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

Since 1 July 2026, Australia's anti-money laundering regime is no longer just a banking issue. Lawyers, accountants, company formation agents and real estate professionals are now regulated by AUSTRAC, many for the first time. If you incorporate Australian subsidiaries for Indian parents, act on property purchases funded from India, or handle client money moving between Mumbai and Melbourne, Tranche 2 is now part of your daily workflow. AUSTRAC expects evidence of compliance, not good intentions.

What Is AML/CTF Tranche 2?

Tranche 2 is the extension of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 to professions that were previously outside the regime. It was legislated through the AML/CTF Amendment Act 2024 and is regulated by AUSTRAC, Australia's financial intelligence agency. The aim is to stop criminals using professional intermediaries to move and hide money, and to align Australia with international FATF standards.

Who Is Now Regulated?

Regulation attaches to the designated services you provide, not your job title. The newly covered sectors are:

• Lawyers, conveyancers and accountants carrying out certain transactions, such as buying or selling real estate or businesses, managing client money or assets, or creating and operating companies and trusts.
• Trust and company service providers that form companies, act as or arrange nominee directors or shareholders, or provide a registered office or business address.
• Real estate professionals acting for buyers or sellers in property transactions.
• Dealers in precious metals and stones making relevant high-value sales.

Routine advice and litigation generally sit outside the designated services, so map each service line you offer rather than assuming your whole practice is in or out.

Key Dates

• 31 March 2026: the first wave of reforms for existing reporting entities took effect, and AUSTRAC enrolment opened for Tranche 2 businesses.
• 1 July 2026: Tranche 2 obligations commenced.
• Enrolment: you must enrol within 28 days of first providing a designated service. If you provide one and haven't enrolled, treat it as urgent.

Your Core Obligations

1. Enrol with AUSTRAC and keep your details current.
2. Assess your ML/TF risk. Document how your clients, services, delivery channels and countries create money laundering and terrorism financing risk.
3. Adopt AML/CTF policies. Have written policies approved by your governing body or senior management, and appoint an AML/CTF compliance officer.
4. Complete customer due diligence (CDD). Identify and verify clients and their beneficial owners, understand why they want your service, and monitor the relationship. Apply enhanced due diligence to higher-risk clients.
5. Report to AUSTRAC. Lodge suspicious matter reports, threshold transaction reports for physical cash of AUD 10,000 or more, and international value transfer reports where relevant.
6. Keep records and train staff. Retain records for seven years and train people to spot and escalate red flags.

Remember the tipping-off prohibition: if you have formed a suspicion or lodged a suspicious matter report, you generally cannot tell the client.

Why the Australia–India Corridor Needs Extra Attention

Trade and investment between the two countries is growing, supported by the Australia–India Economic Cooperation and Trade Agreement (ECTA). Most of it is entirely legitimate. But common features of Indian-linked work, such as layered holding structures, family-controlled businesses, funds crossing several jurisdictions and documents issued under Indian rules, are exactly what your risk assessment must address. The goal is not to turn away Indian clients. It is to show AUSTRAC that you understand the risks and manage them.

Verifying Indian Individuals and Entities

• Individuals: use the passport as primary ID, with a PAN card to corroborate. If you collect Aadhaar, ask for a masked copy and avoid storing the full number.
• Companies: collect the Ministry of Corporate Affairs (MCA) certificate of incorporation, CIN, constitutional documents and a current director and shareholder list, then check them against the public MCA register.
• Documents: obtain certified copies, apostilles where required, and certified English translations of anything not in English.
• Remote clients: verify by live video call and document checks rather than emailed scans alone.

Mapping Beneficial Ownership

Indian structures often include Hindu Undivided Families (HUFs), family trusts, promoter-group holdings and intermediate holding companies in Singapore, Mauritius or the UAE. Trace ownership through every layer until you reach the individuals who ultimately own or control the customer, generally those holding 25% or more or exercising control by other means. India's significant beneficial owner rules use a lower 10% threshold, so an Indian filing may name people your Australian test does not. Reconcile the two rather than assume they match.

Source of Funds and Source of Wealth

For higher-risk clients, ask for evidence that matches the story: income tax returns, CA-certified net worth statements, audited financials, property sale deeds and bank statements. For outward remittances, Form 15CA/15CB and the bank's advice show Indian tax and exchange-control compliance, and an Indian parent investing in an Australian subsidiary should be able to show its overseas investment filings under FEMA. Treat payments from third parties or unrelated accounts as red flags and ask why.

PEPs and Sanctions

Screen clients, directors and beneficial owners against PEP lists and the DFAT consolidated sanctions list. In India, PEPs include parliamentarians, state legislators, senior officials, heads of state-owned enterprises, and their family members and close associates. Re-screen periodically, not just at onboarding.

Setting Up an Australian Subsidiary for an Indian Parent

Company formation is one of the clearest Tranche 2 touchpoints. ASIC charges $636 to register a company (Form 201), and the annual review fee for a proprietary company is $342. An Indian company registering as a foreign company (Form 402) pays $636, with an annual review fee of $1,583 once registered. These are ASIC's government fees and sit on top of any professional costs.

What is new is the pre-lodgement step. A provider forming the company is delivering a designated service and must complete CDD on the Indian parent and its ultimate owners first. At least one director must also ordinarily live in Australia, and every director needs a Director ID. Gather ownership documents early so incorporation isn't held up.

A Practical Action Plan

1. Map your designated services and confirm whether each one triggers obligations.
2. Enrol with AUSTRAC and appoint your compliance officer.
3. Write a risk assessment that names India-specific factors: layered structures, HUFs, third-party payers and cash-intensive sectors.
4. Build an India onboarding checklist using the document list above.
5. Set escalation triggers, such as clients who resist naming owners, structures with no commercial rationale, or payments that don't match the client's profile.
6. Train staff and test the process, then review it annually and whenever you add a service.

Mistakes to Avoid

• Treating CDD as a one-off. Ongoing monitoring is part of the obligation.
• Leaning on the client's Indian CA or bank letter instead of forming your own view.
• Failing to document your reasoning. If it isn't recorded, AUSTRAC will assume it wasn't done.

Get Tranche 2 Right From the Start

Tranche 2 rewards businesses that build a clear, documented process and punishes those that improvise. For firms serving Indian clients, the work is manageable once your checklist, risk assessment and escalation steps are in place. If you want a second pair of eyes on yours, book a free 30-minute compliance call with CorpArray and we'll walk through where you stand.

This article is general information only and is not legal advice. Check current AUSTRAC guidance for your circumstances.

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