- Australia’s “Tranche 2” rules expand AML/CTF regulations from 1 July 2026.
- Most accountants will be covered, facing significant new compliance obligations.
- Firms must assess risks, train staff, and report suspicious client activities.
In recent years, many of the world’s advanced economies have been expanding the scope of their anti-money laundering (AML) and counter-terrorism financing (CTF) rules. Next year, Australia follows this course, when regulator AUSTRAC implements “Tranche 2” rules.
These rules represent a dramatic extension of Australia’s AML/CTF regime. And accountants will be key participants.
Most accountants will contribute
Australia is considered to have one of the world’s lowest levels of national money-laundering risk, up with leaders like the Nordics according to the Basel AML index (see map). Yet until now, Australia’s AML/CTF regime has been narrower than that of nations like the UK and New Zealand. In particular, the rules have applied mainly to giant banks and gambling businesses.
From 1 July 2026, that changes: the Tranche 2 rules will cover all accounting firms offering “designated services”. Those include many activities performed by IPA members, such as offering advice or services related to starting a company or business, and providing bookkeeping services.
Michael Davison, the IPA’s general manager of advocacy and emerging policy, says he suspects 80 to 90% of the IPA’s members in practice will be hit by the change. And the requirements run to hundreds of pages. “This is one of the biggest regulatory changes in years,” Davison says. “If you’re providing the designated service, you’re in and you have to comply with a whole bunch of rules. You have no choice, unless you stop providing that service to your clients.”
Firms will bear the AML burden
For all these businesses newly enlisted in the fight against money-laundering, the new rules will pose practical challenges. Many will need to change procedures, expectations, and engagement with clients. That issue was explored in an AML compliance session at the IPA’s 2025 National Congress, which Davison chaired.
For individual firms, the responsibilities are substantial. Among them:
- Conduct an internal risk assessment and update it as business and client risk profiles shift.
- Develop policies and procedures tailored to the actual threats and vulnerabilities in one’s practice.
- Train staff in the identification and mitigation of suspicious transactions and activities.
- Make and keep records of due diligence, reports, and policy documents.
- Lodge Suspicious Matter Reports (SMRs), Threshold Transaction Reports (TTRs, for any cash transactions over $10,000), and annual compliance reports.
Senior managers are expected to oversee and take ownership of the compliance outcomes; a designated AML/CTF compliance officer will perform day-to-day administration. Firms are also advised to conduct periodic independent reviews of their AML systems to avoid blind spots.
That makes IPA members major contributors to the AML/CTF effort.
Indeed, around the world, AML/CTF regimes stand out for their reliance on business for law enforcement. As one financial regulation expert, Cambridge’s Professor Jason Sharman, told The Economist magazine in 2021, the AML/CTF system pushes the grunt-work of detection onto the private sector.
Firms struggle with risk assessment
As Davison points out, the AML/CTF regimes of nations like the UK and New Zealand have applied to a wider range of accounting firms for some years now.
Tim Pinkney is director of professional standards at the Institute of Financial Accountants (IFA), the IPA’s UK sister organisation. He also was a participant in Davison’s National Congress panel on AML compliance.
Pinkney stresses that most compliance burdens become manageable when businesses embed AML routines into everyday business processes. “It’s difficult to put a figure on compliance hours because it should be part of your everyday process,” he says. “It becomes part of what you do.”
But he adds that IFA members still struggle with understanding the AML rules’ risk-based approach. Even with the guidance that the IFA provides, he says, they find it difficult to risk-assess their clients.
In Australia, many firms are waiting for local AML regulator AUSTRAC to release its compliance guide for small firms before overhauling their procedures.
Regulatory workloads balloon
Changes to regulatory arrangements will also put new stresses on regulators in both Australia and the UK. The IPA’s Davison estimates that the number of entities regulated by AUSTRAC will rise from its current 17,000 to not much short of 100,000. That will bring a huge expansion of AUSTRAC’s workload.
Meanwhile the UK government decided in October to give its Financial Conduct Authority (FCA) sole responsibility for supervising AML/CTF, removing it from private and professional bodies (including the IFA). The result is that the FCA will be expanding its workload to much the same degree as AUSTRAC.
As Pinkney notes, there is as yet no timeline for the transition: he and others will continue to drive the UK system’s operation for several years yet.
Pinkney, like Davison, is cautious about predicting how his national regulator will deal with the workload expansion. But he has his doubts that it will all go smoothly. “The thought of the FCA regulating PwC along the same lines as regulating a sole practitioner with no staff and 30 clients beggars belief,” he says.
Hoping for impact
Australia’s broader AML regime has been a long time in the making: Australia’s move towards Tranche 2 began in 2007. Yet the regime’s overall effectiveness remains a subject of debate around the world.
Some experts worry that given the AML regulatory response started 35 years ago, we should now be able to see more impact. Right now, says Katherine Westmore at London’s Centre for Finance and Security, “it doesn’t appear to be substantially more difficult for criminals to launder their illicit proceeds than it did before we introduced these regulations”.
“We all want to stop bad actors,” says Pinkney. The hope is that by widening the AML/CTF regime’s reach, the Australian system will finally start to have a more noticeable effect.
