Tranche Two Reforms

The Commonwealth Attorney General’s Department has proposed reforms to Australia’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regime. The proposed reforms intend to bring Australia’s legislation in line with international standards as recommended by the Financial Action Task Force.

The reforms are divided into two parts:

Simplifying and modernising the regime to streamline obligations
Extending the regime to additional high-risk professions (or Tranche 2″ entities) including lawyers, accountants, trust and company service providers, real estate agents and dealers in precious metals and stones

Consultation has now closed on the first consultation paper, with another consultation paper due in September 2023.

Expanding the Regime to ‘Tranche Two’ Entities

Australia is one of the few jurisdictions that does not currently regulate “Tranche Two entities”, however under the Commonwealth Attorney General’s Department’s proposed reforms to the AML/CTF regime, this could be about to change. The proposed reforms intend to bring Australia’s legislation in line with international standards as recommended by the Financial Action Task Force (FATF) and is expected to receive Senate approval early next year.

The proposed new regime would extend the legislation to include additional high-risk professions, known as ‘Tranche Two’ entities including:

  • lawyers;
  • accountants;
  • trust and company service providers;
  • real estate agents; and
  • dealers in precious metals and stones. 

Currently, the AML/CTF regime only targets businesses that operate in the financial sector or are involved in transfers of large amounts of cash, including the gambling sector, bullion dealers or money transfer businesses.

A number of factors have led to the Australian Government’s decision to extend the AML/CTF regime. Firstly, the Australian Government has been hit with significant damage from money laundering and exploitative practices, which has led to the widening of social inequities*. Secondly, with the lack of robust AML/CTF measures, Australia faces being grey listed by FATF. Being grey listed would have negatives impacts on Australia’s reputation in the global economy and could impact GDP by up to 7.6%.

Upon the enactment of the revised legislation, Tranche Two entities are likely to be required to implement a range of new procedures, including:

  • Developing an AML/CTF Program and appointing an AML/CTF Officer
  • Implementing risk assessments
  • Conducting client due diligence
  • Monitoring client behaviour and transactions for suspicious activity
  • Reporting certain types of transactions,
  • Carrying out risk assessments

If you are currently involved in one of the Tranche 2 industries, the reforms could have significant impacts on your business. Sophie Grace can help. Sign up to receive updates on the Tranche Two Reforms as they are released as well as updated documents that will comply with the new regime.

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