Australia’s overhaul of its anti-money laundering (AML) regime is set to intensify, with the passage of the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Amendment Bill in November 2024.
The legislation marks a pivotal development in the country’s fight against financial crime, aiming to strengthen enforcement and bring the nation closer to global AML standards set by the Financial Action Task Force (FATF).
A cornerstone of the reforms is the expansion of AML/CTF obligations to include so-called Tranche 2 entities. This group encompasses professionals such as lawyers, accountants, real estate agents, financial planners, and dealers in high-value goods like precious metals and stones. From 1 July 2026, these sectors will fall under AUSTRAC’s regulatory oversight for the first time.
Napier AI, an AI-powered AML solution, recently delved into what the Tranche 2 AML reforms mean.
While the move has been broadly welcomed as necessary for improving financial system integrity, the implications for small and medium-sized enterprises (SMEs) are complex. Many of these businesses have never been subject to AML regulation before and face steep learning curves in implementing compliance frameworks. Lessons from jurisdictions like New Zealand suggest smaller firms often turn to the most affordable—but not necessarily effective—compliance solutions. Already, AUSTRAC has observed that some SMEs have not yet begun preparing for the changes, highlighting a gap in readiness, Napier AI said.
Scalability does not automatically translate to accessibility. Enterprise-level AML systems may be too costly or complex for smaller operators to adopt. Without the resources to hire dedicated compliance teams or deploy robust digital solutions, many SMEs risk non-compliance or adopting insufficient practices that fail to meet regulatory expectations.
The need for more flexible, SME-friendly compliance solutions is becoming increasingly apparent. Traditional subscription-based AML technologies may not be financially viable for lower-volume firms. As a result, there is growing interest in pay-per-click or pay-per-screen models that allow for more tailored usage. While there have been some efforts to introduce shared services—like Singapore’s “KYC as a Service” concept—these have yet to gain broad market traction, leaving many firms with limited options.
With just over a year remaining until enforcement begins, businesses in the Tranche 2 group must begin preparing now. Understanding AUSTRAC’s expectations, assessing current systems, seeking cost-effective compliance tools, and investing in training or external expertise are all essential steps. Technology, especially RegTech, will be critical for helping smaller firms manage ongoing tasks like transaction monitoring, ID verification, and reporting.
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