Australia’s AML Reset: Closing the Gatekeeper Gap or Repeating Old Challenges?

A Framework Built on Financial Institutions

Australia’s anti-money laundering regime has, until recently, followed a familiar model.

Established under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, it has focused primarily on financial institutions and other traditional reporting entities such as banks, remitters, and gambling providers. These ‘Tranche 1’ entities have long been subject to customer due diligence, transaction monitoring, and suspicious matter reporting obligations, forming the backbone of Australia’s financial intelligence system.

While this framework has been effective in monitoring financial flows, it has also created a well understood gap. Key professional intermediaries, including lawyers, accountants, and real estate agents, have historically sat outside the regime. This has left a structural weakness, particularly given their role in facilitating transactions, structuring ownership, and enabling the movement and storage of wealth.

Over time, both domestic risk assessments and international bodies such as the Financial Action Task Force (FATF) have consistently highlighted this as a critical vulnerability.

The Arrival of Tranche 2

The passage of the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 marks the most significant reform to Australia’s AML framework in nearly two decades. 

Often referred to as ‘Tranche 2’, the reform expands the regulatory perimeter to include a wide range of previously unregulated sectors, including real estate professionals, legal and accounting services, trust and company service providers, and dealers in high value goods. 

This is not a marginal adjustment. It represents a structural shift in how AML risk is understood. Approximately 100,000 additional businesses are expected to fall within AUSTRAC’s supervisory remit, a substantial increase from the current base of around 15,000 reporting entities. The reforms will be fully implemented from July 2026, following a phased rollout that includes new rules, guidance, and industry consultation. 

At its core, Tranche 2 brings these sectors into alignment with obligations already familiar to financial institutions. This includes the requirement to conduct customer due diligence, identify beneficial ownership, monitor transactions, report suspicious activity, and implement risk based AML programmes. In doing so, Australia is addressing a gap that has persisted for more than 20 years.

Real Estate and the Shift Towards Asset-Focused AML

Among the newly regulated sectors, real estate stands out as particularly significant. Property has long been recognised as a preferred destination for illicit wealth, offering both stability and a veneer of legitimacy. The inclusion of real estate professionals within the AML regime reflects a broader shift from focusing solely on financial transactions to examining how illicit funds are ultimately converted into assets.

This is not unique to Australia. The U.S. has recently introduced reporting requirements for certain real estate transactions through FinCEN, while the UK has sought to improve transparency through its Register of Overseas Entities. What distinguishes the Australian approach is its decision to regulate the intermediaries themselves, rather than targeting specific transaction types or ownership structures.

In theory, this should provide a more direct line of sight into risk. Real estate agents and associated professionals are often closest to the transaction and may be better positioned to identify unusual behaviour or complex ownership arrangements. Law enforcement agencies have explicitly supported this approach, noting that such professionals have, in some cases, been used to facilitate or obscure illicit activity through their specialist knowledge. 

A More Complete Intelligence Picture

From a regulatory perspective, the primary objective of the reforms is clear. By expanding the range of reporting entities, AUSTRAC aims to build a more comprehensive and proactive intelligence picture, improving its ability to detect, deter, and disrupt money laundering. 

This has several potential benefits. First, it reduces reliance on financial institutions as the sole source of intelligence. Second, it provides earlier visibility into transactions before funds are fully integrated into the financial system. Third, it creates opportunities for richer data sets that link financial flows with asset ownership and professional facilitation.

In principle, this should strengthen the overall effectiveness of Australia’s AML regime. However, the success of this approach will depend heavily on how the data is generated, managed, and used.

The Practical Challenge for the Regulator

The expansion of the AML regime on this scale presents a significant operational challenge for AUSTRAC. Supervising an additional 80,000 to 90,000 entities is not simply a matter of extending existing processes. It requires a fundamental shift in supervisory approach, resourcing and prioritisation.

One immediate issue is volume. A substantial increase in reporting is expected once Tranche 2 comes into force. This raises questions about AUSTRAC’s capacity to process and analyse the incoming data effectively. Without sufficient analytical capability, there is a risk that valuable intelligence becomes diluted within a larger pool of lower quality reporting.

