Anti-Money Laundering (AML)

Australia’s AML/CTF Tranche 2 reforms are a major regulatory shift that will bring thousands of businesses such as lawyers, accountants, real-estate professionals, private developers and dealers in previous stones and metals (Tranche 2 entities), under AUSTRAC regulation from 1 July 2026. These new regulatory reforms are ‘sector-specific’ and specifically targeted to close regulatory gaps in Australia’s defences against money-laundering (ML), terrorism financing (TF) and proliferation financing (PF). Businesses under Tranche 2 reform should begin preparing for their regulatory obligations as soon as possible by understanding their core obligations and assessing the business exposures to ML-TF risks.

Preparation of an AML-CTF policy and program can be time challenging and consuming in a regulatory maze of the proposed Tranche 2 reforms, especially if you do not know exactly as to how to build robust internal policies and systems to fully comply with your core and sector-specific legal obligations.

For professionals under Tranche 2, this means new obligations will apply alongside the existing regulatory requirements imposed on current designated service providers.  Tranche 2 entities must now establish AML/CTF controls, develop an AML/CTF policy and, conduct customer due diligence (CDD), and ensure its services are not used to support money laundering or terrorism financing activities

If you need legal advice regarding the implementation of your AML/CTF obligations including Tranche 2 obligations, our lawyers can assist with any type of AML CTF enquiry.

Tranche 2 entities in Australia must meet strict AML/CTF obligations which are already applied to current reporting entities under the AML/CTF Act.

Regulatory obligations includes the following:

• Enrolling and registering with AUSTRAC;
• Developing the sector-specific AML/CTF program which also needs to be maintained and updated on an ongoing basis;
• Training of your staff as part of the implementation of the internal AML-CTF controls/measures;
• Conducting initial and ongoing customer due diligence (CDD);
• Reporting certain transactions above a threshold, and suspicious activities via ‘suspicious matter reports (SMR);
• Making and keeping accurate and up-to-date records of Know-Your-Customer (KYC) and Know-Your-Business (KYB).

If you provide designated service or “value transfer service”, you will be considered a ‘reporting entity’  under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act), you must  enroll with AUSTRAC within 28 days of starting the designated or value transfer service in Australia, which is done by registering  an AUSTRAC business account and filing the required business information and reporting forms. Your business must have an appointed an AML CTF officer to liaise with AUSTRAC on an ongoing basis for annual AUSTRAC report, and/or SMR lodgment and any other relevant obligations depending upon your business’ nature, size and complexity. Even in some exceptional situations, if your business is considered not under the designated services under the AML/CTF Act, and you can provide evidence that your business carries out non-reportable transaction, you still must enroll with AUSTRAC and apply for an exemption for annual and/or other reporting obligations.

Developing an AML/CTF program is the most detailed and technical step for reporting entities including the designated business groups   in Australia. It is a formal set of internal company policies and procedures that explains how to identify, reduce, detect, and manage the risk on an on-going basis that your services and products will be used for terrorism financing, proliferation financing, and money laundering in Australia and abroad. The reporting entities’ core obligations must be conducted from a “risk-based approach” under the Tranche 2 reforms.

Reporting entities need to comply with the following:

• An obligation to “develop, implement and maintain enterprise-wide policies, systems and controls proportionate to the nature, size and complexity” of the reporting entity’s business.
• An obligation to “establish internal practices” to ensure the company’s employees and authorized representatives comply with AML/CTF obligations.

It is important to seek legal advice to tailor your AML/CTF Policy/Program which needs to be updated on an ongoing basis to align with the recent changes in AML/CTF laws.

If you are in a financial technology (Fintech) service business which relies upon the non-cash payment (NCP) service from the licensed payment service providers (PSPs), your business still must comply with the AUSTRAC’s AML-CTF legislation and relevant rules because it passes on a message/information as part of your “core business” activity in the overall value transfer chain (known as an ‘intermediary institution’). It means that new legislative amendments cover EFTPOS service providers, and other designated remittance service providers, will all be affected by the upcoming AML/CTF law changes which will be applied from 31 March 2026.

If you need legal advice to assist you in developing a program, our legal team can assist. We can provide clear advice and guidance on requirements and help to respond to or make queries with AUSTRAC.

Designated service providers who do not comply with Australia’s AML/CTF laws may face serious financial, legal as well as reputational repercussions. Under the AML/CTF Act, AUSTRAC’s authorized officer has information-gathering powers under section 167 and can issue a written notice to obtain information or documents under section 49B and, can exercise subsequent enforcement actions under section 202 to demand to comply with the current and upcoming changes in AML/CTF laws.

Penalties imposed by AUSTRAC can include :

• Civil penalty for individuals and non-corporate entities and companies.
• Issuance of Infringement Notices and Enforceable Undertakings (if applicable).
• Remedial directions ordering that a business take action to rectify its non-compliance.
• In serious and/or systemic breaches, AUSTRAC can impose Civil Penalty Orders in the Federal Court.
• Issuance of notice for the appointment of an external auditor.
• Issuance of notice to carry out an ML/TF financing risk assessment and independent audit.

Beyond incurring the above monetary fines, there are risks of irreparable reputational damage and loss of customer trust, as well as increased regulatory monitoring from AUSTRAC and relevant regulatory bodies.

If your business requires advice or facing enforcement actions or needs help in implementing a fully compliant AML/CTF policy/program, our skilled Anti-Money Laundering Lawyers at PCL Lawyers can offer detailed guidance and handle everything from developing an AML program to submitting reports and providing legal advice and representation.

If you need advice regarding AML compliance, please contact our lawyers today on 1300 795 893 or complete an online enquiry form and we will respond quickly