Tranche 2 AML/CTF Reforms in Australia: What Professional Services Firms Need to Know

Executive Overview

Australia is on the cusp of one of the most significant regulatory shifts in financial crime prevention in decades. The long-anticipated Tranche 2 AML/CTF reforms will soon extend anti-money laundering and counter-terrorism financing obligations to a new group of regulated professions — including accountants, lawyers, conveyancers, real estate agents, trust and company service providers, and other professional advisers.

For many firms, this represents unfamiliar territory. Unlike banks and financial institutions, Tranche 2 entities have historically operated outside Australia’s AML/CTF regulatory perimeter. That is about to change.

This article provides a high-level, non-technical overview of what Tranche 2 reforms mean, why they matter, and how firm leaders should start thinking about readiness — without diving into legal detail or operational mechanics.

If you are a partner, principal, or firm owner, this guide is designed to help you understand the landscape, assess strategic impact, and make informed decisions about next steps.

Why Tranche 2 Matters — and Why Now

Australia has long been considered a laggard in extending AML/CTF regulation beyond the financial sector. While banks, insurers, and remittance providers have operated under AML obligations for years, many professional services firms have remained unregulated despite their central role in high-value transactions.

International bodies such as the Financial Action Task Force (FATF) have consistently highlighted this gap, noting that lawyers, accountants, and real estate professionals are frequently used — often unknowingly — as gateways for illicit funds.

Tranche 2 reforms are designed to close this gap.

At a practical level, this means that firms who help clients:

• Buy or sell property

• Establish companies, trusts, or other legal structures

• Manage client funds or assets

• Provide certain transactional or advisory services

will now be expected to implement reasonable, risk-based safeguards to prevent misuse of their services.

The intent is not to turn professional firms into banks — but to ensure they are no longer blind spots in Australia’s financial crime framework.

Who Will Be Impacted by Tranche 2?

While final legislative detail continues to evolve, Tranche 2 obligations are expected to apply broadly to:

• Accounting and advisory firms

• Legal practices (excluding some litigation-only work)

• Conveyancers

• Real estate agencies and buyer’s agents

• Trust and company service providers

• Certain consultants and intermediaries involved in financial or asset structuring

Importantly, firm size does not exempt you.Small, mid-tier, and boutique firms will all be in scope if they provide covered services.

For partners and principals, this is a business-wide issue, not just a compliance function problem.

What Will Firms Be Expected to Do (At a High Level)?

Tranche 2 introduces obligations that are principles-based, not prescriptive. Regulators are less concerned with box-ticking and more focused on whether firms have taken reasonable steps to understand and manage risk.

At a high level, firms will be expected to:

1. Understand Their Risk Exposure

Firms must develop a basic understanding of:

• The types of clients they serve

• The services they provide

• The jurisdictions and transaction types they are exposed to

This is often referred to as a risk assessment, but it does not need to be complex.

2. Know Who They Are Dealing With

Firms will be required to verify the identity of clients and, in some cases, understand:

• Who ultimately owns or controls an entity

• Whether a client is a politically exposed person (PEP)

• Whether a client presents higher risk indicators

This is commonly referred to as KYC (Know Your Customer) or client due diligence.

3. Maintain Records

Firms must keep appropriate records to demonstrate:

• Who they dealt with

• What checks were performed

• How long records were retained

This is less about paperwork volume and more about defensibility.

4. Identify and Escalate Suspicious Matters

If something does not make sense — unusual structures, unexplained urgency, opaque ownership — firms may be required to escalate concerns internally and, in limited cases, report them to AUSTRAC.

This does not mean firms must investigate clients — only that they should not ignore clear red flags.

5. Train Staff Appropriately

Partners, managers, and staff need to understand:

• Their responsibilities

• What warning signs look like

• When and how to escalate concerns

Training is expected to be proportionate to role and risk.

What Tranche 2 Is Not

There are several common misconceptions worth addressing upfront.

Tranche 2 is not:

• A requirement to adopt bank-level systems

• A demand for forensic investigations

• An expectation that firms replace professional judgement with rigid checklists

• A one-size-fits-all compliance regime

The reforms are designed to be risk-based and scalable. A suburban accounting practice will not be held to the same standard as a multinational advisory firm — but both must demonstrate that they have taken reasonable steps.

Strategic Implications for Partners and Firm Owners

For leadership teams, Tranche 2 is as much a business decision as it is a compliance obligation.

Key strategic considerations include:

Governance and Accountability

Who in the firm will own AML/CTF accountability?

• Managing partner?

• Compliance lead?

• Risk committee?

Clear ownership is essential.

Client Experience

Poorly implemented compliance can:

• Slow onboarding

• Frustrate long-standing clients

• Create inconsistency across teams

Well-designed processes, on the other hand, can be discreet, efficient, and professional.

Reputation and Risk

Firms that ignore or delay preparation risk:

• Regulatory scrutiny

• Reputational damage

• Loss of trust with banks and counterparties

Conversely, firms that act early can position themselves as trusted, well-governed advisers.

Cost vs. Capability

Firms will need to decide:

• What to handle internally

• What to automate

• What to outsource

Early planning helps avoid rushed, expensive decisions later.

When Do Firms Need to Act?

While final commencement dates are subject to legislation, the direction of travel is clear. Waiting for absolute certainty before acting is risky.

Smart firms are already:

• Educating partners and managers

• Mapping impacted services

• Reviewing onboarding processes

• Identifying technology and training gaps

Preparation does not mean full implementation — it means informed readiness.

A Sensible Way to Approach Tranche 2 Readiness

For most professional services firms, the optimal approach is staged:

1. Awareness – leadership understands obligations and scope

2. Assessment – high-level risk and service mapping

3. Design – proportionate policies, processes, and tools

4. Enablement – staff training and operational rollout

This avoids overwhelm and ensures effort is spent where it matters most.

How PacificNet Supports Tranche 2 Firms

PacificNet works with professional services firms to translate Tranche 2 obligations into practical, proportionate solutions.

We focus on:

• Plain-English guidance for partners and principals

• Scalable KYC and client verification solutions

• AML/CTF training tailored to professional services

• Templates and frameworks that reduce drafting effort

• Ongoing support as regulations evolve

Our approach is designed to protect your firm without disrupting your business.

What to Explore Next

This overview is the starting point. Deeper topics explored in this Tranche 2 hub include:

• KYC & ID verification requirements

• Risk assessments for professional firms

• AML training obligations

• Record-keeping expectations

• Common red flags in accounting, legal, and real estate work

Each article breaks down a specific obligation in a practical, business-friendly way.

Also read: AUSTRAC Tranche 2 Compliance: A Strategic Imperative for Chartered Accountants — a partner-level perspective on why Tranche 2 readiness is becoming a strategic and governance priority for professional firms.

Final Thought

Tranche 2 is not about turning advisers into compliance officers. It is about protecting the integrity of your firm, your clients, and the financial system.

Firms that engage early, take a proportionate approach, and equip their people properly will not only meet their obligations — they will strengthen trust and resilience in the process.

Next: Explore our practical guides on KYC, risk assessment, and AML training for Tranche 2 entities.