AML/CTF Tranche 2 Compliance in 2026: A Practical Guide for Australia–India Businesses

The grace period is over. Tranche 2 of Australia's AML/CTF reforms started applying to lawyers, accountants, real estate professionals, and trust and company service providers on 1 July 2026. If you advise, broker or move money for clients with Indian ties, AUSTRAC now expects you to know exactly who they are, where their funds come from, and what you did when something looked wrong. This guide covers what has changed and what to do next for Australia–India work.

What Is AML/CTF Tranche 2?

Tranche 2 is the second stage of Australia's overhaul of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. It was introduced through the AML/CTF Amendment Act 2024. For two decades, Australia regulated banks, remitters and casinos while "gatekeeper" professions sat outside the regime. That gap drew criticism from the Financial Action Task Force (FATF).

The reforms bring in businesses that provide certain high-risk services, including:

• Lawyers and conveyancers (for example, buying or selling real estate, managing client money, or creating and operating legal structures)
• Accountants and bookkeepers providing the same kinds of designated services
• Real estate agents and property developers involved in buying and selling property
• Trust and company service providers (company formation, nominee directors, registered office services)
• Dealers in precious metals and stones

Check the exact scope against AUSTRAC's current guidance, because the obligations attach to specific designated services rather than to the profession as a whole.

Why the Australia–India Corridor Needs Extra Attention

The Australia–India relationship is one of the fastest-growing in the Indo-Pacific. Indian-born Australians are one of the largest migrant communities, and investment, education, property and professional services all flow in both directions. That volume is also why the corridor deserves a closer look under the new rules.

Common risk factors

• Cross-border property purchases funded from India, often through family members or third parties
• Complex ownership structures, such as Indian private limited companies, family trusts and holding entities that sit behind an Australian investor
• Source-of-funds verification across two regulatory systems, including India's foreign exchange rules under FEMA and the RBI's Liberalised Remittance Scheme
• Informal value transfer (hawala-style arrangements) sometimes used to bypass formal channels
• Politically exposed persons (PEPs), including Indian government officials, state-owned enterprise executives and their relatives

Most Indian-Australian clients are entirely legitimate. The point is to build processes that let you prove it.

Your Core Tranche 2 Obligations

1. Enrol with AUSTRAC

If you provide a designated service, you must enrol as a reporting entity. Enrolment is the first thing AUSTRAC will check, so confirm it is done before anything else.

2. Conduct and document an ML/TF risk assessment

Your AML/CTF program must start with a written assessment of the money laundering and terrorism financing risks your business faces. For Australia–India work, assess these factors separately:

• Customer types (individuals, companies, trusts, NRIs, OCI holders)
• Services offered (property settlements, entity set-up, trust accounts)
• Delivery channels (face-to-face versus remote onboarding across time zones)
• Jurisdictions involved, including any third countries in the funding chain

3. Build an AML/CTF program

Your program needs documented policies, controls and procedures, a designated AML/CTF compliance officer, staff training, and independent review. Regulators care more about whether the program fits your business than about its length. A generic template that never mentions India will not persuade AUSTRAC.

4. Apply customer due diligence (CDD)

You must identify the customer and verify their identity, understand the purpose of the relationship, identify beneficial owners, and monitor the relationship on an ongoing basis. For Indian clients, plan for the documents you will realistically see:

• Individuals: Indian or Australian passport, Australian visa evidence, PAN card, and Aadhaar where appropriate and lawfully collected
• Companies: certificate of incorporation, CIN and MCA (Ministry of Corporate Affairs) records, directors' details, and shareholding registers
• Trusts and partnerships: trust deeds, partnership agreements, and identification of settlors, trustees and beneficiaries

Documents issued in India are often not in the form Australian staff expect. Set out in advance which documents you will accept, how you will check them, and when you need certified translations.

5. Verify source of funds and source of wealth

This is where Australia–India matters most. A client buying a property with funds moved from India should be able to explain, with evidence, how the money was earned and how it left India. Useful evidence includes:

• Bank statements showing the transfer path
• Indian tax returns and Form 16 or equivalent income evidence
• Sale contracts if the funds come from selling Indian property or shares
• Documents showing the transfer was made through authorised channels

6. Report to AUSTRAC

Know which reports apply to your designated services. These include suspicious matter reports (SMRs), threshold transaction reports for cash of $10,000 or more, and, depending on your service, reports on international funds transfers. SMRs are time-critical, and you must not tip off the customer that you have filed one. Train your staff on this point in particular.

7. Keep records

Retain identification, transaction and program records for the period the Act requires (generally seven years). Keep Indian-sourced documents in a form that can be produced quickly on request.

Red Flags Specific to India-Linked Transactions

Put these on a checklist for front-line staff:

• Funds arriving from third parties unrelated to the client, or from several accounts in different countries
• Reluctance to explain how money left India or why a particular structure is used
• Property bought at a price that does not match the client's apparent means
• Rapid layering through newly formed companies or trusts
• Requests for unusual secrecy, nominee arrangements or cash payments
• Inconsistencies between Indian and Australian identity or company records

A single red flag is not proof of wrongdoing. It is a trigger to ask questions, escalate and record what you decided.

A 30-Day Action Plan

1. Map your services. List which of your services are designated services and which clients use them.
2. Confirm AUSTRAC enrolment and appoint a compliance officer.
3. Complete your risk assessment with a dedicated section on India and other foreign-funded work.
4. Update onboarding forms to capture source of funds, beneficial ownership and PEP status.
5. Document your acceptable Indian ID and company records and how you verify them.
6. Train your team on red flags and SMR procedures, and keep attendance records.
7. Review existing clients. Prioritise higher-risk India-linked relationships for refreshed due diligence.
8. Schedule an independent review of the program so you can show it is working.

The Cost of Getting It Wrong

AUSTRAC has shown it will use its enforcement powers against large and small entities, and the penalties include substantial civil penalties. The reputational damage is also real. Clients, banks and professional bodies increasingly ask about AML/CTF compliance before they engage a firm.

Frequently Asked Questions

Do Tranche 2 rules apply if my client is based in India?

The obligations depend on the designated service you provide in Australia, not on the client's location. A foreign-based client usually raises your risk rating and the level of due diligence you should apply.

Can I rely on an Indian bank's or adviser's checks?

Only in limited circumstances, and the rules on reliance are strict. You remain responsible for your own compliance, so do not assume another party's checks will satisfy AUSTRAC.

Is this legal advice?

No. This article is general information. Obligations depend on your services and circumstances, so check AUSTRAC's current guidance or take professional advice.

Turn Compliance Into a Competitive Advantage

Tranche 2 is now part of doing business, and firms that handle Australia–India work well will stand out. A clear risk assessment, India-ready onboarding and trained staff protect you from enforcement action and make you a safer choice for clients. If you are not sure where your gaps are, CorpArray can review your program against the corridor risks above. Book your free compliance check today.

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