Incoming reforms to Australia’s Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) will impact an increased number of service providers, representing a significant expansion of the country’s financial crime prevention framework.

Known as the tranche 2 reforms, the changes are aimed to deter, detect and disrupt money laundering and terrorism financing more effectively, as well as meet international standards.

Their implementation means more entities, including accountants, lawyers, conveyancers and trust and company service providers, will face significant new obligations and be regulated by Australian Transaction Reports and Analysis Centre (AUSTRAC).

They will not only be required to verify the identity of clients, report suspicious activity and maintain detailed records of transactions and due diligence, but must also implement an AML/CTF compliance program by 1 July 2026.

Increase in compliance obligations

The changes will bring a significant increase in compliance for entities, which will be challenging for those who are not prepared, says Alistair McKeough, founder of VerifiMe.

“The compliance burden is significant for small businesses that lack expertise in this area,” he says. “It’s not just about know-your-customer checks – you need to enrol with AUSTRAC, develop and maintain an AML/CTF program, and have systems for conducting ongoing customer due diligence and associated record keeping.”

While many accountants already verify their clients’ identity as a matter of good ethical practice, even though they’re not yet regulated by AUSTRAC, there are more efficient and secure ways of doing it.

“It is often done informally – for example, by photocopying ID documents or taking photos on a mobile phone – which can leave sensitive information unsecured and at risk,” McKeough says.

“Digital identity verification platforms can help by automating the process, eliminating the need for businesses to collect and store sensitive customer documents – it can make the compliance process more efficient and cost-effective, while also providing a better customer experience.”

Individually assessed

The reforms require each program to be individually designed, with a responsible officer appointed to manage the business’s compliance and communication with AUSTRAC. Then, depending on the risk level, the program must be externally reviewed – for some businesses as often as every two to three years – by someone who wasn’t involved in creating it, says McKeough.

“It can be straightforward or complicated, depending on the client and their risk profile,” he says.

To help businesses with the process, VerifiMe handles the collection and verification of customer identity documents and, where a business is AUSTRAC regulated, also handles the assessment of those documents in the business’s AML/CTF program.

Businesses that handle compliance well can gain a competitive edge through smoother customer onboarding and a better overall experience, while those that struggle may lose clients who find the identification part of the onboarding process too slow or inconvenient, McKeough adds.

“The key is finding solutions that automate the compliance requirements and reduce the burden on small businesses, rather than trying to handle it all internally.”

Find out more at VerifiMe.