PART 2:
Tranche 2 Explained — The Industries Now in the Spotlight
In Part 1 of this series, we introduced the upcoming expansion of Australia’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) laws and what they broadly mean ahead of their commencement on 1 July 2026.
At the centre of these reforms is what is commonly referred to as “Tranche 2”—a significant extension of the AML/CTF regime into a group of industries that, until now, have operated largely outside of it.
But what exactly is Tranche 2, and why have these particular industries been brought into focus?
Understanding this is key—not just for those working within these sectors, but also for property owners, investors, and clients who interact with them regularly.
What does “Tranche 2” really mean?
“Tranche 2” is not a new law in itself, but rather the second phase of expanding Australia’s existing AML/CTF framework.
The original regime, introduced in 2006, focused heavily on financial institutions—banks, lenders, and other entities directly involved in handling money. These industries were considered the most obvious points of risk when it came to financial crime.
However, over time it became clear that financial crime does not begin and end with banks.
Instead, it often flows through a broader network of professional services—those that facilitate transactions, structure ownership, and provide advice. These are the industries now captured under Tranche 2.
The concept of “gatekeeper” industries
A useful way to think about Tranche 2 is through the lens of “gatekeepers.”
Gatekeeper industries are those that sit at critical points in financial and asset transactions. They don’t necessarily hold or transfer funds themselves, but they play a key role in enabling those transactions to occur.
These industries include:
+ Real estate agents
+ Lawyers
+ Accountants
+ Conveyancers
+ Trust and company service providers
Collectively, they form the connective tissue between capital and assets.
For example:
+ A lawyer may establish a company or trust structure
+ An accountant may advise on financial arrangements
+ A real estate agent facilitates the acquisition or disposal of property
+ A conveyancer manages the legal transfer of ownership
Individually, each role is legitimate and essential. However, when combined, they can also be used—if not properly monitored—to move and disguise illicit funds.
This is why regulators have turned their attention to these sectors.
Why these industries are now under scrutiny
The inclusion of gatekeeper professions is not unique to Australia. Many comparable jurisdictions—including the UK, Canada, and parts of Europe—have already extended AML/CTF obligations to these sectors.
Australia has, until now, been seen as lagging behind in this regard.
International bodies such as the Financial Action Task Force (FATF) have consistently highlighted this gap, noting that without oversight of gatekeeper professions, financial crime risks remain elevated.
The concern is not that these industries are inherently problematic—but rather that they are high-impact points within the system.
In simple terms: If you want to move money into legitimate assets, you almost always pass through one or more of these professions.
How money laundering can flow through these sectors
To understand the rationale behind Tranche 2, it helps to look at how money laundering can occur in practice.
While methods vary, a simplified example might look like this:
1. Placement – Illicit funds are introduced into the financial system
2. Layering – Transactions are structured to obscure the origin of funds
3. Integration – Funds are invested into legitimate assets, such as property
Gatekeeper industries often play a role in the layering and integration stages.
For instance:
+ Complex ownership structures (companies, trusts, offshore entities) can make it difficult to identify the true beneficial owner
+ Professional services can add a layer of perceived legitimacy
+ Property transactions provide a stable and credible endpoint for funds
Again, it’s important to stress that the vast majority of transactions are entirely legitimate. However, from a regulatory perspective, these are the points where risk can concentrate.
A closer look at each industry
Legal professionals
Lawyers are often involved in structuring transactions, establishing entities, and advising on asset ownership.
Under Tranche 2, certain legal services—particularly those related to financial transactions and entity formation—will fall within the AML/CTF regime.
Accountants
Accountants may assist with financial structuring, tax planning, and entity management.
Their role in advising how money flows and is recorded places them within scope for AML/CTF obligations in specific circumstances.
Conveyancers
Conveyancers manage the legal transfer of property ownership.
Given their involvement at the point of transaction, they are considered a key control point in verifying parties and ensuring transparency.
Trust and company service providers
These providers establish and manage corporate structures, trusts, and other legal entities.
Because such structures can be used to obscure ownership, they are a particular focus of AML/CTF reform.
Real estate agents
Real estate professionals sit at the center of property transactions—often the final step in converting funds into a tangible asset.
Given the size, frequency, and significance of property transactions, this sector is a major focus of the reforms.
What obligations will these industries face?
From 1 July 2026, businesses operating within these sectors will be required to adopt a range of compliance measures.
While the specifics may vary slightly by industry, the core obligations include:
+ Customer identification and verification (KYC)
+ Ongoing customer due diligence
+ Risk assessment and management
+ Suspicious matter reporting to AUSTRAC
+ Record keeping
+ Staff training and internal compliance programs
According to AUSTRAC, these measures are designed to create a consistent, risk-based framework across all regulated industries (AUSTRAC, 2024).
The shift to a risk-based model
One of the most important—and often misunderstood—elements of Tranche 2 is the move toward risk-based compliance.
Rather than applying a uniform set of rules to every transaction, businesses must assess the level of risk and respond accordingly.
This means:
+ Low-risk, straightforward transactions may involve minimal additional steps
+ Higher-risk transactions—such as those involving complex ownership structures or international parties—will require greater scrutiny
This approach is widely used in global AML/CTF frameworks and is considered more effective than a purely rules-based system.
What this means for clients and the broader market
While these obligations sit with businesses, the practical impact will extend to clients and the broader property market.
You may begin to notice:
+ More detailed questions at the outset of a transaction
+ Requests for additional documentation
+ Greater transparency around ownership and funding
+ A more structured transaction process overall
For some, this may feel like an added layer of administration. However, it also provides:
+ Greater confidence in counterparties
+ Reduced risk of problematic transactions
+ A more stable and trusted marketplace
Why this matters for commercial real estate
While Tranche 2 captures a range of industries, its impact is particularly significant in the context of commercial property.
Commercial real estate often involves:
+ Larger transaction values
+ More complex ownership structures
+ Greater involvement of professional advisors
+ Cross-border investment activity
These characteristics place it squarely within the focus of AML/CTF reform.
Looking ahead
Tranche 2 represents more than just a regulatory update—it signals a broader shift in how financial transactions are monitored and managed across the economy.
For those operating within or alongside these industries, understanding the intent behind the reforms is just as important as understanding the rules themselves.
At its core, the objective is simple:
to ensure that the systems and professionals facilitating major transactions are equipped to identify and mitigate financial crime risk.
In Part 3…
In the next article, we will turn our attention specifically to the commercial real estate sector.
We will explore:
+ Why commercial property is particularly exposed
+ What will change for agents, vendors, and buyers
+ How transaction processes are likely to evolve
+ The practical implications for deals in a post-2026 environment
Final thoughts
For many, Tranche 2 may feel like an abstract or distant concept.
But as these reforms take shape, their influence will become increasingly visible—not just within professional services, but across the property transactions they support.
For those who understand the landscape early, there is a clear advantage:
the ability to navigate change with confidence, rather than react to it.