What Accountants Need to Know About Tranche 2 Reporting Obligations

From 1 July 2026, Australian accounting practices providing "designated services" must comply with new anti-money laundering and counter-terrorism financing (AML/CTF) requirements under Tranche 2 reforms.

This affects over 25,000 accounting practices across Australia. While TPB compliance has prepared you well, AML/CTF introduces structured risk assessment, enhanced due diligence, and mandatory reporting obligations specifically targeting money laundering and terrorism financing risks.

What Are "Designated Services" for Accountants?

Designated services include accounting services involving:

• Buying and selling real estate

• Managing client money, securities, or other assets

• Managing bank, savings, or securities accounts

• Organising contributions for company formation, operation, or management

• Creating, operating, or managing legal persons or arrangements (including trusts and companies)

Standard tax return preparation and bookkeeping services alone typically don't trigger these requirements. However, if you provide any of the services above, you may be considered a reporting entity under the AML/CTF Act.

Building on Your TPB Foundation

If you're following Tax Practitioners Board Practice Note TPB(PN) 5/2022 for client verification, you have a strong foundation. AML/CTF Tranche 2 extends these practices with additional requirements.

Key Difference: TPB requirements focus on professional conduct and fraud prevention. AML/CTF compliance specifically targets money laundering and terrorism financing through structured risk assessment, enhanced due diligence, and suspicious activity reporting to AUSTRAC.

What You're Already Doing Under TPB Practice Note 5/2022

• Client identity verification using photographic and non-photographic ID

• Authority documentation for representatives

• Risk-based approach for established clients

• Verification record-keeping

What AML/CTF Adds to Your Process

• Formal risk classification system (low/medium/high-risk)

• Beneficial ownership identification beyond client representatives

• Politically Exposed Person (PEP) and sanctions screening

• Source of wealth and source of funds verification for high-risk customers

• Ongoing transaction monitoring throughout the relationship

• Suspicious Matter Report (SMR) and Threshold Transaction Report (TTR) filing

Comprehensive Customer Due Diligence (CDD) Requirements

Your TPB foundation expands to meet AML/CTF standards across all customer types:

Individuals

TPB Foundation: Primary photographic ID, secondary identification, and address verification

AML/CTF Additions:

• Document full name and any known aliases

• Conduct formal risk assessment and classification

• Screen against PEP and sanctions lists

• Verify identity through Document Verification Service (DVS) or equivalent reliable sources

Companies and Partnerships

TPB Foundation: Entity registration, director/partner verification, authority documentation

AML/CTF Additions:

• Complete beneficial ownership mapping (individuals owning 25% or more)

• Corporate structure analysis and documentation

• Industry-based risk assessment

• Enhanced screening for all beneficial owners

Trusts

TPB Foundation: Trust deed verification, trustee identification, beneficiary identification

AML/CTF Additions:

• Trust type classification and risk rating

• Complete beneficiary mapping with ownership percentages

• Settlor verification and documentation

• Enhanced screening of all controlling parties

Politically Exposed Persons (PEPs) and Risk Classification

Foreign PEPs (individuals holding prominent public functions in foreign countries) are always classified as high-risk and require:

• Source of wealth documentation

• Source of funds verification

• Enhanced ongoing monitoring

• Senior management approval

Domestic PEPs require enhanced measures only when your risk assessment indicates high risk based on other factors.

All PEP relationships require continuous monitoring throughout the engagement.

Enhanced Due Diligence (EDD)

Enhanced Due Diligence applies when customers are rated high-risk or when specific indicators emerge:

Triggers include:

• Customer rated medium or high-risk in your assessment

• Foreign PEP involvement

• Connections to high-risk jurisdictions

• Unusual transaction patterns or complexity

• Complex structures without clear commercial purpose

• Significant cash transactions

EDD Requirements:

• Source of wealth verification (origin of overall wealth)

• Source of funds documentation (specific transaction funds)

• Enhanced ongoing monitoring protocols

• Senior management or AML Compliance Officer (AMLCO) approval

• Detailed documentation of commercial rationale

Ongoing Monitoring Requirements

Implement continuous monitoring throughout client relationships. Watch for patterns that don't align with the client's expected profile:

• Multiple properties purchased in short periods

• Sudden changes in transaction structures or complexity

• Inconsistent or unexplained funding sources

• Complex arrangements without clear business purpose

• Attempts to obscure beneficial ownership

• Unusual urgency or secrecy requests

Risk-Based CDD: Practical Workflow Examples

Low-Risk: Individual Tax Return Preparation

Client: Individual seeking annual tax return preparation and basic tax advice

Due Diligence Process:

• Verify identity using DVS or an equivalent reliable source

• Conduct biometric verification where applicable

• Screen against PEP and sanctions lists

• Document the service purpose and low-risk classification

• Maintain records per TPB and AML/CTF requirements

Medium-Risk: Local Import Business with Cash Transactions

Client: Australian importing business with frequent cash handling requiring tax compliance services

Due Diligence Process:

• Verify the company registration and structure

• Identify and verify all directors and beneficial owners (25%+ ownership)

• Conduct enhanced analysis of cash transaction patterns and business model

• Document the business purpose, nature, and operational cash flow

• Screen all beneficial owners against PEP and sanctions lists

• Classify as medium-risk and implement ongoing monitoring for unusual patterns

High-Risk: Offshore Individual Establishing an Australian Company

Client: Overseas individual establishing Australian company with funding via foreign trust structures for property investment

Due Diligence Process:

• Verify the identity of the instructing party using reliable sources

• Conduct full beneficial ownership verification of the foreign trust structure

• Map all layers of ownership and control

• Document the business purpose and commercial rational

• Apply Enhanced Customer Due Diligence including:

• Source of wealth documentation

• Additional document requests in line with your program

• Enhanced Customer Due Diligence with senior approval workflows recorded and AMLCO reviewed

• Rate as higher risk based on your Program and apply. Continuous monitoring for potential Suspicious Matters that need reporting as a Suspicious Matters Report.

VerifiMe: Seamless TPB-to-AML/CTF Transition

VerifiMe's shareable identity wallet automatically maps existing TPB verification to AML/CTF requirements, ensuring no duplicate work while meeting both frameworks.

Key Advantages:

• Regulatory cross-compliance: Single process satisfies TPB and AML/CTF requirements

• Risk-based automation: The System escalates to EDD when indicators are detected

• Audit-ready documentation: Complete trails for both TPB and AML/CTF reviews

• Client continuity: Existing TPB-verified client’s transition seamlessly

• Shareable credentials: One-time verification, multiple professional service providers

• Real-time DVS integration: Instant government database verification

• Automated monitoring: Continuous transaction pattern analysis and risk alerts

Implementation Benefits:

• Leverage existing TPB compliance investment

• No client re-verification required for established relationships

• Automated risk classification and escalation

• Integrated PEP and sanctions screening

• API integration with practice management systems

Ready to prepare for AML/CTF Tranche 2 while building on your TPB compliance foundation? VerifiMe bridges your current verification practices with new regulatory requirements, ensuring seamless transition and ongoing compliance efficiency.

Contact VerifiMe to discuss how our shareable identity wallet transforms regulatory compliance from repetitive burden into competitive advantage hello@verifime.com

Disclaimer: The content on this website is general and is not legal advice. Before you make a decision or take a particular action based on the content on this website, you should check its accuracy, completeness, currency and relevance for your purposes. You may wish to seek independent professional advice.