There is also the question of capability within the newly regulated sectors. Many of these businesses have limited experience with AML compliance. Unlike banks, they may not have established systems, trained personnel, or a strong compliance culture. This creates a dual challenge for the regulator: ensuring compliance while also supporting a significant uplift in capability across diverse industries.

Early commentary has already highlighted concerns around readiness, including potential shortages of qualified compliance professionals and the practical burden placed on smaller businesses.  AUSTRAC itself has acknowledged this, signalling a pragmatic approach that prioritises genuine risk mitigation over strict technical compliance in the early stages of implementation. 

Learning from other jurisdictions

Australia is not the first jurisdiction to extend AML obligations to gatekeeper professions, and there are lessons to be drawn from those that have gone before.

In the UK, the inclusion of legal and property sectors within the AML regime has led to increased reporting and greater awareness of risk. However, it has also exposed challenges in supervision and enforcement, particularly in ensuring consistency across a large number of smaller firms. Questions around the quality of suspicious activity reporting and the effectiveness of oversight have persisted.

Similarly, in Canada and parts of the European Union, efforts to increase transparency in property ownership and professional services have yielded mixed results. While these measures have improved visibility, they have not always translated into meaningful enforcement outcomes. Issues such as data reliability, limited verification, and uneven compliance have constrained their impact.

These experiences highlight a common theme. Expanding the regulatory perimeter is necessary, but it is not sufficient. The effectiveness of AML measures depends not only on who is regulated, but on how those regulations are implemented, supervised, and enforced.

The Risk of Unintended Consequences

As with any major regulatory change, there is a risk of unintended consequences. One of the most well documented in the AML context is displacement. When controls are introduced in one area, illicit activity often shifts to others.

In Australia’s case, this could take several forms. There may be increased use of individuals rather than corporate structures to conduct transactions. Certain asset classes or transaction types may become more attractive if they fall outside the scope of the reforms. There may also be a shift towards jurisdictions with less developed AML frameworks.

There is also the question of proportionality. For smaller businesses, particularly in sectors such as real estate and accounting, the cost and complexity of compliance may be significant. If not carefully managed, this could lead to a focus on procedural compliance rather than genuine risk management, undermining the intent of the reforms.

A Shift Towards Risk-Based AML

One of the more notable aspects of the reforms is the emphasis on a risk based approach. The new AML framework is designed to move away from prescriptive rules and towards a more flexible model that allows businesses to tailor their controls based on their specific risk profile. 

This aligns with international best practice and reflects a broader evolution in AML thinking. However, it also introduces additional complexity, particularly for sectors that are new to AML. Understanding and applying a risk based approach requires judgement, expertise and, in many cases, access to data and tools that may not be readily available.

For the regulator, this creates a balancing act. Too much flexibility risks inconsistency and weak implementation. Too much prescription risks reducing the regime to a compliance exercise.

Conclusion: Closing the Gap, but Not the Debate

Australia’s Tranche 2 reforms represent a long overdue expansion of its AML framework. By bringing gatekeeper professions and high risk sectors such as real estate into scope, the country is addressing a structural weakness that has been recognised for years.

There is little doubt that this will improve transparency and provide new opportunities for detecting and disrupting financial crime. It aligns Australia more closely with international standards and reduces the risk of regulatory arbitrage.

However, the reforms also raise important questions. Can the regulator effectively supervise such a large and diverse population of entities? Will the quality of reporting support meaningful intelligence outcomes? Will the inclusion of new sectors lead to genuine risk mitigation, or simply a redistribution of illicit activity?

Experience from other jurisdictions suggests that the answers will not be straightforward.

What is clear is that AML is evolving, with the focus shifting from financial institutions to the broader ecosystem that enables the movement and storage of illicit wealth. Australia’s reforms are a significant step in that direction.

Whether they prove to be transformative, or simply another incremental adjustment, will depend not on the legislation itself, but on how it is implemented in practice.