Australia’s Tranche 2 reforms will expand AML/CTF obligations to thousands of small and medium-sized businesses, particularly those in professional services, real estate and high-value goods. Many of these businesses have never been regulated before. This guide explains what Tranche 2 is, why it matters and what small businesses need to know as Australia prepares for these changes.

What Is Tranche 2 and Why Is Australia Introducing It?

Tranche 2 refers to the next phase of Australia’s Anti-Money Laundering and Counter-Terrorism Financing reforms. These changes aim to bring certain professions and service providers into the AML/CTF regime due to the financial risks linked to their work.

For many years, Australia has been one of the few developed countries where sectors such as real estate, legal services and accounting have not been included in AML requirements. International reviews have highlighted this gap, which has led to pressure for reforms. Tranche 2 is designed to close these gaps and create a more consistent approach to financial crime prevention.

Which Businesses Will Be Affected?

Tranche 2 will introduce AML/CTF obligations for a range of industries that were not previously regulated. These can include:

  • Real estate agencies that manage or sell property
  • Lawyers and conveyancers involved in transactions, trust accounts or company formation
  • Accountants and bookkeepers who handle client funds or set up business structures
  • Dealers in precious metals, stones and high-value goods
  • Certain professional service providers who arrange transactions on behalf of clients

Many small and medium-sized firms fall into these categories, which means a large number of businesses will need to understand and adopt new compliance processes.

What Tranche 2 Means for Small Businesses

Tranche 2 introduces several core responsibilities that newly regulated businesses will need to manage. These include identifying customers, assessing risks, recording information and reporting certain activities to AUSTRAC.

Unlike banks and large financial institutions, small firms often operate without dedicated compliance teams. This can make the transition feel overwhelming at first. However, the requirements can be broken into manageable steps when businesses understand how the system works.

Tranche 2 is not designed to stop day-to-day operations. Instead, it aims to ensure that small businesses are able to detect suspicious financial behaviour and protect themselves from being used to facilitate money laundering or terrorism financing. This approach ultimately improves trust and reduces long-term risk.

The Key Obligations Under Tranche 2

1. Understanding Your AML/CTF Risks

Every business will need to assess the types of risks it may face. This includes looking at the services offered, the types of customers engaged and how transactions are conducted. For example, certain real estate transactions or high-value purchases may require closer attention.

This assessment allows businesses to decide which controls are necessary. It becomes the foundation of the AML/CTF program and helps demonstrate that risk is being taken seriously. Good record keeping supports this and shows AUSTRAC that the business understands its exposure.

2. Verifying Customers and Beneficial Owners

Customer Due Diligence (CDD) will be a new requirement for many Tranche 2 entities. This involves confirming who the customer is, understanding the purpose of the business relationship and identifying any beneficial owners.

Small businesses do not need complex systems to do this effectively. Many use straightforward digital tools that make verification and screening easier. These tools ensure that checks are completed accurately and help meet reporting expectations.

3. Reporting Suspicious Matters and Certain Transactions

Businesses will need to report suspicious activity when they believe a transaction or behaviour is unusual or inconsistent with what they know about the customer. Certain threshold transactions may also require reporting.

Reporting is an important part of Australia’s financial crime framework. It helps AUSTRAC detect patterns and trends, which in turn protects the community and reduces risks for businesses that handle financial transactions.

4. Keeping Records and Maintaining an AML Program

Businesses must document their AML/CTF program, maintain accurate records and review their program regularly. This ensures that controls remain relevant as the business grows or the environment changes.

Most SMEs manage this step by using simplified templates or support tools that match the size of their operations. The aim is not to create excessive paperwork but to maintain clear evidence that AML obligations are being met.

Why Tranche 2 Is Important for SMEs

Tranche 2 will create a more consistent regulatory environment across industries that handle financially significant transactions. For small businesses, this provides several long-term benefits.

First, it gives customers increased confidence. When businesses can demonstrate that they follow structured identification and monitoring processes, it builds trust. Second, it reduces the risk of unknowingly facilitating criminal activity. Finally, it helps small businesses align with expectations seen in other developed countries, which strengthens Australia’s overall financial integrity.

For many SMEs, the initial requirement is simply understanding what applies to them. Once that is clear, the steps involved become easier to manage.

How NameScan Supports Businesses Preparing for Tranche 2

Tranche 2 introduces new screening and verification responsibilities that some SMEs have never handled before. NameScan’s pay-as-you-go tools can support this transition by offering simple ways to verify customers, screen for politically exposed persons and identify sanctions risks.

These tools are used by businesses that need clear, accessible options without long contracts or complicated processes. They help small businesses meet their obligations while maintaining a smooth experience for customers.

FAQs

Will every small business be affected by Tranche 2?
Only businesses operating in certain sectors will be included. These typically involve handling large transactions, managing client funds or providing services that can be misused for financial crime.

Do I need a full compliance team?
No. Most SMEs manage their AML responsibilities using practical tools, templates and clear internal procedures.

What if I make a mistake?
AUSTRAC’s approach focuses on education and improvement, particularly for newly regulated businesses. The key is to show genuine effort and maintain proper records.

When will Tranche 2 start?
Final dates will depend on the legislative process. However, businesses are encouraged to start preparing early to avoid disruption.

Is screening required for every customer?
Requirements vary by sector, but identity checks and screening are common elements for many Tranche 2 entities. It depends on the services provided and the level of risk involved.

Stay Informed

NameScan will continue to provide guidance as Australia moves towards implementing Tranche 2. These reforms represent a significant shift for many small businesses, and early preparation helps reduce stress and uncertainty.

Disclaimer: The information provided is general in nature and is not legal advice. Tranche 2 reforms are still progressing, and requirements may change. Before making decisions or taking action, please refer to AUSTRAC’s official guidance or seek independent professional advice.