Tranche 2 Compliance Explained: What Has Changed Under AUSTRAC Reform?

Introduction

One of Australia’s biggest regulatory changes in decades is about to begin. There has been an update to the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Amendment Act.

Thousands of Australian companies will have to comply starting on July 1, 2026. AML regulations did not previously apply to these companies. They have a wide range of new responsibilities to fulfill.

The Tranche 2 reforms are the name given to these modifications. This impacts those who work as lawyers, accountants, real estate brokers, or trust providers.

At Grace Advisory, we help Australian businesses understand and meet their AML/CTF compliance obligations with confidence. In this guide, we explain the Tranche 2 AML reforms. We cover who is captured and what you need to do. We also show how to build an AML/CTF compliance program before the deadline.

What Are the AML/CTF Reforms and Why Now?

Since 2006, Australia has had an AML/CTF system in existence. However, the framework was never applied to some high-risk professional and service sectors for almost twenty years.

These industries are referred to as Tranche 2 enterprises. Among them are attorneys. Accountants are among them. Among them are experts in real estate. Precious metal and stone traders are among them.

The Financial Action Task Force (FATF) consistently criticized their exclusion.

FATF establishes international guidelines to combat money laundering and the funding of terrorism. Australia ran the risk of receiving a formal FATF non-compliance rating in the absence of reform. Australia’s reputation in international financial markets might have suffered as a result.

The urgency has been reaffirmed by domestic research in addition to foreign pressure. Money laundering and the harm caused by organized crime in Australia are clearly related, according to the Australian Institute of Criminology. There was no denying the need for reform.

A contemporary framework for AML/CTF compliance is the end outcome. It closes these loopholes and expands control to areas that criminals have long taken advantage of. These industries serve as points of entry into the financial system.

Who Is Captured by the Tranche 2 Reforms?

From 1 July 2026, the following sectors will be regulated under Australian AML/CTF laws for the first time:

• Legal professionals (lawyers, conveyancers, notaries)
• Accountants and accounting firms
• Real estate agents (for property sales, purchases, and rentals involving significant funds)
• Dealers in precious metals and gemstones
• Trust and company service providers

Existing reporting institutions, such banks and remitters, will also have additional responsibilities in addition to these newly regulated industries. Financial services companies and digital currency exchanges would also have updated responsibilities under the new framework.

According to AUSTRAC, the Tranche 2 amendments will subject almost 90,000 new companies to AML supervision. As a result, this is the biggest extension of Australia’s AML/CTF law since it was first implemented.

Use AUSTRAC’s self-assessment website at austrac.gov.au if you’re not sure if your company is covered. One of Grace Advisory’s compliance experts is another person you can talk to.

What Changes Under the Tranche 2 AML Reforms?

Expanded Definition of Virtual Assets

The phrase “digital currency” has been superseded by the more general notion of “virtual assets.” This revised definition broadens the scope of the compliance framework to include additional actions linked to cryptocurrency. Additionally, several virtual asset service providers (VASPs) are included. It’s possible that these VASPs did not previously consider themselves to be reporting organizations.

Updated Customer Due Diligence (CDD) Obligations

A modernized, risk-based method of client due diligence is introduced by the revisions. Companies must identify and validate their clients, comprehend the nature and intent of the commercial relationship, and use further vigilance when greater dangers are found. Ongoing CDD requirements start on March 31, 2026, while initial CDD modifications for current reporting organizations have been postponed until March 30, 2029.

New Reporting and Value Transfer Rules

The reporting and monitoring of foreign value transfers are now subject to updated regulations. The requirements of the International Value Transfer Service (IVTS) are being phased in, with some entities delaying complete implementation until 2029.

Repeal of the Financial Transaction Reports Act 1988

All AML/CTF regulations will be combined into a single, cohesive framework with the abolition of the antiquated FTRA 1988. This makes obligations more clear while streamlining the regulatory environment.

Stronger Governance Obligations

Senior management and board members are now specifically in charge of making sure AML/CTF threats are recognized and handled throughout the company. As a result, AML/CTF compliance is becoming a governance issue rather than only a back-office task.

Key Dates to Know

What Does an AML/CTF Compliance Program Need to Include?

Under the reformed Act, every regulated business must implement and maintain a documented AML/CTF compliance program. This is not a one-size-fits-all document – it must be tailored to the specific risks and operating model of your business.

