Get ready for Australia’s AML/CTF Tranche 2 laws

Tranche 2 builds on the foundation laid by the initial AML/CTF regime that came into force in 2016 and which focused primarily on financial institutions and casinos. The latest reforms are designed to address the growing threat of money laundering and terrorist financing through the real estate sector and associated professions. Because of the position of trust they hold, money launderers may target law firms, for instance. They often handle large amounts of money confidentially for their clients, including escrow on sale transactions. As a result, using a solicitor's client account can give criminals a way to enhance the credibility of transactions.

Alongside CPA Australia and the Institute of Public Accountants, they reiterated the willingness of the accountancy profession to join efforts to prevent, detect, and report money laundering and the financing of terrorism. However, the accounting professional bodies stressed that the implementation of tranche 2 should “harness, not duplicate, existing obligations on professional accountants.”

Tranche 2 will have a major impact on Australia’s real estate industry. Real estate transactions involving high-value properties have been attractive to money launderers for a long time as they try to legitimise their illicit funds. Under new laws, real estate agents must perform extensive background checks on buyers and sellers, which will lead to an increased administrative burden, longer transaction times, and potential financial costs for compliance.

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is continuing to hone in on businesses that aren’t complying with Australia's existing anti-money laundering (AML) and counter-terrorism financing (CTF) rules.

After the legislation was passed, numerous weaknesses were discovered. A key omission was that the laws failed to include various professions that operated outside the traditional financial system. This list included real estate professionals, lawyers, accountants, dealers in high-value items like precious metals and stones, and trust and company service providers.

In April 2023, the Australian Attorney-General announced the launch of two rounds of public consultation on proposed Tranche 2 reforms to the country’s anti-money laundering (AML) and counter-terrorism financing (CTF) regime. The first round of consultation, which closed in June 2023, proposed reforms to simplify and modernise Australia’s anti-financial crime regime.