What do the AML/CTF Tranche 2 reforms change?
Tranche 2 is the long-delayed extension of Australia's anti-money laundering and counter-terrorism financing regime into sectors that sit at key points in financial and property transactions but were never captured by the original 2006 legislation.
The Attorney-General introduced the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 into Parliament on 11 September 2024 with three stated objectives: to expand the AML/CTF regime to additional high-risk services provided by tranche two entities, to modernise the regulation of digital currency and of virtual asset and payments technology, and to simplify and clarify the regime to increase flexibility, reduce regulatory impacts and support businesses to better prevent and detect financial crime. Responsibility for the AML/CTF Act now sits with the Department of Home Affairs. See its anti-money laundering and counter-terrorism financing page.
Parliament passed the Bill on 29 November 2024, amending the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. AUSTRAC frames the purpose plainly, that the new laws expand regulation into new industries recognised domestically and globally as high risk for criminal exploitation, and bring Australia into line with international standards set by the Financial Action Task Force.
The reforms landed in stages. Changes to the tipping off offence started on 31 March 2025. The Financial Transaction Reports Act 1988 was repealed on 7 January 2025. Changes for current reporting entities, covering value transfer obligations, the definition of bearer negotiable instruments, AML/CTF program requirements and due diligence, started on 31 March 2026 unless deferred under the transitional rules. Newly regulated businesses could enrol with AUSTRAC from 31 March 2026 and became subject to obligations from 1 July 2026.
Who do the AML/CTF Tranche 2 reforms apply to?
AUSTRAC lists the newly regulated entities as real estate professionals, dealers in precious stones, metals and products, lawyers, conveyancers, accountants, trust and company service providers, and businesses providing certain virtual asset services beyond the previously regulated digital to fiat currency exchange services. See about the reforms.
The trigger is the designated service, not the professional title. A firm is captured because of what it does for a client, which is why AUSTRAC publishes separate guidance on designated services for newly regulated entities, alongside program starter kits for accountants, conveyancers, jewellers, legal professionals and real estate.
The scale of the change is the part most often understated. AUSTRAC stated on 31 March 2026 that from 1 July the number of businesses it regulates would grow from around 19,000 to close to 100,000 nationwide, and described the reforms as the most significant overhaul of Australia's AML/CTF framework in more than 20 years.
From 1 July 2026 those businesses are required to comply with obligations under the AML/CTF laws, including implementing AML/CTF programs, conducting customer due diligence, reporting suspicious matters and keeping records. Most businesses only need to enrol. Those intending to provide remittance or virtual asset designated services must also apply for registration. Existing reporting entities were not left alone either, with new enrolment forms collecting updated designated services, beneficial ownership details, AML/CTF compliance officer information, refreshed organisational profile information and reporting group details.
Where does AI fit in AML/CTF Tranche 2 compliance?
Tranche 2 lands on tens of thousands of small and mid-sized firms with no compliance function, no transaction monitoring system and no history of regulatory reporting. AI is the obvious lever, and that is exactly why the governance question matters.
The obligations that AI most naturally touches are customer due diligence, ongoing monitoring for unusual transactions and behaviour, and the triage that precedes a suspicious matter report. Each of those is a judgement that must be defensible after the fact. Automating the work does not move the obligation, which stays with the reporting entity, so an AML/CTF program that cannot explain how an alert was generated or why a customer was risk rated as it was leaves a gap that no vendor contract fills.
AUSTRAC's own position is a fair benchmark. Its AI transparency statement records that it has not yet deployed AI which directly interacts with the public or is involved in decision making and administrative action without human intervention, that it is trialling enterprise generative AI with clear human oversight, and that mandatory protective security controls prevent sensitive or classified information being entered into public generative AI systems.
There is also a confidentiality trap specific to this regime. The tipping off offence, amended from 31 March 2025, makes it a criminal offence to disclose certain information where doing so would or could reasonably be expected to prejudice an investigation. Suspicious matter content pasted into a general-purpose AI tool is a disclosure risk that has nothing to do with model quality.
What should practitioners do under AML/CTF Tranche 2?
Start from the designated service test, not the sector label. Confirm which services your firm provides, then work out which obligations attach. Firms that assume they are captured wholesale tend to over-build, and firms that assume they are exempt tend to miss a single conveyancing or trust service that pulls them in.
Use the AUSTRAC program starter kits as a baseline rather than a finished program. They exist for accountants, conveyancers, jewellers, legal professionals and real estate, and they are a faster starting point than a blank page, but the risk assessment underneath still has to reflect your actual client base.
If you deploy AI for screening, monitoring or drafting, document it as a control. Record what the tool does, what a human checks, who is accountable, and how you test that it still works. Keep client identity material, source of funds evidence and suspicious matter content out of public generative AI tools entirely.
Finally, treat AUSTRAC guidance as interpretation rather than law. AUSTRAC states that its guidance sets out how it interprets the legislation, that Australian courts are ultimately responsible for interpreting these laws, and that the guidance is not a substitute for legal advice.
Bottom line
These reforms extend Australia's anti-money laundering and counter-terrorism financing regime to lawyers, conveyancers, accountants, trust and company service providers, real estate professionals and dealers in precious stones and metals. What captures a firm is the designated service it provides, not the professional title on the door, so the first question is which services you actually offer and which obligations attach to them. AI is the obvious lever for firms that have never held a compliance function, but customer due diligence, ongoing monitoring and suspicious matter triage are judgements that must stay defensible, and the obligation remains with the reporting entity whatever tool produced the alert. Keep client identity material, source of funds evidence and suspicious matter content out of public generative AI tools, because the tipping off offence makes that a disclosure risk rather than a question about model quality.
TheAICommand. Intelligence, At Your Command.*
TheAICommand. Intelligence, At Your Command.