Typically, a strong AML compliance program consists of:

1. Evaluation of Business-Wide Risk an evaluation of the risks associated with money laundering and terrorism financing that your company faces, including your clients, goods, services, delivery methods, and geographic exposure.
2. Policies and Procedures for Risk Mitigation documented controls, such as transaction monitoring, customer screening, and escalation protocols for questionable situations, to mitigate the risks found.
3. Customer Due Diligence (CDD) Systems Procedures for identifying and confirming the identities of customers, including enhanced due diligence for higher-risk interactions such high-value transactions and politically exposed persons (PEPs).
4. Continuous Monitoring Systems that track consumer behavior and transactions over time and identify anomalous activity for further investigation.
5. Questionable Matter Reporting (SMR): Establish clear protocols for employees to promptly report questionable behavior to AUSTRAC.
6. Record-keeping: Keeping correct client and transaction records for at least seven years.
7. Staff Training Appropriate AML/CTF training must be provided to all pertinent staff. This entails being aware of warning signs, reporting requirements, and the risk-based approach to compliance.
8. Designated AML/CTF Compliance Officer Companies have until May 30, 2026, to designate a compliance officer and notify AUSTRAC.

At Grace Advisory, we assist businesses in building and implementing all components of a compliant, practical, and commercially sensible AML/CTF compliance program — from initial risk assessments through to staff training and independent program reviews.

Steps to Prepare Before 1 July 2026

If your business is within scope, here is a practical roadmap:

Step 1 – Confirm whether you are a reporting entity Review the list of designated services under the updated AML/CTF Act. If any of your services appear on that list, you are required to comply.

Step 2 – Enrol with AUSTRAC New reporting entities must enrol with AUSTRAC between 31 March and 29 July 2026. Early enrolment is strongly recommended to allow time for program development. Our AUSTRAC registration service can guide you through the process accurately and on time.

Step 3: Evaluate the risks facing the entire company. Prior to developing your compliance framework, identify the areas in which your company is vulnerable to financial crime.

Step 4: Create a customized program based on your risk tolerance. For recently regulated businesses, AUSTRAC has released Program Starter Kits that can help with this process.

Step 5: Put CDD processes into practice Create a trustworthy procedure for confirming the identities of customers and checking them against PEP lists and sanctions.

Step 6: Educate your team Your employees must be aware of their responsibilities. Distributing policy texts is not nearly as useful as providing hands-on, scenario-based training.

Step 7: Designate a compliance officer By May 30, 2026, designate a qualified individual as your AML/CTF compliance officer and inform AUSTRAC.

Step 8 – Plan for your independent review Under the Act, your AML/CTF program must be subject to independent review on a risk-based cycle. Build this into your compliance planning from the start.

How Grace Advisory Can Help

Grace Advisory is an Australian compliance consulting firm specialising in AML/CTF and AFSL compliance. We work with financial services businesses, real estate professionals, legal practitioners, accountants, and other regulated entities across Australia.

Our AML/CTF compliance services include:

• AML/CTF Program Development – We build tailored, practical compliance programs that meet AUSTRAC’s requirements and reflect your actual business risk profile.
• AUSTRAC Registration Assistance – We guide you through the enrolment process, ensuring your registration is completed accurately and on time.
• Ongoing AML/CTF Compliance Support – We provide ongoing monitoring, reporting, and advisory support so your program remains current as regulations evolve.
• Independent Review of AML/CTF Programs – Our independent reviews assess whether your program is fit for purpose and identify areas for improvement.
• AML/CTF Training – We deliver practical, sector-specific training for boards, senior management, and frontline staff.

Whether you are a Tranche 2 business preparing for your first AML/CTF compliance program or an existing reporting entity updating your compliance framework in response to the reforms, Grace Advisory is here to help.

Contact Grace Advisory today to discuss your AML/CTF compliance needs.

FAQs

What are the Tranche 2 AML/CTF reforms in Australia?

Lawyers, accountants, real estate agents, trust and company service providers, and precious metal dealers are among the previously unregulated industries that are now covered by Australia’s AML/CTF regulatory framework thanks to the Tranche 2 changes. As part of a larger modernization of the AML/CTF Act to bring Australia into compliance with worldwide FATF standards, these changes will go into effect on July 1, 2026.

Who needs to comply with the new AML/CTF obligations?

Any business that provides a service listed as a “designated service” under the updated AML/CTF Act must comply. This includes approximately 90,000 newly regulated businesses across legal, accounting, real estate, and other sectors, in addition to existing reporting entities such as banks and financial services providers who face updated obligations.

When do businesses need to enrol with AUSTRAC?

New reporting entities must enrol with AUSTRAC from 31 March 2026. The deadline for enrolment is 29 July 2026, with full compliance obligations commencing from 1 July 2026. Early enrollment is recommended.

What is required of an AML/CTF compliance program?

A business-wide risk assessment, documented rules and procedures, customer due diligence systems, continuous transaction monitoring, mechanisms for reporting suspicious matters, staff training, record-keeping procedures, and governance arrangements are all necessary components of a compliant AML/CTF program. The program needs to be risk-based and customized for your particular company.