Tranche 2 reforms align with Financial Action Task Force (FATF) Recommendations 22 and 23, bringing the country in line with AML/CTF standards already adopted by the UK, EU, Canada, and New Zealand.

Key dates

All regulated businesses must be registered with AUSTRAC and have a compliant AML/CTF program in place by 1 July 2026. AUSTRAC strongly recommends beginning preparations well in advance of this date.

What does compliance involve?

At a high level, every Tranche 2 business must:

1. Register with AUSTRAC — enrol as a reporting entity before providing any designated services
2. Identify your designated services — understand which of your business activities are regulated under the AML/CTF Act
3. Appoint an AML/CTF Compliance Officer — designate a senior person to oversee your compliance program
4. Conduct a risk assessment — assess your business's exposure to money laundering and terrorism financing (ML/TF) risks
5. Develop an AML/CTF program — create and maintain a written compliance program that addresses:
   • Your ML/TF risk assessment
   • Customer identification and verification procedures
   • Ongoing customer due diligence
   • Transaction monitoring and reporting procedures
   • Record-keeping and personnel obligations
6. Perform Customer Due Diligence (CDD) — identify, verify, and risk-assess every customer before providing a designated service
7. Monitor transactions — watch for suspicious activity, threshold transactions, and unusual patterns
8. Submit reports to AUSTRAC — Suspicious Matter Reports (SMRs), Threshold Transaction Reports (TTRs), and annual compliance reports
9. Train your personnel — ensure all staff understand their AML/CTF obligations and can recognise suspicious behaviour
10. Keep records — retain compliance records for 7 years after the end of the business relationship
11. Review and update — regularly review your program to ensure it remains current and effective

Penalties for non-compliance

AUSTRAC has significant enforcement powers. Penalties for non-compliance can include:

• Civil penalties of up to $18.78 million per contravention for bodies corporate (indexed annually)
• Criminal penalties including imprisonment for serious offences such as structuring transactions to avoid reporting obligations
• Enforceable undertakings requiring specific remedial actions
• Remedial directions to address compliance deficiencies
• Infringement notices for lower-level breaches
• Reputational damage from public enforcement actions and the AUSTRAC compliance register

AUSTRAC takes a risk-based approach to enforcement and will consider whether a business has made genuine efforts to comply.

How Verifia helps

Verifia is purpose-built for Tranche 2 businesses. Rather than adapting complex bank-grade compliance tools, Verifia provides a streamlined, industry-specific platform that:

• Follows AUSTRAC's 3-step framework — customise, use, and maintain your AML/CTF program
• Generates your AML/CTF program using AI, tailored to your industry, designated services, and risk profile
• Streamlines customer due diligence with integrated identity verification (DVS), risk scoring, and UBO analysis
• Monitors transactions with configurable rules designed for your industry
• Manages reporting with assisted SMR and TTR drafting and deadline tracking
• Maintains your compliance vault with tamper-evident, 7-year record retention and full audit trails
• Provides industry-specific guidance throughout every workflow — from onboarding to ongoing reviews

Continue to the next section to understand your specific obligations, or jump to your industry guide for sector-specific information:

• Real Estate
• Legal Profession
• Accounting
• Conveyancers
• Precious Metals, Stones and Jewellery