AML/CTF Tranche 2: Customer Due Diligence for Accounting Practices

Written By Yeowon Lee

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.

Building on Your TPB Foundation: If you're following the 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 risk-based requirements, enhanced record-keeping, and reporting obligations.

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

How AML/CTF Builds on TPB Requirements

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

  • Formal risk classification (low/medium/high)

  • Enhanced due diligence for high-risk scenarios

  • Beneficial ownership identification beyond client representatives

  • Source of wealth/funds verification for high-risk customers

  • Ongoing transaction monitoring

  • Suspicious Matter Report (SMR) filing capabilities

What You Will Need to Do: TPB Foundation + AML/CTF Enhancement Based On Customer Type

Individuals

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

AML/CTF Addition: Full name/aliases documentation, risk assessment, PEP/Sanctions screening

Companies/Partnerships

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

AML/CTF Addition: Complete beneficial ownership mapping, corporate structure analysis, industry risk assessment

Trusts

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

AML/CTF Addition: Trust type classification, complete beneficiary mapping, settlor verification, enhanced screening

Enhanced Due Diligence (EDD) Triggers

EDD can apply when:

  • Customer rated high/medium-risk

  • Foreign PEP involvement

  • High-risk jurisdiction connections

  • Unusual transaction patterns

  • Complex structures without a clear commercial purpose

EDD Requirements:

  • Source of wealth verification

  • Source of funds documentation

  • Enhanced ongoing monitoring

  • Senior management approval

Politically Exposed Persons (PEPs)

Foreign PEPs: Always high-risk, requiring source of wealth/funds documentation and ongoing monitoring

Domestic PEPs: Enhanced measures only when risk assessment indicates high risk

Ongoing Obligation: Continuous monitoring throughout the relationship.

Delayed Verification: Enhanced TPB Flexibility

TPB allows professional judgment for established clients. AML/CTF provides structured delayed verification:

  • Low ML/TF risk assessment required

  • No money movement until verification is complete

  • Standard services: 20 business days maximum

  • Real estate: 15 days or settlement

Leveraging Existing TPB Work

Your TPB verification satisfies AML/CTF when:

  • DVS verification meets identity confirmation standards

  • Authority documentation satisfies representative verification

  • Record-keeping provides an audit trail foundation

  • Risk assessment aligns with AML/CTF methodology

Additional Requirements:

  • Formal risk classification documentation

  • Screening for PEP’s/Sanctioned individuals

  • Enhanced due diligence procedures

  • Beneficial ownership beyond TPB scope

  • Ongoing monitoring systems

  • SMR preparation capabilities

Ongoing Monitoring

Monitor for patterns that don't fit normal client behaviour:

  • Multiple properties purchased in short periods

  • Sudden changes in transaction structures

  • Inconsistent funding sources

  • Complex arrangements across deals

  • Attempts to obscure ownership

Risk-Based CDD: Workflow Examples

Low-Risk: Individual Tax Returns

Client: Individual seeking annual tax return preparation

  • Verify the individual IDs against an independent source and biometric checks

  • Document the service purpose and risk classification

  • Record and report outcome in line with TPB requirements and AML-CTF obligations

Medium-Risk: Local Import Business with Cash Transactions

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

  • Complete verification of the company and its directors and significant shareholders using a reliable source plus enhanced cash transaction analysis

  • Note the purpose of the business, its nature and document the business structure and operational cash flow

  • Risk rate as Medium, apply ongoing monitoring through VerifiMe's surveillance capabilities

High-Risk: Offshore Individual -Looking to Incorporate Company

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

  • Identify and verify the instructing party

  • Full beneficial ownership verification of the foreign trust

  • Understand the nature and purpose of the business

  • Apply Enhanced Customer Due Diligence, including, though dependent on your program, source of wealth/funds documentation and PEP/sanctions screening

  • Enhanced 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.

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.

Yeowon Lee
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