Estimated reading time: 9 minutes
What is AML Tranche 2?
AML Tranche 2 refers to the second phase of Australia’s anti-money laundering and counter-terrorism financing regulatory reforms. The Anti-Money Laundering and Counter-Terrorism Financing Amendment Act expands AML/CTF obligations to professions previously outside the regime, the so-called “gatekeeper professionals” who act as intermediaries in financial transactions.
From 1 July 2026, if your business provides certain designated services in the areas of law, accounting, real estate, or dealing in precious metals and stones, you must comply with Australia’s AML/CTF framework including enrolment with AUSTRAC, a risk assessment, an AML/CTF program, customer due diligence, and suspicious matter reporting.
This is law. The FATF (Financial Action Task Force) has long identified Australia’s failure to regulate these sectors as a weakness in its financial crime framework.
Whether you need to review your PI cover, Cyber + Privacy Liability, or just want to understand what Tranche 2 means for your business — book a free call with the Pocket team →
TL;DR
- From 1 July 2026, Australia’s AML/CTF regime expands to cover accountants, lawyers, conveyancers, real estate agents, and dealers in precious metals/stones.
- Approximately 70,000 new reporting entities must enrol with AUSTRAC and implement a compliant AML/CTF program by 1 July 2026.
- Penalties for non-compliance reach up to $6.6M for individuals and $33M for corporations.
- These obligations create new Professional Indemnity exposures if you give advice in regulated services and get it wrong, you’re liable.
- Over 100,000 small businesses will simultaneously lose their Privacy Act exemption, adding a privacy liability layer on top.
Table of Contents
Who is captured by AML Tranche 2?
| Profession | Designated services covered |
|---|---|
|
Lawyers and conveyancers |
Acting on behalf of clients in property transfers, company creation, managing client funds |
|
Accountants |
Managing client funds, executing transactions on client’s behalf, company creation |
|
Real estate agents and buyer’s agents |
Buying, selling, or transferring real estate on behalf of a client |
|
Property developers |
Selling house-and-land packages |
|
Trust and company service providers |
Creating, operating, or managing legal persons or arrangements |
|
Dealers in precious metals, stones, and products |
Transactions of $10,000 or more |
Source: AUSTRAC — New industries and services to be regulated
Important clarification: Not every service you provide will be captured. The obligations attach to specific “designated services.” Enrol with AUSTRAC from 31 March 2026, and use AUSTRAC’s online tool to check whether your specific services are regulated.
What are your obligations from 1 July 2026?
If you provide designated services, you must:
-
Enrol with AUSTRAC – enrolment opened 31 March 2026 and is now open. If you haven’t enrolled yet, do so immediately.
-
Conduct an ML/TF risk assessment – Identify and assess money laundering and terrorism financing risks in your business
-
Implement an AML/CTF program – Policies, procedures, and controls to manage identified risks
-
Conduct customer due diligence (CDD) – Verify client identity before providing designated services
-
Monitor ongoing client activity – Ongoing CDD for higher-risk clients
-
Report suspicious matters to AUSTRAC – Mandatory reporting of suspicious transactions
-
Keep records for a minimum of 7 years
| Key milestone | Date |
|---|---|
|
Existing reporting entities: new obligations apply |
31 March 2026 (now in effect) |
|
AUSTRAC enrolment for Tranche 2 entities |
Open from 31 March 2026 (now open) |
|
Tranche 2 obligations fully commence |
1 July 2026 |
|
AUSTRAC penalties for non-compliance apply |
1 July 2026 |
Source: Pitcher Partners — AML/CTF Tranche 2 guide, Norton Rose Fulbright — Tranche 2 hub
What does AML Tranche 2 mean for your insurance?
Professional Indemnity
This is an important insurance consideration for Tranche 2. Professional Indemnity insurance covers you for claims arising from negligent acts, errors, or omissions in the provision of professional services.
Under AML Tranche 2, your professional duties are expanding. If you:
-
Fail to conduct adequate customer due diligence before acting for a client
-
Fail to report a suspicious matter and a client suffers loss as a result
-
Make an error in implementing your AML/CTF program that exposes a client or third party
…you may face a professional liability claim. Your Professional Indemnity policy needs to reflect these new duties.
Key questions to ask your PI insurer or broker:
-
Does my current PI policy cover claims arising from AML/CTF compliance duties?
-
Does my policy cover regulatory investigation costs (AUSTRAC review)?
-
Has my policy limit kept pace with the increased scope of my professional duties?
-
Are there any exclusions for regulatory penalties or fines?
Cyber and Privacy Liability
AML/CTF compliance requires collecting and storing significantly more client data like identity documents, beneficial ownership structures, transaction records. This increases your data exposure.
From 1 July 2026, over 100,000 small businesses in the regulated professions will simultaneously lose their Privacy Act small business exemption for personal information collected, used, or disclosed for AML/CTF purposes. If you collect personal information as part of AML/CTF customer due diligence, you’re now also subject to the Australian Privacy Principles.
