Australia: Preparing for Australia’s Anti-Money Laundering and Counter-Terrorism Financing ACT 2006: What Tranche 2 Entities Need to Know

In preparation for the changes to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML Act) which are due to commence on 1 July 2026, “tranche 2” entities including lawyers, accountants and real estate agents will need to make some significant changes to their business processes to ensure they comply with the new requirements. 

Lawyers, accountants and real estate professionals will become “reporting entities” where they provide “designated services” to their clients which will include many of the fundamental services that are commonly provided by these entities.

Preparing for 1 July 2026

As with many new substantive regulatory requirements it is better to prepare early. Tranche 2 entities should start preparing for 1 July 2026 no later than Q4 2025 as many of the processes and in particular contracts with outsourced providers may take some months to bed in. Some of the key steps, including the following:

1. Prepare a timeline to commencement for your business:
   Put together a timeline with milestones to July 2025 including how you will manage your obligations (e.g. customer due diligence), document your AML/CTF program and ensure all staff have been trained prior to the commencement date.
2. Identify designated services:
   Identify which services provided by your business are designated services. This will likely be a significant proportion of services typically provided by lawyers, accountants and real estate agents.
3. Conduct your ML/TF risk assessment based on:
   – The types of services provided to clients/customers,
   – The types of customers,
   – Service delivery channels,
   – Geographical areas of operation and customer domicile.
4. Prepare your AML/CTF policies:
   After identifying relevant risks, reporting entities should prepare relevant AML/CTF policies, tailored to the findings of the ML/TF risk assessment.
5. Review your customer due diligence (CDD) processes:
   Reporting entities must have adequate initial, ongoing, simplified and enhanced due diligence procedures. Entities with a high volume of clients may look to a third party to assist with CDD processes.

   Tranche 2 entities should ensure they understand their CDD obligations ahead of 1 July 2026, to avoid any possible interruptions to the ordinary course of business.

6. Conduct an independent evaluation:
   Reporting entities must arrange for an independent evaluation of their AML/CTF program at least every three years. 
7. Enrol with AUSTRAC and ongoing reporting:
   Most new reporting entities will have until 29 July 2026 to enrol with AUSTRAC. Once registered, entities will need to put in place processes for annual and ongoing reporting.

After the finalisation of the draft AML/CTF Rules, sector specific guidance for tranche 2 entities is expected from AUSTRAC later in 2025. Tranche 2 entities should be proactive in preparing for the changes and in particular, commence preparing the ML/TF risk assessment and AML/CTF policies as soon as practicable.