AML/CTF Obligations & Penalties Under Tranche 2
It’s important to recognise that your anti-money laundering (AML) and counter-terrorism financing (CTF) obligations aren’t just a box-ticking exercise. Failure to comply can carry serious legal, financial and reputational consequences.
If you're a small or medium business affected by Tranche 2 reforms, now is the time to understand what’s at stake, as well as how to stay compliant.
What are my AML/CTF obligations?
If you provide services that put you at risk of being used for money laundering or terrorism financing, you must comply with Australia’s AML CTF rules.
This includes:
- Verifying client identity (Know Your Customer/Know Your Business - KYC/KYB)
- Assessing and managing client risk
- Monitoring transactions for suspicious activity
- Reporting suspicious matters to AUSTRAC
- Maintaining an AML/CTF compliance program
- Keeping appropriate records
These rules apply under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, and will soon extend to new professions under Tranche 2.Failure to comply with AML obligations will see businesses at risk of significant penalties.
What are the legal consequences of not complying with AML CTF rules?
AUSTRAC can take action against businesses that fail to meet AML/CTF obligations.
Legal consequences may include:
- Enforceable undertakings. These are court-enforceable commitments to fix compliance failures.
- Infringement notices. Fines for specific breaches of AML/CTF rules.
- Remedial directions. Instructions to take specific action to prevent the same breach from occurring again.
- Civil penalty orders. Financial penalties imposed by the courts for serious breaches.
- Written notices. AUSTRAC may direct you to appoint an external auditor or conduct a risk assessment.
- Suspension or cancellation of registration.
- Referral for criminal investigation, where appropriate.
How much could it cost me if I don’t comply with my AML obligations?
Failing to comply with AML/CTF laws can result in significant fines. AUSTRAC penalties are calculated using penalty units. Currently, one penalty unit is valued at $313.
- Individuals who breach their AML/CTF obligations can be charged up to 20,000 penalty units. This means an individual can be charged up to $6,260,000.
- Body Corporates that breach their AML/CTF obligations can be charged up to 100,000 penalty units. This means a body corporate can be charged up to $31,300,000.
It’s important to realise that these aren’t just "big bank" numbers.
These penalties can be applied by AUSTRAC to any business that fails in its anti-money laundering obligations.
What are the reputational risks of breaching AML CTF rules?
Beyond legal and financial penalties, failing to meet your AML obligations can damage the reputation you’ve worked hard to build:
- Loss of trust with clients and referral partners
- Public naming in AUSTRAC enforcement actions
- Increased scrutiny from regulators and lenders
- Impact on licences or professional memberships
Once your business name is publicly associated with non-compliance, it’s hard to rebuild trust.
So what can you do to avoid these risks?
The best thing you can do is prepare early and build a strong foundation for compliance.
Here's how easyAML can help:
- Digital ID verification that meets AUSTRAC standards
- Smart risk scoring to flag issues early
- Audit-ready reporting at your fingertips
- Ongoing monitoring to stay compliant over time
- And most importantly? We’re designed for Australian SMBs, with a local team that’s here when it matters.
AML penalties are serious business
Don’t leave it too late. Tranche 2 may not be enforceable yet, but the risks of waiting are very real.
Join our readiness list today to get ahead of your obligations, with the tools and support to make compliance simple.
FAQs: AML Penalties & Tranche 2
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Does Tranche 2 include penalties?
Yes. Once Tranche 2 legislation takes effect, all covered professions will face the same enforcement framework as existing AML/CTF businesses. That includes potential financial penalties for non-compliance. Preparing now helps you avoid surprises later and gives you the chance to put effective systems in place before enforcement begins.
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Can small businesses be fined?
Absolutely. AUSTRAC can and has taken action against small and medium businesses, especially where there are clear or repeated breaches. Being a small business doesn’t exempt you from AML obligations. Taking early steps and using the right support can make compliance manageable and help reduce the risk of costly enforcement action down the track.
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What if I didn’t know I had to comply?
Unfortunately, a lack of awareness isn’t a defence. That’s why it’s so important to understand your obligations now and get systems in place early. If you’re unsure whether the rules apply to your business, we can help you get clarity. We’ll provide you with clear guidance so you can understand your obligations and take the right steps.
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When do I need to comply?
Tranche 2 is coming into effect in 2026. For all the important dates, refer to our Key Dates Timeline. That gives you time to prepare. Starting now means you can understand your obligations, get the right systems in place and feel confident knowing you’re ready when the new laws take effect.
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How do I know if my business offers a ‘designated service’ under AML law?
If you offer services like real estate transactions, legal or financial advice, accounting or crypto-related services, you may provide a ‘designated service’ under the AML/CTF Act. You can also check AUSTRAC’s official list or speak to a compliance expert.
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Is staff training part of my AML/CTF obligations?
Yes. All staff involved in AML/CTF processes must receive regular training. This ensures they can identify suspicious activity, understand reporting duties and follow your internal compliance program. AUSTRAC expects training to be ongoing, documented and tailored to your business risks and role types.
If you're looking for an affordable way to cover training and all other AML obligations, our all-in-one solution includes everything in our simple plans.
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Will AUSTRAC name and shame non-compliant businesses?
Yes. AUSTRAC can publicly name businesses that breach AML/CTF obligations. These enforcement actions are published on its website and can include fines, directions or legal action. Public exposure can seriously damage your reputation, especially for trust-based professions like real estate, legal and financial services.