A Cyber + Privacy Liability policy covers data breach notification costs, regulatory investigation response, and third-party privacy claims, all newly relevant for Tranche 2 entities.
Insurance responses to AML/CTF-related claims depend heavily on policy wording, the nature of the breach, and your specific circumstances. Regulatory penalties are generally not covered, and not every compliance failure will trigger a PI or cyber policy automatically. We’d recommend speaking with your broker before assuming your existing cover is adequate for your expanded obligations under Tranche 2.
Source: OAIC — Privacy guidance for reporting entities under the AML/CTF Act
The penalties for getting it wrong
AUSTRAC’s enforcement powers under Tranche 2 are significant:
- Up to $6,600,000 for individuals
- Up to $33,000,000 for a body corporate
These are civil penalty maximums. Criminal penalties also apply for serious non-compliance.
Even before penalties, the cost of implementing a compliant AML/CTF program for consultants, technology, training, legal advice, is real and immediate. For small practices starting from scratch, this is a material operational investment.
What clients of these professions should know
If you use a lawyer, accountant, or real estate agent for transactions from 1 July 2026, you may be asked to:
- Provide additional identity verification documents
- Disclose the beneficial ownership of any company or trust involved
- Confirm the source of funds for transactions
This is not optional on the part of your service provider, it’s a legal obligation. Refusing to provide information may mean they cannot act for you.
Frequently asked questions
- What is AML Tranche 2 in Australia?
AML Tranche 2 refers to the expansion of Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime to new sectors including lawyers, accountants, real estate agents, conveyancers, and dealers in precious metals and stones, from 1 July 2026.
2. Who does AML Tranche 2 apply to?
Businesses providing “designated services” in legal, accounting, real estate, trust and company services, and precious metals/stones sectors. AUSTRAC’s online tool can help you check whether your specific services are captured.
3. What do I need to do before 1 July 2026?
Enrol with AUSTRAC (from 31 March 2026), conduct an ML/TF risk assessment, implement an AML/CTF program, train staff, and put customer due diligence processes in place. AUSTRAC has published sector-specific guidance to assist.
4. What are the penalties for non-compliance with AML Tranche 2?
Civil penalties of up to $6.6 million for individuals and $33 million for corporations. Criminal penalties also apply for serious non-compliance.
5. Does AML Tranche 2 affect my Professional Indemnity insurance?
Not directly — Tranche 2 expands your professional obligations, which means your exposure to potential PI claims increases. Your policy wording doesn’t change, but the scope of your duties does, so it’s worth reviewing your cover with your broker to make sure your existing policy and limit still reflect the work you’re now responsible for.
6. Do I need to collect more client data for AML compliance?
Yes. Customer due diligence under AML/CTF requires verifying client identity, understanding the nature of the business relationship, and in some cases confirming source of funds. This means collecting and storing more personal information which creates new Privacy Act obligations for previously exempt small businesses.
7. When does AUSTRAC enrolment open for Tranche 2 entities?
Enrolment opened 31 March 2026 and is now open. If you haven’t enrolled yet, do so immediately, obligations fully commence 1 July 2026.
8. What is a suspicious matter report?
If you form a suspicion that a transaction or client may be connected to money laundering or terrorism financing, you must report this to AUSTRAC. Failure to do so when required can result in significant penalties. Reports are confidential, you cannot tell the client that a report has been made.
9. Does AML Tranche 2 affect lawyers and legal professional privilege?
Yes, but with protections. The amended AML/CTF Act includes clear provisions preserving legal professional privilege. Information or documents covered by LPP cannot be compelled by AUSTRAC. However, lawyers still have AML/CTF obligations for non-privileged aspects of their work.
10. What insurance should a small accounting firm carry under Tranche 2?
At minimum: Professional Indemnity (to cover claims arising from errors or omissions in your professional services, including your expanded AML/CTF duties) and Cyber with Privacy Liability (given the increased volume of sensitive client data you’ll be collecting and storing). Management Liability is worth considering for firms with directors or partners, though note it won’t cover regulatory penalties imposed on individuals directly — that exposure is largely uninsurable.
Related guides
New obligations need updated coverage
AML Tranche 2 changes your professional duties and your insurance program should reflect that. Pocket works with accountants, lawyers, and real estate businesses to make sure their PI and Cyber cover is matched to their actual risk before 1 July.
Book a free call with the Pocket team →
This article is general in nature and does not constitute legal or compliance advice. Always consult a qualified AML/CTF specialist for obligations specific to your business. Sources: AUSTRAC (austrac.gov.au), Pitcher Partners, Norton Rose Fulbright, Grant Thornton, Helios Salinger.
Pocket is a licensed Australian insurance broker (AFSL 491165) and member of NIBA. Part of the Steadfast Group — Australia’s largest broker network. We help small and growing businesses get the right cover without the jargon. Start smart. Scale strong. Stay protected.