Case Explained: Shining Light on Financial Crime – Legal Perspective

On 1 July 2026, the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth) (New Act) comes into full effect. This legislation introduces the long‑anticipated Tranche 2 reforms to the existing Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (Old Act). Together, these amendments bring Australia closer to international compliance standards, close long‑criticised regulatory gaps, and strengthen the nation’s defence against financial crime.

Why Tranche 2 Matters

Historically, the Old Act applied only to higher‑risk industries such as financial institutions, gambling operators, and bullion dealers. This left a regulatory blind spot: key professional service providers who routinely manage client funds and high‑value transactions were excluded from the regime.

Tranche 2 changes this by expanding AML/CTF obligations to a new class of regulated entities known as designated non‑financial businesses and professions (DNFBPs), including lawyers, accountants and real estate agents.

Australia has long been criticised for this exemption, with international bodies warning that DNFBPs are uniquely vulnerable to misuse by money launderers and terrorism financiers. Their inclusion reflects global recognition that financial crime often travels through professional services long before it reaches a bank.

Key Reforms

1. DNFBPs Brought Into the AML/CTF Framework

DNFBPs must comply with the same core obligations traditionally imposed on financial institutions. This includes enrolment with AUSTRAC, customer due diligence, reporting, and robust internal compliance programs.

2. Stronger Due Diligence and KYC/KYB (Know Your Client/Know Your Business) Requirements

The New Act enhances identity verification processes across all reporting entities. DNFBPs must now:

• perform initial and ongoing customer due diligence (CDD)
• verify customers’ identities and, where relevant, beneficial owners
• understand the nature and purpose of the business relationship
• conduct ongoing monitoring of client activities

Each client must be assigned a risk rating, taking into account factors such as:

• client type
• jurisdiction
• transaction nature
• watchlist or adverse media results

For example, a client linked to the British Virgin Islands, which appeared on the 2025 FATF grey list, may raise a red flag—particularly if the source of their funds is unclear or cannot be verified.

3. Enhanced Monitoring for High‑Risk Clients

Where a client is assessed as high risk, DNFBPs must:

• conduct deeper verification of identity and source of funds
• review past and ongoing transactions
• monitor for suspicious patterns, such as transactions that lack economic purpose or appear deliberately structured below reporting thresholds

4. Increased Exposure to Liability

Once DNFBPs handle client money—through trust accounts, trading accounts, or other channels—they may be “dealing with money” as defined under the Criminal Code Act 1995 (Cth). This may expose them to potential money laundering or terrorism financing offences if they unknowingly handle tainted funds.

If contraventions occur, AUSTRAC may apply to the Federal Court for civil penalty orders, with potential penalties reaching $33 million.

What DNFBPs Must Do

From 31 March 2026, DNFBPs must enrol with AUSTRAC before offering any designated services. They must also, by 1 July 2026:

• implement a compliant AML/CTF Program
• appoint an AML/CTF compliance officer
• train staff on obligations, risk indicators, and internal reporting pathways

CDD obligations may be scaled depending on the client’s risk rating. Politically Exposed Persons (PEPs) and clients linked to high‑risk jurisdictions require enhanced scrutiny and ongoing monitoring.

After 1 July 2026, AUSTRAC has indicated it will prioritise enforcement against those who wilfully ignore their enrolment obligations or who are wilfully blind to suspicious activity.

What Clients Should Expect

Clients engaging DNFBPs should anticipate:

• more frequent and detailed identity checks
• requests for documentation verifying source of funds or wealth
• ongoing review of their transaction activity

Refusing to provide information—or providing incomplete information—may trigger a reassessment of risk and potential limitations on services.

Time and Cost Considerations

The reforms have raised questions about proportionality. While they close a long‑acknowledged gap in Australia’s AML/CTF framework, smaller DNFBPs may face disproportionate administrative and financial burdens. Compliance may require investment in systems, staff training, and procedural redesign.

This could lead to “de‑risking”, whereby smaller or higher‑risk clients are turned away to reduce compliance pressure, potentially limiting legitimate access to services.

Conclusion

Under the New Act, DNFBPs play a critical role in safeguarding Australia’s financial system. By cooperating with identity verification and due diligence processes, clients help ensure services can be delivered in full compliance with the law.

Although Tranche 2 introduces new responsibilities and costs, its purpose is clear: to strengthen Australia’s financial integrity, enhance global confidence, and shine a brighter light on the shadows where financial crime operates.

Integra Legal is working closely with clients and DNFBPs to ensure a seamless transition to the new AML/CTF regime, while continuing to strengthen our existing relationships and collaborations to guarantee the uninterrupted provision of services. For further guidance or to discuss how these changes may affect your organisation, please contact the Integra Legal Team to take advantage of our journey to 1 July 2026.