A milestone for Australia: Tranche 2 sets the stage for a safer financial landscape

As Australia's dreaded Tranche 2 legislation gains approval, we should in fact celebrate the positive impact it promises for the country's financial and social situation. With this expansion of the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act 2006, Australia is poised to significantly bolster its defences against illicit financial activities.

This development looks set to usher in a new era of transparency, accountability, and enhanced safeguards for our nation's economy and security.

A big step forward

The Tranche 2 legislation is a big step forward for Australia. Extending the regulatory reach of AUSTRAC (Australia’s financial crime agency) to include professional services firms, including law, real estate and accounting, will be a powerful deterrent against money laundering, terrorist financing, and other illicit activities that pose a threat to our financial system. What’s more, the decision to expand the coverage to a remarkable 115,000 organisations, compared to the current 15,000, demonstrates Australia's commitment to ensuring that no avenue is left unchecked in the fight against financial crimes.

One of the primary benefits of Tranche 2 is that it will enhance the due diligence processes of professional services firms. These firms, known as gatekeeper organisations, play a pivotal role, either deliberately or unwittingly, in, allowing criminal funds to enter the Australian market by facilitating ‘dirty’ financial transactions.

By bringing them within the regulatory framework, Tranche 2 allows these firms to implement robust anti-money laundering measures, effectively closing potential loopholes exploited by criminals, and keeping Australia safe. This newfound scrutiny will undoubtedly fortify Australia's financial sector, protecting it from becoming a safe haven for illicit funds and reinstating public trust in our system.

Aligning with global standards

Moreover, Tranche 2 enables Australia to align itself more closely with international standards and best practices. As financial crimes increasingly transcend borders, global collaboration and harmonisation of regulatory frameworks become imperative. The legislation's comprehensive scope demonstrates Australia's commitment to fulfilling its international obligations and taking a proactive stance against money laundering and terrorist financing. By doing so, Australia strengthens its reputation as a responsible global player and a nation that prioritises the integrity of its financial system.

It also avoids a significant economic hit. According to the IMF, countries put on the FATF’s ‘grey list’ suffer an average net loss of 7.68% of capital flow into their states relative to GDP. Not to mention the reputational damage.

A fairer financial system

The implementation of Tranche 2 is not merely a legal requirement; it represents a fundamental step towards a fairer and more secure society. By combating money laundering and terrorist financing, the legislation helps protect everyday Australians from the economic and social consequences of these crimes. It curtails the negative impact of illicit funds on house prices, reduces wealth disparities, and safeguards the integrity of our property market.

As Tranche 2 takes effect, it is imperative for the Australian government, regulatory authorities, and industry stakeholders to work hand in hand to ensure its successful implementation. Adequate resources, robust training programs, and effective enforcement mechanisms must be put in place to support the organisations that fall under the expanded regulatory framework. 

As noted in late 2022 by Corrs Chambers Westgarth partner and regulatory expert Anna Ross, “Digital innovation means there are opportunities to be quite streamlined in the way tranche two entities are regulated,” which would ease compliance burdens. “It’s too important to avoid, it’s more about finding the right balance and right way forward.”

This collaborative approach will further solidify Australia's financial resilience and position the country as a global leader in combating financial crime.

A milestone for Australia

Tranche 2 is a significant milestone for Australia. It propels the country toward a future where the financial system operates with heightened transparency, accountability, and resilience.

With professional services firms now under the oversight of AUSTRAC, Australia stands stronger in the global fight against money laundering and terrorist financing. Let’s embrace this opportunity to increase the integrity of our financial system and make it easier for everyday people to access the financial system while limiting criminal exploitation.

About First AML

First AML is an AML technology provider, and the maker of Source, an all-in-one AML platform. Source powers thousands of compliance experts around the globe to reduce the time and cost burden of complex and international entity KYC. Its enterprise-wide, long term approach to the KYC / CDD data lifecycle addresses time and cost challenges while minimising compliance, reputational and security risks.

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