Tranche 2 AML Compliance: A Practical Guide for Small Businesses

myAML
May 20
7 min read

Running a small business is challenging enough without adding complex regulatory requirements to your plate. If you're among the Australian small businesses affected by the upcoming Tranche 2 AML/CTF (Anti-Money Laundering and Counter-Terrorism Financing) regulations, you might be feeling overwhelmed.

The good news? With the right preparation, you can manage these requirements yourself, without the hefty price tag. This guide breaks down what Tranche 2 entities need to know about AML compliance, what you can do now to prepare, and how to approach the process in a manageable, cost-effective way.

What Is Tranche 2 AML/CTF Compliance and Why Does It Matter to Small Businesses?

AML/CTF regulations are designed to prevent criminals from using legitimate businesses to disguise the origins of illicit funds or to finance unlawful activities, including terrorism. While these regulations have affected the likes of banks and financial services providers (Tranche 1 entities) for years, the government is now extending these obligations to new sectors known as Tranche 2 entities.

If you're a real estate agent, accountant, lawyer, precious metals dealer, or provide certain professional services, these Tranche 2 regulations will likely affect your business starting July 2026. But don't worry, you have time to prepare, and the process can be much more manageable than you might think.

Who Does Tranche 2 AML/CTF Compliance Affect?

The Tranche 2 reforms specifically target:

Real estate professionals including real estate agents, buyers’ agents and property dealers conducting property transactions
Accountants providing certain financial and corporate services
Lawyers and conveyancers involved in financial transactions, establishing corporate structures, or managing client money
Precious metals and stones dealers conducting high-value transactions
Trust and company service providers

It's important to note that not all services provided by these businesses will be captured—only specific services that carry higher money laundering risks, and more information will be released by AUSTRAC later in the year.

The Tranche 2 Timeline: What's Happening When?

Understanding the Tranche 2 timeline helps you pace your preparation efforts appropriately:

Now through 2025: Learning phase—build knowledge about your obligations and prepare your business
Later in 2025: Final AML/CTF Rules and AUSTRAC sector-specific guidance expected to be released
March 2026: AUSTRAC enrolment opens
July 1, 2026: Compliance date—when you need to be fully compliant

The key takeaway? You have time to prepare methodically, but starting early gives you a significant advantage.

The Core Tranche 2 AML/CTF Obligations for Small Businesses

While the final Tranche 2 rules are still being developed, AML/CTF regulations typically revolve around eight core obligations:

Enrolment with AUSTRAC: Officially registering your business as a reporting entity
Appointing an AML/CTF Compliance Officer: Designating someone responsible for overseeing your compliance program
Risk assessment: Identifying and documenting money laundering and terrorism financing risks specific to your business
AML/CTF Program: Developing a program including policies, procedures, and controls to manage and mitigate these risks
Customer Due Diligence: Verifying the identity of your customers and understanding the nature of their business
Ongoing Reporting: Submitting suspicious matter reports, threshold transaction reports, and compliance reports to AUSTRAC
Record Keeping: Maintaining appropriate records of customer identification, transactions, and compliance activities
Independent Review: Periodically having your AML/CTF program reviewed by an independent party

Each of these areas will require specific actions, but with proper guidance, they're entirely manageable for small business owners.

The Cost Consideration: Benefits of Self-Management

One of the biggest concerns for small businesses is the cost of compliance. Traditional approaches to compliance can be costly, particularly for small businesses with limited resources.

For a small business with fewer than 20 employees, these costs can strain already tight budgets. This is precisely why self-managed AML compliance is becoming an attractive and viable alternative.

By taking a DIY approach with the right resources and guidance, small businesses can keep compliance costs manageable, while still meeting their regulatory obligations effectively.

What You Can Do Now: 7 Practical Steps to Prepare for Tranche 2 Compliance

Even though the final Tranche 2 regulations aren't available yet, there's plenty you can do now to position your business for smooth compliance:

1. Determine If Your Business Is Affected by Tranche 2

The first step is confirming whether your business will be captured by the Tranche 2 regulations. This depends on both your industry and the specific services you provide. For example, a law firm that exclusively handles family law matters may not be affected, while one that helps establish corporate structures would be.

At this stage you can use the AUSTRAC tool to determine if your services may fall within the designated Tranche 2 scope. If you're unsure, you can also seek clarification from your specific industry association or professional body who are working in consultation with AUSTRAC while the rules are finalised.

2. Understand Your Business's Risk Profile

Begin thinking about your business from a risk perspective:

What services do you provide that could potentially be vulnerable to money laundering?
Who are your clients or customers and do any present a higher risk profile?
Do you handle large transactions or cash payments??
Do you have clients in high-risk jurisdictions?

Documenting these considerations now will give you a head start on the formal risk assessment you'll need to complete later.

3. Map Your Current Customer Onboarding Process

Review your existing client or customer onboarding process:

What information do you collect?
Do you already verify their identity?
How do you store and protect this information?

Comparing this to likely AML requirements will help you identify gaps that you'll need to address. Many businesses may find they're already collecting much of the required information—they just need to formalise the process.

4. Begin Upskilling Your Team

Start building knowledge within your organisation about AML/CTF concepts and obligations. This doesn't require expensive training—free resources, webinars, and government guidance materials can provide a solid foundation.

myAML is already providing free training and resources to Tranche 2 entities - you can subscribe for free today.

