90,000 New Reporting Entities: Understanding Australia's Tranche 2 Expansion

Australia is about to experience the largest expansion of anti-money laundering regulation in its history. On 1 July 2026, Tranche 2 of the AML/CTF reforms will bring approximately 90,000 new businesses into the regulatory framework - more than quadrupling the number of entities subject to AUSTRAC oversight.

This represents a fundamental shift in Australia's approach to financial crime prevention, extending AML obligations beyond traditional financial institutions to capture sectors that criminals have increasingly exploited for money laundering.

The Scale of Transformation

Current vs Future Landscape

Before Tranche 2 (Current State):

• Approximately 17,000 reporting entities
• Primarily banks, credit unions, money service businesses, gaming (casinos and pubs & clubs), and bullion dealers
• Focus on traditional financial services sector

After Tranche 2 (From July 2026):

• Over 107,000 reporting entities
• Addition of 90,000+ new businesses across five key sectors
• Expansion into designated non-financial businesses and professions (DNFBPs)

Sector-by-Sector Breakdown

Real Estate Sector (~35,000 new entities):

• Real estate agents and agencies
• Buyer advocacy services
• Property development companies
• Commercial real estate brokers

Legal Sector (~25,000 new entities):

• Law firms and sole practitioners
• Conveyancing specialists
• Corporate legal services
• Legal process outsourcing companies

Accounting Sector (~20,000 new entities):

• Accounting firms and practices
• Tax agents and advisors
• Business advisory services
• Corporate restructuring specialists

Trust and Company Services (~5,000 new entities):

• Corporate service providers
• Trust management companies
• Nominee director services
• Virtual office providers

Precious Metals and Jewellery (~5,000 new entities):

• Jewellery retailers and wholesalers
• Precious metals dealers
• Diamond and gemstone traders
• Luxury goods retailers

Note: Numbers are estimates based on industry analysis and business registrations. Final numbers may vary based on threshold applications and business structure changes.

Why This Expansion Is Happening Now

International Pressure and Standards

Australia’s Tranche 2 reforms align with international standards set by the Financial Action Task Force (FATF), the global body that sets AML standards. Most developed nations already regulate these sectors:

• United States: FinCEN requirements for real estate, legal, and accounting services
• European Union: 4th and 5th Anti-Money Laundering Directives covering DNFBPs
• United Kingdom: Money Laundering Regulations covering all Tranche 2 sectors
• Canada: FINTRAC oversight of real estate, legal, and accounting sectors

Criminal Exploitation of Regulatory Gaps

Law enforcement intelligence shows that criminals increasingly exploit these sectors:

Real Estate Laundering:

• Foreign criminals purchasing Australian property with illicit funds
• Complex ownership structures hiding beneficial owners
• Cash settlements in high-value property markets

Legal Services Abuse:

• Trust accounts used to layer and integrate dirty money
• Shell companies created to obscure ownership
• Cross-border transactions exploiting legal professional secrecy

Accounting Service Misuse:

• Business acquisitions funded by criminal proceeds
• Complex corporate structures designed to hide illicit wealth
• Financial advice facilitating tax evasion and money laundering

High-Value Goods Trading:

• Cash-intensive transactions in luxury goods
• Trade-based money laundering through precious stones and metals
• Value transfer through portable high-value items

The Geographic Impact

State-by-State Distribution

• NSW: ~28,000 new entities
• VIC: ~24,000 new entities
• QLD: ~18,000 new entities
• WA: ~12,000 new entities
• SA: ~4,000 new entities
• TAS: ~2,000 new entities
• ACT: ~1,500 new entities
• NT: ~500 new entities

Metropolitan vs Regional Impact

• Major Cities (Sydney, Melbourne, Brisbane, Perth): 65% of new reporting entities
• Regional Areas: 35% of new reporting entities

Economic Implications

Compliance Cost Estimates

• Industry-wide compliance costs: Estimated $1.6 billion – $2.1 billion annually
• Small practices (1–5 staff): $25,000 – $30,000 annually
• Medium firms (6–25 staff): $50,000 – $150,000 annually
• Large practices (25+ staff): $200,000 – $500,000 annually

Cost Components:

• Staff training and compliance officer appointment: 30%
• System implementation and maintenance: 25%
• Customer due diligence procedures: 20%
• Record keeping and reporting: 15%
• External advisory and audit services: 10%

Market Consolidation Predictions

The compliance burden is expected to drive market consolidation.
Small practices will face resource constraints, while larger firms will benefit from economies of scale.

