Upbeat intro music
Rebecca Archer
Welcome back to Beyond the Numbers with Grant Thornton – a podcast unpacking marketplaces shifts in today’s dynamic business landscape.
I’m Rebecca Archer, and today I’m welcoming back AML experts Neil Jeans and Katherine Shamai. They’ve been busy travelling around the country, unpacking the Tranche 2 reforms, which will be enforceable AML/CTF compliance from 1 July 2026 for lawyers, accountants, real estate professionals, property developers and precious stone dealers. They’ve also been informing existing reporting entities of the new changes to their reporting requirements, which come into effect even sooner – 31 March 2026.
It has been announced that AUSTRAC will be insuring ‘starter kits’ for Tranche 2 reporting entities at the end of January 2026 to help them achieve compliance, reducing effort and cost and supporting a smooth transition when compliance deadlines come into effect.
So, with the compliance date fast approaching, guidance being issued, and AML/CTF compliance shaping up to be a focus in the first half of next year, how can we shift the mindset from compliance to strong change management within the Tranche 2 businesses?
Welcome back Neil & Katherine!
Katherine Shamai
Good to be here again, Rebecca.
Neil Jeans
Good to be here too.
Rebecca Archer
Alright, so first off, can you walk us through what the starter kits are?
Neil Jeans
The starter kits are a novel approach that AUSTRAC has adopted to help the new Tranche 2 entities – whether that's lawyers, accountants, real estate agents and conveyancers, and dealers in precious metals and precious stones – to achieve compliance.
I say it's novel because it's the first time anywhere in the world that a regulator has taken this bold step to support the regulated community in this way, driven by lessons learned.
Before the reforms came in this time last year, AUSTRAC conducted significant global consultation to find out what worked well, what worked poorly, and what regulators overseas would do differently. The starter kits are an initiative to address those insights and help Tranche 2 entities become compliant.
They consist of a series of workbooks that allow businesses to work through them to achieve baseline AML/CTF compliance. Again, in doing this, AUSTRAC has taken a novel approach, effectively giving you your risk assessment and policy, so all you need to do is complete and ultimately implement them.
The kits will be published in late January, and businesses will have until July to work through and implement them.
Rebecca Archer
And what exactly are they designed to achieve? What's the end game here?
Katherine Shamai
They are really designed to create a system that a small business can use to partially help them deal with clients. So how do you identify, assess, mitigate, manage the risk of your clients and meeting their reporting obligation, but also how to run your practice internally from the perspective of maintaining personnel, policies, procedures, systems to help you achieve all of this?
And it looks at it from a couple of different lenses as well. It looks at it from the lens of detecting – so how do you identify a risk or a customer or client that you might be onboarding that might be a risk? How to escalate it. So, if something happens during the course of a relationship, what are the escalation points?
And last but not least: action. So, what do you do if you do identify something, how do you meet your reporting obligations and the like? So, it is a very holistic view of how to achieve compliance, and when you get the starter kits, there are essentially three components to it: one is the risk guide. So, this is the risk assessment component of it. What to look out for, what are some of the indicators, etc.
The next bit is a policy bit. This sets out what you need to do and when you need to do it, essentially how to meet the obligations, and the last bit is the very practical toolkit, which provides you with the day-to-day business practice you need to implement, and this is really where, you know, a new reporting entity or a smaller practice or business need to focus their attention in terms of using these tools and adapting them and implementing them.
I think, though, with a lot of change that happens in any sort of compliance and regulatory space, you know, I would expect small businesses still need some help to implement these and to understand how to actually put them into practice because I think if you just read them potentially essentially you might understand the words, but not necessarily the intent or the practical reality of how do I use these tools in my everyday business to make sure I meet my obligations?
I think this is where peak bodies and professional bodies have a huge role to play in terms of educating their members and also their sectors on what's expected.
Rebecca Archer
Well, let’s just stay with that thought now Katherine. I guess we’re expecting the starter kits in early 2026 – that’s not too far away. What should we do once they land?
Katherine Shamai
So, once they land, absolutely pick them up and read them as the first port of call, and if you're a small business and you fit within that definition, complete them and start and start implementing them.
So, from the time they release up until 1 July, there's a small window of time, but really start getting into that habit and the practice and if you're not a small business and you look at the packs and you're going we’re just outside of that, you have the ability to adapt, but definitely read it through first and understanding what you have to adapt to make it fit your practice and your business. Update the program. So obviously can't leave it undocumented. Update the program and implement it.
I might say, before even they land, start thinking about your business. What kind of customers do you have, what kind of people do we deal with and what services do we provide?
Rebecca Archer
Are these kits something every Tranche 2 entity can use, or are there limitations?
Neil Jeans
By definition, there are limitations. They are aimed at the smaller end of town and that's where we suspect that the most support will ultimately be provided, but effectively think about these things as policies.