Focus on ensuring that key team members understand:

Basic AML/CTF concepts and terminology
How money laundering typically occurs in your industry
Warning signs or red flags to watch for

5. Review Your Record-Keeping Systems

Effective record-keeping is central to AML compliance. Assess your current systems for:

Customer information storage
Transaction records
Document security and retention

Making improvements to these systems now will make implementation much smoother when the time comes.

6. Consider Potential Process Changes

Begin thinking about how AML requirements might affect your day-to-day operations:

Will you need to adjust your client/customer onboarding process?
How might customer due diligence affect the client experience?
What additional steps might be needed for certain transactions?

Planning for these changes early allows you to implement them gradually rather than rushing at the last minute.

7. Stay Informed

The regulatory landscape is evolving, and staying informed is crucial. Subscribe to updates from reliable sources including:

AUSTRAC guidance
Industry association communications
myAML - you can now subscribe to receive free training, resources, and regulatory updates.

This will ensure you're aware of any changes or clarifications to the upcoming requirements.

Common Myths About Tranche 2 AML Compliance for Small Businesses

There are several misconceptions about Tranche 2 AML compliance that can create stress and confusion:

Myth 1: "We'll need to report all our transactions to the government."

Reality: You'll only need to report certain transactions such as suspicious transactions and those above certain thresholds. Clear guidelines will be released with the final laws and rules.

Myth 2: "We have to hire a full-time compliance officer."

Reality: Small businesses can typically manage compliance responsibilities with existing staff, provided they have appropriate training and resources.

Myth 3: "We'll need expensive software to comply."

Reality: While software can help, small businesses with simpler operations can often manage compliance effectively with well-designed processes and basic tools like spreadsheets or existing practice management systems.

Myth 4: "Compliance will drive away our customers."

Reality: When implemented thoughtfully, AML procedures can enhance professionalism and build trust. Many customers already expect identity verification as standard practice.

Myth 5: "The Tranche 2 regulations won't really be enforced for small businesses."

Reality: AUSTRAC takes enforcement seriously across all entity sizes. The consequences of non-compliance with Tranche 2 regulations, including penalties and reputational damage, apply to businesses of all sizes.

The Self-Management Advantage: Why Self-Managing Tranche 2 Compliance Makes Sense for Small Businesses

Taking a self-managed approach to Tranche 2 AML compliance offers several advantages for small businesses:

Cost-Effectiveness

By developing in-house knowledge and capabilities, you can achieve effective compliance without the hefty price tag typically associated with regulatory compliance.

Better Business Integration

When you understand your compliance obligations thoroughly, you can integrate them more seamlessly into your existing business processes, minimising disruption.

Greater Control

Self-management gives you direct control over how compliance is implemented in your business, allowing you to tailor approaches to your specific needs.

Knowledge Retention

The knowledge and capabilities you build remain within your business, becoming a valuable asset that grows with your organisation.

Long-Term Sustainability

A self-managed approach is more sustainable over time, allowing your compliance activities to evolve naturally with your business.

Real-World Perspective: Learning from Tranche 1 for Tranche 2 Implementation

We can learn valuable lessons from smaller Tranche 1 entities (like money remitters and digital currency exchanges) that have successfully implemented AML compliance that will be relevant for Tranche 2 businesses:

Start with education: Businesses that invested time in understanding requirements before implementing solutions had smoother compliance journeys.
Document everything: Well-documented policies and procedures not only satisfy regulatory requirements but also make ongoing compliance management much easier.
Focus on risk-based approaches: The most efficient compliance programs are those that allocate resources according to risk, focusing more attention on higher-risk areas.
Leverage existing processes: The most successful implementations build upon existing business processes rather than creating entirely separate compliance systems.

These insights can help Tranche 2 entities avoid common pitfalls and implement more effective compliance programs with less stress and cost.

Looking Ahead: Preparing for Tranche 2 While Managing Today's Business

Tranche 2 AML compliance preparation doesn't need to distract from your core business. By taking an incremental approach, tackling small, manageable pieces over time, you can prepare effectively while maintaining focus on serving your clients and growing your business.

Key Tranche 2 milestones to keep in mind:

Now through 2025: Learning phase, build knowledge about your obligations and prepare your business
Later in 2025: Final AML/CTF Rules and AUSTRAC sector-specific guidance anticipated
March 2026: AUSTRAC enrolment opens
July 1, 2026: Compliance date, when you need to be fully compliant

Empowerment Through Tranche 2 Preparation

Tranche 2 AML compliance doesn't have to be overwhelming or excessively costly for small businesses. With the right knowledge, resources, and approach, you can navigate these requirements confidently and cost-effectively.

The key is starting early, building knowledge incrementally, and focusing on practical implementation suited to your specific business context. Remember that Tranche 2 compliance isn't just about ticking regulatory boxes, it's about protecting your business and contributing to a financial system that actively deters criminal activity.

At myAML we are dedicated to breaking down complex requirements into clear, actionable steps that you can implement yourself, without the hefty price tag.

Subscribe to myAML for free AML training & updates, and start learning at your own pace with practical, easy-to-follow resources.