If you run a real estate agency, a law firm or an accounting practice, you are a Tranche 2 reporting entity. Most of the AML advice you have read this year was not written for you. It was written for Tranche 1, the banks and casinos and remittance dealers who have been in this regime for nearly 20 years, and a lot of it does not apply to you. Some of it will actively mislead you about your own deadlines.

I am going to lay out the difference plainly, because the gap between the two groups is where I see newly regulated firms make their first real mistake. The dangerous version of that mistake is reading a Tranche 1 timeline and assuming you have the same breathing room. You do not. That is the one thing in this article I would underline twice.

Who Tranche 1 and Tranche 2 actually are

The two tranches are just the two waves in which Australia brought businesses into the AML/CTF regime.

Tranche 1 is the original group, regulated since 2006: banks, credit unions, remittance and money transfer providers, casinos and other gambling operators, bullion dealers, and more recently digital currency exchanges. They have had risk programs, compliance officers and AUSTRAC reporting for years.

Tranche 2 is the new group, brought in by the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024. It captures the so called gatekeeper professions: real estate agencies, conveyancers, law firms, accountants, and dealers in precious metals and stones. Roughly 80,000 to 90,000 businesses that, until now, had no AML obligations at all.

The label matters less than what it does to your dates and your starting point. A Tranche 1 bank is editing a 20 year old program to meet new rules. You are building one from nothing. The law treats those two situations very differently, and that is the whole point of this comparison.

Figure 1. The two tranches: who was already in, and who is being brought in now.

The differences that actually affect you

There are 5 differences worth knowing. The first 4 are about timing and starting point. The 5th, the transition period, is the one that bites, so I have given it its own section below.

1. Different commencement dates

Tranche 1 entities moved onto the reformed rules on 31 March 2026. Tranche 2 obligations commence on 1 July 2026. So when you read that “the new rules started in March,” that is true for banks. For you the start line is July. The reform reaches the two groups on different days, and your day is later.

2. Different enrolment position

Tranche 1 entities are already enrolled with AUSTRAC and are updating their details. You are enrolling for the first time. Enrolment opened for Tranche 2 on 31 March 2026, and if you provide a designated service from 1 July you must enrol within 28 days, which puts the deadline at 29 July 2026. A bank does not have a first enrolment to make. You do, and missing it carries a daily penalty.

3. Different compliance officer deadlines

Existing reporting entities had until 30 May 2026 to notify AUSTRAC of their AML/CTF compliance officer. Tranche 2 entities have until 29 July 2026, the same date as the enrolment deadline. The deadlines look similar but they are not the same date, and they come from your different start points, so do not copy a Tranche 1 checklist that says May.

4. Different reporting forms, for now

This one is subtle. Existing Tranche 1 entities can keep using their old suspicious matter and threshold transaction report forms until 2029 under a transitional rule. You, as a new entity, use the reformed reporting framework from the start. You never had old forms to keep, so there is nothing to transition. You begin on the new system, which is cleaner, but it also means any guidance about “the old form until 2029” is simply not about you.

5. Designated business groups are gone

Tranche 1 had a concept called the designated business group, a way for related entities to share compliance. That concept ceased on 31 March 2026 and was replaced by the reporting group. If you are reading older material that tells you to set up a designated business group, that advice is out of date for everyone, including you. For a new firm it is mostly academic, but if you have related entities (an agency and a separate rent roll company, say) the structure you want is a reporting group, not the old term.

Figure 2. The same reform, two timelines. Tranche 1 dates in the upper band, Tranche 2 in the lower.

The transition period: the trap that catches new firms

Here is the single most important difference, and the one most likely to hurt you if you get it wrong.

Tranche 1 entities got a 3 year grace period on initial customer due diligence. From 31 March 2026 to 30 March 2029, an existing reporting entity can keep using its old customer identification procedures, known as ACIP, while it upgrades to the new CDD framework. Three years of runway to change systems gradually.

Tranche 2 entities do not get that runway. The transitional rule says so directly: the initial CDD transition does not apply to newly regulated businesses that commence enrolment from 31 March 2026. You enter the reformed framework on day one. On 1 July 2026 your full CDD obligation is live, at the new standard, with no ACIP fallback, because you never had an ACIP to fall back on.

Read that against the marketing you are seeing. A vendor or a consultant who works mostly with banks may tell you there is a 3 year transition. There is, for their usual clients. There is not one for you. If you build your plan around a 2029 horizon you will be roughly 3 years late on the day you open.

Figure 3. The transition gap. Tranche 1 can phase initial CDD to 2029. Tranche 2 is at full standard from 1 July 2026.

I had this exact conversation with a principal at a mid size agency in March. He had been to a seminar run for the financial services sector and come away relaxed, because the headline message there was “you have until 2029.” He genuinely believed he had 3 years before his customer due diligence had to be at full standard. He did not. The seminar was right for the room it was in, a room full of Tranche 1 entities. He was the only Tranche 2 firm in it, and nobody had drawn the line for him.
We rebuilt his plan against a 1 July 2026 date that afternoon. The relief he had walked in with was the most expensive thing in the room, because it had cost him 2 months he thought he still had. If you take one thing from this article, take the date that applies to you, not the one that applied to the person who gave the talk.

