Australia’s gambling and wagering industry is no stranger to regulatory pressure. From advertising restrictions to responsible gambling requirements, compliance is part of daily operations for bookmakers and betting agencies. However, the upcoming Tranche 2 Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) reforms represent a significant escalation in expectations—particularly for small and mid-sized operators.

Tranche 2 aims to bring Australia into alignment with global best practices by expanding the AML/CTF regime to include previously uncovered “gatekeeper” sectors. While many casino operators are already within scope under Tranche 1, bookmakers and betting agencies—especially online or boutique firms—will be under greater scrutiny. And the challenges they face are real.

In this article, we explore the key challenges facing Australian operators in the betting industry as they prepare for the tightening net of Tranche 2 compliance.

1. Clarity and Scope of Obligations

One of the biggest challenges for operators is navigating the grey zone. Many betting agencies assume that AML/CTF compliance applies only to casinos or large gaming institutions. In reality, Tranche 2 is expected to close that loophole, explicitly bringing betting, online wagering, and sports bookmakers under regulatory oversight.

Key questions operators must address:

1. Will your business be classified as a reporting entity?
2. Are all your products (e.g., tote betting, fixed odds, online betting wallets) subject to CDD obligations?
3. What thresholds trigger AML/CTF reporting?

Challenge: SMEs must understand exactly where they stand under Tranche 2 and how far their obligations extend—before enforcement begins.

2. Verifying Customer Identity in a Frictionless Way

Online betting platforms, mobile apps, and self-service kiosks are designed for speed and ease of use. Yet, Tranche 2 will require enhanced Know Your Customer (KYC) processes—including identity verification, source of funds checks, and ongoing customer due diligence.

This creates tension between:

1. Offering a seamless user experience
2. Collecting robust documentation (e.g., government-issued IDs, proof of address)
3. Ensuring identity verification is not easily bypassed

Pain point: Many operators lack integrated eKYC tools or rely on manual processes that are both error-prone and slow.

3. Monitoring for Suspicious Activity in High-Volume, Fast-Moving Environments

Betting platforms process thousands of microtransactions daily, often in real time. Tranche 2 compliance will demand systems capable of:

1. Identifying patterns such as structuring (breaking up large deposits)
2. Detecting suspicious betting behavior (e.g., consistent large bets with cash-outs)
3. Triggering alerts for suspicious matter reports (SMRs) and threshold transaction reports (TTRs)

Operational challenge: Smaller operators may not have access to enterprise-grade transaction monitoring tools—or the data science team to make them effective.

4. Managing High-Risk Customer Types

The betting industry often attracts high-risk profiles, including:

1. Politically Exposed Persons (PEPs)
2. Individuals using proxies to place bets
3. Syndicate bettors or participants in matched betting schemes
4. International customers placing large online wagers

Under Tranche 2, enhanced due diligence (EDD) becomes mandatory for high-risk customers. This means assessing risk at onboarding, tracking ongoing activity, and being prepared to refuse or exit relationships where risk cannot be managed.

Complexity: Identifying and managing high-risk bettors without breaching privacy or alienating legitimate customers is a delicate balancing act.

5. Legacy Systems and Data Fragmentation

Many operators run their platforms on legacy systems or outsource key components like payments and customer management. This creates serious challenges for:

1. Integrating monitoring tools across platforms
2. Ensuring data visibility across in-store and online environments
3. Retaining customer and transaction records for at least seven years, as required under the AML/CTF Act

Tech challenge: Fragmented architecture means compliance teams can’t see the full picture, making accurate risk assessments difficult.

6. Training and Culture Change in a Fast-Paced Industry

From customer service agents to kiosk staff and digital product teams, all employees have a role to play in AML/CTF compliance. However, betting agencies—especially SMEs—often lack formal training programs or dedicated compliance officers.

Tranche 2 raises expectations for:

1. Staff education around red flags (e.g., cash-in/cash-out behaviour, proxy betting)
2. Escalation and internal reporting processes
3. Clear compliance ownership and accountability

Human factor: Culture change is often the hardest part—compliance needs to shift from a back-office task to a frontline priority.

7. Cost of Compliance vs. Revenue Margins

For smaller operators or regional betting agencies, compliance can feel like a heavy cost burden—especially when operating on thin margins.

Expenses include:

1. Upgrading systems for KYC and transaction monitoring
2. Hiring or contracting AML compliance professionals
3. Paying for annual audits or independent reviews

Challenge: Striking a balance between commercial viability and regulatory readiness is a growing concern for SME betting businesses.

8. Regulatory Engagement and Readiness

Tranche 2 will give AUSTRAC greater enforcement powers, and regulators are likely to conduct more audits, reviews, and enforcement actions in the early stages of rollout.

Operators must:

1. Be audit-ready with all policies, procedures, and transaction data documented
2. Establish clear communication protocols for lodging SMRs and responding to queries
3. Be proactive in engaging with AUSTRAC guidance and industry working groups

Risk: Unprepared operators may find themselves exposed early on, especially during the transition period and industry consultation phase.

Final Thoughts: A Regulatory Shift Worth Preparing For

While Tranche 2 may feel like a major disruption, it’s also a necessary evolution—designed to clean up vulnerabilities in Australia’s financial system and reduce the risk of criminal exploitation of betting platforms.

For Australian bookmakers and betting agencies, the challenge is real—but so is the opportunity.

1. Strengthen internal controls
2. Build long-term trust with regulators and customers
3. Position your business as a compliant, transparent operator in a crowded market

Need Help Getting Ahead of Tranche 2?
We offer tailored AML/CTF support for betting agencies and wagering platforms, including AML Program reviews, eKYC integration, and staff training packages.

Start preparing today—because in the compliance game, being reactive is a losing bet.

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