Tranche 2 Shifts AML Enforcement From Institutions To Individuals

Australia’s latest expansion of anti money laundering (AML) laws is often described as a compliance exercise. In practice, it is something more confronting: a transfer of regulatory judgment from institutions to individuals who have rarely been asked to articulate and defend it.

That shift was thrown into sharp relief earlier this week, when detectives charged a senior partner at a Sydney law firm with allegedly helping a fraud and money laundering syndicate purchase more than $25 million worth of Sydney property. NSW Police Detective Superintendent Gordon Arbinja said the arrest “sends a clear message that no role or qualification places anyone above the law.”

The case underscores a broader shift by both law enforcement and regulators towards the role of so-called “gatekeeper” professions – including lawyers, accountants, real estate agents and trust and company service providers.

From July 1, 2026, Tranche 2 extends Australia’s AML regime beyond banks and casinos to these professions when they facilitate certain transactions. But the point of Tranche 2 is not to criminalize professional judgment; it is to regulate how that judgment is exercised and documented when risk is unclear.

Consider a solicitor who receives several million dollars into a trust account ahead of a property purchase by a discretionary trust with offshore connections. The transaction is lawful and familiar. Under the expanded AML regime, however, the solicitor is now expected to articulate who controls the structure, who benefits from it and how that conclusion was reached.

Or consider an accounting firm that has long structured assets through layered trusts and nominee arrangements. That firm is now required to demonstrate that its understanding of ownership, control and purpose was reasonable at the time it made key professional decisions— such as structuring an arrangement or accepting a client engagement—rather than reconstructed later in response to regulatory scrutiny.

Similarly, a real estate agent selling a high value property to a newly incorporated domestic company purchasing without finance is now expected to form a view about who stands behind the buyer, and whether anything about the transaction warrants closer attention.

These scenarios are not about wrongdoing. They illustrate where responsibility now sits and how ordinary professional activity can, often unwittingly, become the point at which money laundering risk materializes under the expanded regime. Under Tranche 2, these gatekeeper professions are not only expected to assess risk, but to conduct customer due diligence, retain records, lodge suspicious matter reports with AUSTRAC where concerns arise, and submit ongoing compliance reporting—obligations that sit alongside their existing professional duties.

Tranche 2 widens the orbit of Australia’s AML regime, extending long-standing obligations beyond banks to the professional intermediaries involved in designing and executing transactions. That responsibility is expanding faster than transparency. While Australia is moving toward greater beneficial ownership disclosure, public registries — from ASIC company records to state-based land titles systems — still reveal legal ownership far more readily than effective control, and often with significant time lags. Legal ownership, beneficial control and influence do not always align, and opacity is frequently a by product of lawful transaction design (such as for tax, succession or asset protection purposes) rather than criminal intent.

As a result, professional intermediaries can no longer rely solely on registries or automated checks. They are expected to exercise judgment close to the transaction, based on what they can reasonably observe at the time. The regulatory question is not whether firms had perfect information, but whether they responded appropriately when uncertainty or ambiguity arose.

Policies, checklists and outsourced systems remain necessary, but under Tranche 2 they are no longer sufficient. What matters is whether someone within the firm formed a view about risk—and can explain how and why they reached it. Many gatekeeper professions have not historically been trained to do this. Sales oriented environments tend to minimize friction; advisory cultures often assume good faith; and across many firms, practitioners are rarely required to document their comfort with risk, as distinct from why a transaction was just technically permissible.

The shift has clear governance implications. In many small and mid sized firms, AML responsibilities will fall to partners or principals designated as compliance officers by default. Under Tranche 2, those roles cease to be symbolic. Regulators such as AUSTRAC will look for evidence of authority, independence and sufficient capacity to exercise oversight—not just a title on an organizational chart.

Firms that treat AML compliance as a secondary function risk discovering that accountability has shifted to individuals rather than systems. That exposure may include regulatory investigation, personal civil penalties, enforceable undertakings and, in serious cases, constraints on an individual’s ability to continue practicing.

Ultimately, Tranche 2 does not introduce a standard of certainty, but one of defensibility. Regulators do not expect clairvoyance. They will ask who formed the view that a risk was acceptable, what questions were asked when ambiguity arose, and what records exist to explain how that conclusion was reached. For newly regulated professions, the most practical response is to ensure that risk decisions are made deliberately, by the right people, and in a way that can be explained later. That discipline is not merely compliance – it is a form of professional self protection in a regime that increasingly scrutinizes how individuals exercise judgment, not just whether procedures exist.

This article has been authored by Erin Tennant, Associate Managing Director, Investigations, Diligence and Compliance, Kroll, reflecting his views and expertise on the subject.