Predicted Outcomes:

• 10 - 15% reduction in small practices over 2 - 3 years
• Increased merger activity in professional services
• Growth in compliance outsourcing services

Innovation Opportunities

RegTech Growth:

• $200 - 300 million in new RegTech investment expected
• Expansion of Australian AML software companies
• Entry of international RegTech vendors into Australia

Professional Services Evolution:

• New compliance-focused service offerings
• Specialisation in AML-compliant structures
• Premium services for high-risk clients

Regulatory Infrastructure Changes

AUSTRAC Scaling Requirements

Staffing:

• 150+ new AUSTRAC staff
• Specialist teams for each Tranche 2 sector
• Strengthened enforcement capacity

Technology Investment:

• $50+ million in new reporting and analysis systems
• AI-powered transaction monitoring
• Enhanced data sharing with law enforcement

Guidance and Support:

• Sector-specific guidance
• Educational programs and webinars
• Industry liaison officers

Enforcement Capability

• Civil penalties up to 100,000 penalty units (~$31.3 million) per breach
• Graduated enforcement approach
• Public naming of non-compliant entities
• Criminal task forces with AFP and state police
• “Follow-the-money” investigations using Tranche 2 data
• International enforcement coordination

International Comparison and Learning

United States:

• Geographic Targeting Orders (GTOs) reduced all-cash corporate property purchases by 80%
• Industry resistance gave way to acceptance

United Kingdom:

• Phased implementation over 3 years
• Professional body cooperation key to success

Canada:

• Transparency registers highly effective
• British Columbia property reforms led to a 15% price correction

Australia’s Unique Challenges

• Federal system complexity across 8 jurisdictions
• Coordination challenges between AUSTRAC and state regulators
• Resistance from legal and accounting professions
• Privacy concerns in regional areas
• Skills shortage in compliance professionals
• Limited RegTech maturity vs. US/UK

The Transformation Timeline

Phase 1: Preparation (Now – Dec 2025):

• Industry bodies mobilising
• RegTech vendors localising tools
• Government finalising guidance
• Only 25% of businesses have begun planning

Phase 2: Implementation (Jan – June 2026):

• System development and staff training ramp up
• Goal: 80% readiness by April 2026
• Reality: Only ~60% will be ready by July

Phase 3: Go-Live and Stabilisation (July – Dec 2026):

• AUSTRAC takes education-first approach initially
• Full enforcement starts January 2027
• Market consolidation and service adjustments begin

Long-term Strategic Implications

Criminal Adaptation:

• Shift to virtual assets and unregulated sectors
• More complex transaction structuring
• Greater use of technology and international routing

Future Regulation (Tranche 3 Potential):

• Art and antiquities dealers
• Expanded regulation of cryptocurrency services
• Professional sports and gaming sectors

Professional Services Evolution:

• Premium AML services for high-risk clients
• Compliance specialisation as a differentiator
• Tech-enabled due diligence and risk management

Preparing for the New Landscape

For Individual Businesses:

• Begin AML risk assessment
• Budget for compliance now
• Implement CDD systems and train staff
• Plan for long-term strategic adaptation

For Industry Bodies:

• Support members with training and resources
• Participate in regulatory consultation
• Coordinate sector-wide responses

For Government and Regulators:

• Provide clear, practical guidance
• Allow sufficient time for system changes
• Take a collaborative enforcement approach

Conclusion: Australia’s AML Revolution

The addition of 90,000 new reporting entities is more than a regulatory change—it’s a systemic transformation in the fight against financial crime.

It will:

• Strengthen Australia's financial system
• Transform how professional services operate
• Challenge businesses to adapt, invest, and comply

Its success depends on:

• Industry cooperation and early preparation
• Strong support from government and regulators
• Technology innovation to ease compliance
• Public understanding of the reforms’ purpose

The countdown to 1 July 2026 has begun. The businesses that prepare thoroughly and adapt strategically won’t just survive—they’ll thrive in a more transparent, secure, and trusted marketplace.

Need help preparing for Tranche 2?
Lane Consulting supports businesses with sector-specific guidance, hands-on implementation support, and ongoing compliance expertise. Our team understands both the regulatory requirements and the commercial realities facing Australia's 90,000 new reporting entities.

This article provides general analysis and is not legal or compliance advice. The regulatory environment is evolving, and businesses should seek tailored professional guidance.