Australia’s Tranche 2 AML reforms risk leaving SMEs behind

June 3, 2025

Australia has taken a significant step in tightening its anti-money laundering regime with the passage of the AML/CTF Amendment Bill in November 2024. The reforms aim to enhance enforcement against financial crime and bring the country closer in line with global standards set by the Financial Action Task Force (FATF).

A key feature of the bill is the inclusion of ‘Tranche 2’ entities—lawyers, accountants, real estate professionals, financial planners, and dealers in high-value goods—under AUSTRAC’s regulatory scope from 1 July 2026.

Napier AI, an AI-powered AML solution, recently delved into what the Tranche 2 AML reforms mean.

For small and medium-sized enterprises (SMEs) within these sectors, the shift could prove difficult. Many lack the resources, expertise, or systems to quickly implement comprehensive compliance frameworks. New Zealand’s experience with similar reforms shows smaller firms often adopt low-cost, limited solutions that risk falling short of regulatory requirements.

In Australia, early signals from AUSTRAC suggest many SMEs are yet to begin preparing, Napier AI explained. Scalable compliance platforms exist, but they are often unaffordable or too complex for smaller firms, highlighting a critical need for accessible, flexible alternatives.

Traditional subscription-based AML solutions may not suit these smaller players. Instead, usage-based models such as pay-per-screen or click-based services are gaining appeal. Shared service models, like Singapore’s “KYC as a Service”, have been trialled with limited success, and the market still lacks widely adopted, SME-friendly compliance tools.

The government has stated a goal of simplifying compliance obligations. These reforms are also designed to address emerging risks and technologies. However, clarity and usability for smaller firms must be prioritised to ensure adoption across the board.

As the July 2026 deadline approaches, Tranche 2 entities should take immediate steps: understand their obligations, assess internal capabilities, explore fit-for-purpose RegTech, and build compliance expertise. Scalable, cost-effective technologies will be essential for streamlining tasks like due diligence and reporting.

Read the story here.