In November 2024, Australia passed its Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Amendment Bill in Parliament. The Bill, which extends AML/CTF regulatory obligations to designated Tranche 2 entities, would see approximately 100,000 new entities under AUSTRAC’s scope.
Australia’s Tranche 2 AML/CTF reforms encourage a risk-based approach for know your customer (KYC) due diligence and compliance, where risk policies are tailored to an organization’s risk appetite. This approach to risk management emphasizes the importance of allocating resources to areas identified as higher-risk to improve the efficiency and effectiveness of due diligence and compliance efforts. In contrast, a compliance-based approach typically demands strict adherence to the regulations, which can be resource intensive for organizations.
By adopting a risk-based model, companies have greater flexibility to adapt to evolving threats and regulations while optimizing resource utilization. This strategic focus on higher-risk areas can not only streamline compliance processes but also lead to more proactive identification and mitigation of potential financial crimes.
2026:
Dates as of January 2026. Updated details can be found on AUSTRAC’s AML/CTF Reforms page.
The impacted Tranche 2 entities are similar to the Designated Non-Financial Businesses and Professions (DNFBPs) identified by the Financial Action Task Force (FATF) as higher-risk sectors for money laundering and other financial crimes. Bad actors may use a number of typologies to evade detection of illicit activity, such as concealing beneficial ownership through complex ownership structures, shell companies, or by obscuring the source of wealth and funds.
In the FATF Recommendations, AML/CTF requirements would also apply to the following DNFBPs who meet certain thresholds for transaction values or other requirements: casinos; real estate agents; dealers in precious metals and stones; lawyers, notaries, other independent legal professionals and accounts; and trust and company service providers.
While some may view increased regulatory oversight on more sectors as a compliance burden, the alignment with FATF’s standards can help regulatory regimes combat money laundering and terrorism financing threats more comprehensively. The move will aim to introduce more transparency in financial transactions and enhance consistency with global efforts to mitigate financial crime risk.
Other jurisdictions that extend AML/CTF obligations to DNFBPs include Singapore, Portugal, Luxembourg, and the United Arab Emirates.
Smaller entities may find adoption of additional compliance requirements challenging with limited resources, which could hamper their ability to implement comprehensive measures at scale. In comparison, larger firms may have the advantage of established compliance frameworks that allow them to integrate the new regulations more seamlessly while still making sure subsidiaries can operationalize the new standards with consistency.
Regardless of company size, newly regulated entities in the region will need time to adapt current operations to the updated AML/CTF regime. It’s important to begin preparing for the new regulations early.
Learn more about starting your compliance journey in 3 steps.
To streamline the compliance process, teams can leverage artificial intelligence and machine learning (AI/ML) in AML workflows to reduce false positives and improve the accuracy of compliance efforts. Moody’s intelligent screening solutions harness the power of AI/ML technology to automate KYC and screening.
Targeted training programs and resource optimization are crucial for companies to meet the requirements of the Tranche 2 reforms. Additionally, organizations may consider leveraging technology, such as automated compliance tools, to implement a risk-based approach to compliance and streamline their processes to enhance their ability to monitor and report suspicious activities at scale.
Moody’s Maxsight™ unified risk management platform supports businesses with integrated global datasets embedded in automated compliance workflows that can help streamline onboarding and monitoring processes aligned to their organization's risk policies and appetite.
Leverage Moody’s global datasets to get a more holistic picture of risk for your business. Maintain up-to-date records and conduct ongoing monitoring with a perpetual KYC approach, equipping you with more information to mitigate new risks that emerge in your portfolio.
Moody’s published a Risk Reframed podcast episode on the Tranche 2 reforms, where our host Alex Pillow spoke with Qing Liu, Moody’s Senior Director of Compliance & Third-Party Risk in Australia, and Jeremy Moller, Senior Advisor from Norton Rose Fulbright. Their conversation covered:
Moody’s works with financial institutions and corporates on AML/CTF solutions tailored to their specific business needs and regulatory environment. Get in touch today to learn how we can support your compliance program before the July 1, 2026 deadline for Tranche 2 entities – we would love to hear from you.
Disclaimer: This content is for informational purposes only and does not constitute legal, financial, compliance or other professional advice. Please consult with a qualified professional for specific legal, financial, compliance, or other professional advice. For more terms and conditions pertaining to Moody’s products and services, refer to the disclaimer on Moody’s website.