What is the same for both

The differences are real, but do not overcorrect into thinking you are running a different regime. Once you are in, the core obligations are the same ones every reporting entity carries.

You appoint a compliance officer. You run an ML/TF risk assessment and maintain an AML/CTF program. You do customer due diligence before you provide a designated service, with enhanced checks where risk is higher. You screen for politically exposed persons and sanctions. You report suspicious matters. You keep records for 7 years. The standard you are held to is the same standard a bank is held to. The reform did not write an easier rulebook for small firms. It just brought you into the existing one.

So the right reading of this comparison is narrow. You are not exempt from anything by being new. You simply have different dates, a different starting point, and crucially no transition cushion. Everything else, you share with the institutions that have been doing this for 20 years.

The regulatory detail

Source of the two tranches

The AML/CTF regime is established by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), register reference C2006A00169. Tranche 1 sectors have been regulated under it since commencement. Tranche 2 sectors are brought in by the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth), register reference C2024A00110, with operational detail in the Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 (Cth), F2025L01026. Designated services for Tranche 2 sectors commence on 1 July 2026.

Key dates, both tranches

31 March 2026: reformed rules commence for existing (Tranche 1) reporting entities; AUSTRAC enrolment opens for Tranche 2; ongoing CDD obligation begins for all existing entities with no transition; designated business group concept ceases and is replaced by the reporting group.

30 May 2026: deadline for existing reporting entities to notify AUSTRAC of their AML/CTF compliance officer.

1 July 2026: Tranche 2 obligations commence. Penalty unit value scheduled for reindexation under the Crimes Act 1914 (Cth) s4AA on this date; unit counts stay fixed, the dollar conversion rises.

29 July 2026: Tranche 2 enrolment deadline (28 days after first providing a designated service from commencement) and Tranche 2 compliance officer notification deadline.

30 March 2029: end of the 3 year initial CDD transition period for existing reporting entities. Not available to Tranche 2.

The initial CDD transition (Tranche 1 only)

Under the transitional rules made by the Minister for Home Affairs under Schedule 12 of the Amendment Act 2024, an entity enrolled as a reporting entity on 30 March 2026 may continue to use its applicable customer identification procedures (ACIP) instead of the new initial CDD obligations, from 31 March 2026 to 31 March 2029, if it maintains AML/CTF policies requiring ACIP that complied with the Rules in force on that date. This transitional period does not apply to newly regulated (Tranche 2) businesses that commence enrolment from 31 March 2026. Ongoing CDD applies to existing entities from 31 March 2026 regardless of the initial CDD method chosen.

Reporting forms transition (Tranche 1 only)

Existing reporting entities may continue using existing suspicious matter and threshold transaction report forms until 2029 under Rules 12-1 to 12-4. Newly regulated entities use the reformed reporting framework from commencement.

Frequently asked questions

Am I Tranche 1 or Tranche 2?

If you are a real estate agency, conveyancer, law firm, accountant or dealer in precious metals or stones, and you did not have AML/CTF obligations before 2026, you are Tranche 2. Tranche 1 is banks, remittance providers, casinos and other gambling operators, bullion dealers and digital currency exchanges, who have been regulated since 2006.

Do Tranche 2 firms get the 3 year CDD transition?

No. The 3 year initial CDD transition period, running 31 March 2026 to 30 March 2029, applies only to existing reporting entities. It does not apply to newly regulated Tranche 2 businesses. Tranche 2 entities meet the full customer due diligence standard from 1 July 2026.

When do my obligations start?

Tranche 2 obligations commence on 1 July 2026. The reformed rules started for Tranche 1 entities earlier, on 31 March 2026, which is why a lot of general AML coverage refers to a March start. That March date is not your date.

When do I have to enrol and notify my compliance officer?

If you provide a designated service from 1 July 2026, you must enrol with AUSTRAC within 28 days, by 29 July 2026, and notify AUSTRAC of your compliance officer by the same date. Existing entities had an earlier compliance officer deadline of 30 May 2026, which does not apply to you.

Is the compliance standard lower for small Tranche 2 firms?

No. The obligations are scaled to your risk, not relaxed because you are new or small. You carry the same core duties as a Tranche 1 entity: a program, customer due diligence, reporting and 7 year record keeping. Being newly regulated changes your dates and your starting point, not the standard.

Sources

Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth): legislation.gov.au/C2006A00169/latest

Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth): legislation.gov.au/C2024A00110/latest

Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 (Cth), F2025L01026: legislation.gov.au/F2025L01026/latest

AUSTRAC, AML/CTF transitional rules 2026: austrac.gov.au/about-us/legislation/updates-legislation/amlctf-transitional-rules-2026

AUSTRAC, AML/CTF transitional rules update: austrac.gov.au/reforms/amlctf-transitional-rules-update

AUSTRAC, Summary of changes for current reporting entities (reform): austrac.gov.au/amlctf-reform/reforms-guidance/before-you-start/summary-changes-current-reporting-entities-reform

Crimes Act 1914 (Cth), s4AA (penalty unit value and indexation).