So, AUSTRAC are basically telling the Tranche 2 sectors what they need to do to comply, and again, because those sectors are very different, that is an accountant is very different from a lawyer and a lawyer is very different from a real estate agent, as examples, there are unique starter kits for each of the sectors because the risks, the money laundering and terrorist financing risks in those sectors are different, and the way that the Act and Rules has been crafted, there are some additional requirements but also some relaxations in – particularly in the rules – for particular sectors. So, those have had to be incorporated into the starter kits. That's why they are relevant to each sector rather than being a more generic starter kit for every Tranche 2 entity.
That means they're very much tailored to those businesses. They should be very practical hopefully to those businesses. A couple of examples around that: for the real estate sector there is different timings around buying and selling real estate, and also there's an ability to place reliance between the conveyancer and the real estate agent.
Similarly, for lawyers, because of legal professional privilege, they have additional time to apply for waivers against privilege before they file a suspicious matter report to the authorities. So, those nuances – they're edge cases, they're about a 5 per cent variation, but effectively they are quite important variations for each of the sectors.
Rebecca Archer
You have mentioned that this goes beyond just ticking compliance boxes. It really does need solid business and change management foundations. Could you perhaps unpack that a little bit further for us?
Katherine Shamai
It is absolutely more than just about compliance; it needs to change in the way that we think about how we interact with clients, how we think about certain business decisions that's taken for granted, and it's not just implementing a new process and thinking that it's just going to keep ticking and keep going.
One of the things that we see when we conduct reviews of existing reporting entities is the lack of adherence or sticking with the control and performing it consistently over time, and that is a cultural change for a lot of smaller practices; it is another thing that they need to do, but there are time frames attached to a lot of the reporting obligations. So, it's really important that culturally this is embedded into the day-to-day practice.
And in a lot of businesses – particularly accountants and lawyers – there is the client take on process already. It's just how do we embed the AML element into client take on and expand it where needed? And it's important to remember that not doing this correctly will result in the cost to the business from a penalty perspective. But also, you know, the cost of audits and remediation is expensive as well.
So, we often say doing it once, doing it right the first time, it's a lot more practical than trying to retrofit something. And again, while there's a small window of time to embed once the starter kits come out, it is worth the practice run and the soft run if you have the capacity and dedicate the time to it.
So, planning early, what does that look like in my business? What does that look like in my practice? Who's going to be doing what? It's critically important as a planning step. I think part of it also is thinking through what does this mean for our clients and how we work with our clients and how do we educate and train our team to recognise red flags, recognise risk factors and empower them to speak up if they see those things?
Rebecca Archer
Cultural change can always be quite challenging in any business – large or small. Have you got any sort of tangible, practical tips for how businesses can embed this new practice and make it as seamless as possible within the culture of the business?
Katherine Shamai
Cultural change is hard when people don't understand why they're doing something. So, I think one of the really important handy tips is make it practical; make it real. Why is it that we're doing this? And this isn't to comply with an obligation; it's really making our financial systems more secure and making our community more secure and protecting it from illicit funds and illicit activities.
So, I think once people understand what this is about and what we're looking for and why it's so important as an overall piece to the puzzle, that creates a more sensible buy in, and of course, reminding people of penalties always has a scare factor as well.
Rebecca Archer
I wonder if there's maybe a risk that the implementation of these new regulations might slow down how things currently operate, or do you sort of foresee that it will be integrated quite smoothly?
Neil Jeans
Rebecca, I think you're 100 per cent – there is a risk. This is a substantive piece of legislation. These are primarily new obligations. Although in our experience, well-run business will be doing a fair chunk of these things. They're just not calling it Anti-Money Laundering at the moment, but there are significant challenges and to reflect on what Katherine has said, time is important. We have very little time now. You need to spend that time wisely.
And the more time you start to think about your business, understand the impacts of the business, the less risk there is that actually you are going to slow down the business or have an unintended consequence or an unavoidable impact and actually integration will go smoothly.
So, the clients that we're working with at the moment are already thinking about how they bring this to life in their businesses – potentially before the legislative requirements start on 1 July. So, doing sort of dry runs or practice tests the couple of months before. But also, what they're also doing is thinking deeply about what the obligations are requiring and then working out what the most practicable and sensible approaches are for their business.
Those are the ones that I think are going to be very, very well prepared. But there could be inertia in the system. If you think about it, you've got all these businesses in lawyers, accountants, real estate and other sectors and conveyancers that are now going to have to do due diligence on their clients to the extent that they've never done before. So, that means that potentially the customer experience could be significantly damaged.
We're hearing from AUSTRAC that they are going to be doing more national promotions closer to the time. So, you know the public know that your real estate agent isn't asking this just because they're being nosy or collecting this documentation just because they think they can; it’s a part of their legal regulatory obligations, but actually thinking deeply about this in your business is quite important.
