Tranche 2 refers to a set of proposed reforms that will extend Australia's Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regulations.

It will cover designated non-financial businesses and professions like lawyers, accountants, real estate agents, and trust and company service providers. 

Phase 1:

• Introduced in 2006, it focused on the financial services sector, including banks and casinos.

Phase 2:

• Expands the scope to include non-financial designated non-financial businesses and professions (otherwise known as DNFBPs) that are considered high-risk for money laundering.
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• Mandates more stringent customer due diligence, transparency of beneficial ownership, and continuous transaction monitoring.

• To align with (Financial Action Task Force) FATF standards and avoid potential greylisting for deficient AML law
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• To address regulatory gaps that made Australia vulnerable to money laundering
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• To modernise the AML regime against evolving financial crime threats

Tranche 2 will directly impact and regulate:
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• Lawyers and legal professionals
• Accountants and accounting firms
• Real estate agents
• Trust and company service providers

For covered DNFBPs, it will mean new obligations like:

• Implementing robust customer due diligence (CDD) and Know Your Customer (KYC)
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• Verifying beneficial owners and sources of funds
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• Enhancing transaction monitoring to detect and report suspicious activities
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• Appointing an AML/CTF compliance officer and training staff
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• Potentially higher compliance costs

A rough timeline for Implementation‍

• Government consultation concluding soon (as of early 2024)
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• Legislation to be drafted and passed in 2024
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• Implementation period of 6-12 months
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• Target to be fully operational before Australia's 2026 FATF evaluation

Enforcement and Penalties could include:

• AUSTRAC will get enhanced enforcement powers like investigations, penalties, injunctions
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• Civil penalties up to millions of dollars for non-compliance 
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• Criminal sanctions like fines and imprisonment for serious offences