Are banks ready for Australia’s Tranche 2 AML/CTF reforms?

The short answer is yes, but only for those ready to act. Tranche 2 introduces structured beneficial ownership data, traceable lineage from source to decision, and stronger audit trails.

In this blog, we explain what’s changing, why it matters, and how Encompass supports banks and compliance teams in adapting to the new landscape.

Understanding Tranche 2 AML/CTF reforms

Australia’s Tranche 2 reforms extend Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) obligations to gatekeeper professions. These include lawyers, accountants, real estate agents, aligning Australia with global FATF expectations after years of delays.

The goal is clear: close well-known blind spots in real estate and corporate structuring channels. These sectors will now be required to:

• Perform risk-based customer due diligence
• Maintain auditable beneficial ownership records
• Report suspicious activity to AUSTRAC

For banks, this means upstream data that feeds financial system risk decisions will shift from a patchwork of PDFs and declarations to a traceable, evidence-based ecosystem.

Why banks should care

While headlines focus on newly regulated professions, the most impacted audience is banks.

Banks rely heavily on corporate records, trust deeds, property documentation, and professional certifications, the exact evidence Tranche 2 aims to structure, standardize, validate and make more transparent. Supervisory expectations will rise, and banks must be able to prove that decisions are based on accurate, traceable data.

Tranche 2 is therefore not just more paperwork, it is a structural change in how data flows from clients and gatekeepers to banks.

Key changes include:

• Deeper, structured beneficial ownership information
• Traceability from source data to risk decisions
• Mandatory record-keeping expectations
• Broader data sharing with AUSTRAC across the transaction journey

Practical implications for banks

Banks must now validate the regulated data they receive and demonstrate traceable, auditable decision-making. We will see static onboarding “files” will struggle in this world as KYC becomes a dynamic profile, not a PDF binder. The shift demands real-time, structured data management, an area where automation becomes essential.

Notable implications:

• KYC processes will become more complex and dynamic
• Increased volume of PEP/sanctions/adverse media checks
• Greater lineage scrutiny in audits and post-event reviews
• Reduced viability of static onboarding “files”. PDFs and scanned documents will struggle in a dynamic, data-driven world

The role of automation

Manual compliance processes and throwing more analysts at the problem cannot scale under Tranche 2. Banks that treat this as a structured data and automation opportunity will gain efficiency, accuracy, and stronger regulatory confidence.

Encompass EC 360 enables banks to:

• Automate evidence collection from trusted sources
• Dynamically build beneficial ownership graphs
• Maintain end-to-end data lineage from source to decision
• Orchestrate sanctions, PEP, and adverse media checks automatically
• Reduce case handling times and rework rates

Automation turns compliance from a manual, time-consuming task into a real-time, auditable, and scalable process, enabling banks to manage risk and maintain oversight without increasing headcount.

Introducing Corporate Digital Identity (CDI)

CDI supports Tranche 2 by providing a standardized, consistent, and verifiable representation of a corporate entity or trust. It unifies public and private data into a comprehensive corporate profile in real-time that can be used across departments and geographies. By combining CDI with structured automation banks can:

• Maintain a single, trusted client view across divisions
• Standardize onboarding and risk assessments
• Reduce manual effort and duplication
• Enhance data quality and reduce costs across multiple purchases
• Deliver measurable operational, financial benefits and ROI

In practice, CDI ensures that every entity a bank engages with has a verified digital identity, making decision-making faster, more accurate, and auditable.

Real-world example: onboarding a property trust

Before Tranche 2, onboarding a property trust relied on client-supplied documents and manual verification. Post-Tranche 2, banks must validate and monitor every detail.

With Encompass EC 360, banks can:

• Automatically source and verify data from multiple registries
• Dynamically map beneficial ownership structures
• Automate sanctions, PEP, and adverse media checks
• Maintain full audit-ready data lineage

The result: faster onboarding, lower operational risk, and compliance as a strategic advantage.

From compliance to competitive advantage

Tranche 2 is not about more paperwork; it is about turning better, actionable data into a strategic advantage. Banks that act now will define the next era of data-driven compliance in Australia.

As Australia aligns with global FATF standards, Tranche 2 modernizes KYC and KYB processes. Waiting, risks costly remediation and operational disruption. Banks that embrace structured-data transformation will onboard clients faster, reduce costs, generate cleaner audit artefacts, and maintain traceable data lineage as the core compliance asset.

In this new landscape, automation and intelligent data management separate leaders from laggards, making compliance a forward-looking, strategic capability.