So, to take the Customer Due Diligence example is a good example. There are different ways that you can approach the challenge of doing Customer Due Diligence. Do I meet my customers face-to-face? Well, that's easy. I can collect their passport or their driving license, ask them a series of questions and my work is going to be done.
If they're remote and overseas, I might use other ways of doing it – maybe electronic verification, for example. I need to screen my customers for risk. Do I do that on a manual process, or do I have the volumes and want to speed this up? So therefore, use external vendors and providers, and again, making these decisions are going to be quite important because they come with impact on the business, but also cost on the business. There's that balance between making it easy for everybody but actually maybe paying a little bit more, and that's the sort of calculation that a lot of businesses are going to have to go through in the next six months.
Rebecca Archer
The compliance deadline is fast approaching. What’s your top advice for Tranche 2 entities right now?
Neil Jeans
That's a great sort of maybe call to action before Christmas, because as Katherine mentioned, time is not your friend here. Time will disappear very, very quickly and we'll be back after our Christmas breaks and then we'll blink, and it'll be July as it tends to happen every year, but effectively you can work out what the impact on your business is going to be already because effectively, unless your business is going to dramatically change in the next six months, what you're doing today is exactly what will be AML-regulated tomorrow.
So, we're advising clients – particularly with this window between Christmas and New Year when things do get quiet, but maybe over the Christmas/New Year break if you've got a bit of time and capacity – think about understanding where, how and who within your business is providing the designated services, because that's the bit of your business that’s going to be caught.
There's going to be some stuff that isn't going to be caught by the designated services. So, working that out is quite important, and following on from that, understand the number of times in the last 12 months – because you know what your business is – who you've provided designated services to – that will give you an insight into what the future looks like. There's a lot of work also around governance, but I'll let Katherine cover that because she's our governance expert.
Katherine Shamai
Thanks, Neil. So, you do need to work out who your governing body and your senior manager is, and if you're a sole practitioner, that's a pretty easy one to solve, but if you're in a partnership, you might need to have a think about what those definitions mean and what does it mean to take on those roles as well.
You also need to identify your compliance officer and again, that has a very particular definition in terms of obligations and what they’re responsible for. So, looking at who in your practice is best placed to support that and also factoring in the fact that they probably need some extra training to get them up to speed on the requirements. Where are they going to source that; what kind of support are they going to need? Is it short term, is it long term, ongoing? And whether there are any systems or anything that you need to implement that will take a bit of longer-term planning.
But I think we were talking to a number of smaller practices last week and one of the things that I think is quite practical, instead of thinking through a complex project plan, think of it as a prioritised to-do list.
So, taking the time – whether it's before Christmas or in the quiet of January when everyone's just back and refreshed – just taking a little bit of time to pause and think of all those questions that Neil just posed, but also what do I need to do and map that out from a prioritised task list perspective. What's going to be most impactful, easy wins, what is going to take me longer and what do I need to get started?
So, thinking it through that way and having a clear plan and giving yourself then the permission to say, I will tackle one thing a week and that will take me to compliance by hopefully June, that might give a bit of comfort and make it more accessible and digestible as well, because otherwise it can feel very overwhelming to look at all the packs and go, I have to do all of this by the 1 July and have it operating effectively.
Neil Jeans
And the last piece of advice, which is probably the most important piece of advice for you, is have a great Christmas, get some rest, enjoy seeing your family and your friends, because look, I think hopefully you're starting to realise that the first half of 2026 is going to be a very busy time, and it's going to result in changes to your business.
Again, prepare, plan, prioritise, are the key important messages that hopefully you'll take into the Christmas break.
Rebecca Archer
Neil and Katherine, thank you so much for coming on the show once again. For those people who are listening who might wish to connect and delve deeper into the work that you're doing and maybe even explore potential ways that you can help them, what's the best way for them to find you?
Neil Jeans
There are various ways. Obviously, we're on LinkedIn; you can contact us there. We also have an AML hub, a website which has our contact details in and ultimately, we also have AML alerts and newsletters that come out on a regular basis.
So again, we're out there. Feel free if you've got a question, if we can, happy to answer those questions. And again, this is about supporting the industry to become compliant, and again, as Katherine said at the top of the presentation, about helping protect the financial system and the abuse of that by criminal elements.
Interested in who we interview outside of our firm? Have you heard about our other podcast series The Remarkables? Listen as we uncover and explore remarkable stories about incredible people working to better their local (and sometimes global!) communities and inspire younger generations. A link to series will be in the show notes.
If you liked this podcast and would like to hear more, you can find and subscribe to Grant Thornton Australia on Apple Podcasts or Spotify. Leave us a review or ideas on who you’d like to hear from next. Thank you for listening.
Upbeat outro music
