With the commencement of the ‘Tranche 2’ Reforms (“Reforms“) drawing closer, we have put together a summary of some of the key obligations and how they will impact your business.
Currently, a wide range of financial services businesses (such as financial services providers, banks, casinos and gambling services providers, bullion dealers, remittance service providers, and digital currency exchange providers) are already regulated under the AML/CTF regime. This is because these businesses provide a “designated service” as defined in the AML/CTF Act.
Under the Reforms, the list of designated services has expanded to include additional high-risk services, which are often provided by gatekeeper professions – non-financial businesses which facilitate transactions and activities that can be used for money laundering or terrorism financing.
Note: A business is not regulated under the AML/CTF regime just because it belongs to one of the above industries. The business must provide one or more “designated services” as defined by the AML/CTF Act in the course of carrying on a business (i.e. the designated service is a regular part of the business’ operations and not an incidental event).
The Reforms alter the current AML/CTF regime to include legal, accounting, conveyancing and trust/company services, and firms that prepare or carry out transactions for clients, relating to the following:
It also includes trust and company service providers when they prepare for or carry out transactions for clients, relating to the following:
The reforms impact real estate agents and property developers involved in transactions to buy or sell real estate, including any legal or equitable interest in real property, such as freehold title, strata title or leasehold tenure. A number of criteria may be relevant to whether a person is carrying on a business of selling real estate, including the number, type and value of properties sold over a given time period. A business that does any of the following, is classified as providing a designated service and will therefore be subject to the new AML/CTF regime:
A business provides a designated service if it buys or sells precious metals, precious stones and/or precious products, where:
If a business that deals with precious metals, stones and products decides not to accept cash or virtual asset payments for any transaction above the $10,000 threshold, the business does not provide a designated service. The business must make this a business rule and ensure that its employees adhere to this rule.
If a business deals with bullion, the business provides a designated service and is regulated under the AML/CTF regime, regardless of the payment methods accepted and the value of the transaction.
The legislation outlines that dealers in precious metals and stones are any persons engaged in the business of buying or selling precious metals or stones, including:
If an entity provides any Tranche 2 designated services, they must comply with the AML/CTF regime, and the six key regulatory obligations:
If you are required to enrol with AUSTRAC, please see the below table outlining the deadlines for enrolment.
| Comply with AML/CTF Act and Rules | Enrol with AUSTRAC | Register with AUSTRAC | |
|---|---|---|---|
| Buyer/seller of precious metals, stones, products | 1 July 2026 | Between 31 March and 29 July 2026 (if providing services before 1 July 2026) | N/A |
| Real Estate Services | 1 July 2026 | Between 31 March and 29 July 2026 (if providing services before 1 July 2026) | N/A |
| Professional Services | 1 July 2026 | Between 31 March and 29 July 2026 (if providing services before 1 July 2026) | N/A |
| Virtual Asset Service Providers | 31 March 2026 | Submit application before 31 March 2026 | Submit application before 31 March 2026 |
As a founding member of FATF, Australia recognises the important role that FATF plays in ensuring that the global response to money laundering and terrorism financing is robust. FATF’s standards are accepted globally and comprise of 40 recommendations and 11 immediate outcomes with a number of these specifically applying to Tranche 2 entities.
FATF monitors compliance with its Standards through a peer review process known as a Mutual Evaluation. These evaluations assess the compliance and effectiveness of legislative and regulatory frameworks, and a poor result may lead to being publicly ‘grey-listed’ and subject to ongoing monitoring. After Australia’s 2015 Mutual Evaluation, it was found that Australia was non-compliant or only partially compliant with 16 of the FATF’s recommendations.
Australia will undergo its next Mutual Evaluation between 2025 and 2027 and if there have been no changes since the 2015 Evaluation, is at great risk of potential grey-listing. Grey-listing could result in economic costs for Australia, such as increased costs of doing business as other jurisdictions apply enhanced measures, reduction in credit rating and foreign direct investment, reduction in incoming capital flows, and the potential loss of international banking connections as Australia will be perceived to be higher-risk. This could have significant impacts on Australia’s GDP. The Reforms seek to address this.
If you are unsure if you will be a Tranche 2 entity, please contact us. Also, sign up to our newsletter to ensure you receive the latest updates on these reforms.
Businesses which provide a “designated service” under the AML/CTF Act and have a geographical link to Australia are known as reporting entities. Reporting entities are regulated by AUSTRAC and have a variety of obligations under the AML/CTF Act, including the requirement to implement an AML/CTF Program and conduct customer due diligence. For further information about what these obligations are, please refer to this page.
More details can be found in the following locations:
If you have any questions about how these changes affect you, please contact us.
