AML/CTF Tranche 2: The Legislation Behind the Reforms

Australia’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Tranche 2 reforms are not policy ideas or guidance notes — they are grounded in formal legislation passed by Parliament and supported by binding rules and detailed government analysis. If you’re looking for the “why”, the legal authority, and the policy reasoning behind the changes, it starts with one key law.

The Core Law: AML/CTF Amendment Act 2024

The Anti‑Money Laundering and Counter‑Terrorism Financing Amendment Act 2024 (Amendment Act) was passed by the Australian Parliament on 29 November 2024 and received Royal Assent in December 2024.

This Act amends the original AML/CTF Act[1] significantly expanding Australia’s anti‑money laundering framework.

Most importantly, the Act formally extends AML/CTF obligations to persons and entities which provide a broader range of  ‘designated services’

These include certain services which are provided by:

• Accountants and accounting firms
• Lawyers, conveyancers and legal service providers
• Trust and company service providers
• Real estate professionals
• Dealers in precious metals and stones

 These ‘designated non-financial businesses and professions’ are referred to as ‘DNFBPs’.

Why Was the Law Changed?

The Amendment Act was introduced to ensure Australia’s AML/CTF regime can effectively deter, detect and disrupt money laundering and terrorism financing, and to bring Australia into line with international standards set by the Financial Action Task Force (FATF).

The Department of Home Affairs (Department) has identified three key objectives of the Amendment Act[2], which are to:

1. Expand the AML/CTF regime to additional high-risk services provided by tranche two entities.
2. Modernise the regulation of digital currency and of virtual asset and payments technology.
3. Simplify and clarify the AML/CTF regime to increase flexibility, reduce regulatory impacts and support businesses to better prevent and detect financial crime.

According to the Department, without reform, Australia’s AML/CTF regime would become increasingly ineffective in addressing modern money laundering risks.

Why “Gatekeeper Professions” Are Included

AUSTRAC and Home Affairs consistently refer to professions such as accountants and lawyers as “gatekeepers” — trusted advisers who sit at critical entry points to the financial system.

International risk assessments have shown that criminals frequently misuse professional services to:

• Create companies or trusts to obscure beneficial ownership
• Avoid regulatory controls
• Evade detection and confiscation of criminal assets
• Add legitimacy to illicit transactions
• Move funds through complex but lawful‑looking structures 

The Amendment Act responds to these risks by regulating specific services, not entire professions — meaning obligations apply only when a business provides a designated service.

How Tranche 2 Fits Into the Reform Timeline

The Amendment Act forms part of a broader, staged reform program.

Under the legislation:

• Existing reporting entities transitioned to the new framework from 31 March 2026
• Newly regulated Tranche 2 entities must comply from 1 July 2026

This phased approach reflects government consultation feedback and recognises that many professional firms are engaging with AML/CTF obligations for the first time.

What the Explanatory Materials Clarify

The Explanatory Memorandum and Bills Digest (published alongside the legislation) provide important context to how and why the law was designed.[3]

These materials explain:

• The policy drivers, including FATF scrutiny and international compliance risks
• Why DNFBPs were considered a regulatory gap
• How Tranche 2 complements earlier AML/CTF reforms rather than replacing them
• The intention to maintain a risk‑based, proportionate framework, rather than a one‑size‑fits‑all model

AUSTRAC guidance reinforces that compliance is assessed on effectiveness, not paperwork alone.

What This Means for Professional Firms

From a legal standpoint, the Amendment Act removes uncertainty.

If a business provides a designated service with a geographical link to Australia, AML/CTF compliance becomes a statutory obligation, not a best‑practice choice.

For accountants and lawyers, this legislation establishes AML/CTF compliance as:

• A governance and risk responsibility
• A legal obligation which must be complied with at All times when providing designated services
• A core part of operating in a regulated professional and commercial environment

Key Takeaway

The AML/CTF Tranche 2 reforms are firmly grounded in legislation, international standards, and documented risk assessments.

The Amendment Act provides the legal authority behind the reforms — and makes clear why professional advisers now play a formal role in protecting Australia’s financial system.

In the next article, we’ll move from legislation to how AML/CTF obligations work in practice, including what firms are expected to implement before 1 July 2026.

[1] Anti Money Laundering and Counter Terrorism Act 2006 (Cth)

[2] https://www.homeaffairs.gov.au/criminal-justice/Pages/overview-of-the-amlctf-amendment-act.aspx

[3] https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r7243