Australia’s pubs and clubs are iconic institutions — central to community life, entertainment, and hospitality. But as the federal government moves forward with Tranche 2 of its Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) reforms, these venues may soon find themselves navigating unfamiliar regulatory territory. While aimed at curbing criminal financial activity, Tranche 2 compliance poses significant challenges for pubs and clubs, many of which are not currently equipped to meet the anticipated requirements.

What Is Tranche 2?

Tranche 2 refers to the long-anticipated extension of Australia’s AML/CTF regime to include additional sectors identified as vulnerable to money laundering and terrorism financing. These include real estate agents, lawyers, accountants, motor vehicle dealers — and potentially, pubs and clubs, particularly those operating high-risk activities such as gaming, large cash transactions, and financial services like remittance or stored value facilities.

This expansion is a response to international pressure, particularly from the Financial Action Task Force (FATF), which has long criticised Australia’s AML/CTF framework for failing to fully regulate “designated non-financial businesses and professions” (DNFBPs).

Why Pubs and Clubs Are in Focus

While primarily known for food, drink, and socialising, many pubs and clubs also operate gaming machines, host high-stakes events, and process large volumes of cash. These factors can create pathways for illicit money flows — through gambling, cash-based transactions, or even third-party remittance activities. As a result, they are increasingly being viewed as high-risk businesses under AML/CTF criteria.

Key Compliance Challenges

1. Complexity and Scope of Compliance Obligations

If brought under the AML/CTF regime, pubs and clubs would need to implement a range of compliance measures, including:

1. Customer due diligence (CDD)
2. Suspicious matter reporting (SMRs)
3. Ongoing transaction monitoring
4. Record-keeping and staff training

For many operators, these are entirely new responsibilities requiring deep structural and cultural change.

2. Limited Internal Resources and Expertise

Most pubs and clubs, particularly those in regional or small communities, lack dedicated compliance staff. Adapting to AML/CTF compliance could require hiring specialists or significantly retraining current staff — an expensive and time-consuming undertaking for businesses already dealing with cost pressures and labour shortages.

3. Cash-Heavy Environments

The reliance on cash transactions — still common in gaming and bar areas — increases both the risk of non-compliance and the complexity of monitoring and reporting. Transitioning toward traceable payments and tightening transaction oversight will be operationally difficult and potentially unpopular with patrons.

4. Privacy and Patron Trust

Customer due diligence could require pubs and clubs to verify patron identities or track gaming behavior, raising significant privacy concerns. Many regular patrons may resist what they perceive as surveillance, particularly in environments designed for leisure and anonymity.

5. Technology and Systems Gaps

Effective AML/CTF compliance often relies on robust IT systems to monitor transactions, flag anomalies, and generate reports. Many venues lack the digital infrastructure to support these functions, and retrofitting or upgrading systems could prove prohibitively expensive — especially for smaller clubs.

6. Inconsistent Regulatory Expectations

Without industry-specific guidance, pubs and clubs risk misinterpreting or underestimating their obligations. Unlike banks or casinos, they don’t have a long-established compliance culture or access to industry-standard templates and frameworks. A lack of clarity from AUSTRAC (the regulator) could result in inconsistent application and heightened regulatory risk.

Industry Concerns

Industry groups, including hospitality and club associations, have expressed concern that Tranche 2 compliance could:

1. Disproportionately affect small and community-based venues.
2. Increase administrative burdens without clear evidence of criminal activity within the sector.
3. Lead to unintended consequences, such as reduced patronage or the elimination of certain services.

Preparing for the Future

Despite the uncertainty, forward-thinking venues can begin preparing by:

1. Conducting a preliminary AML/CTF risk assessment.
2. Reviewing current cash handling and patron management practices.
3. Starting internal conversations about compliance culture and responsibilities.
4. Engaging with hospitality associations for updates and advocacy efforts.

Additionally, the government must support the sector through:

1. Clear, industry-specific guidelines.
2. Funding or subsidies for compliance infrastructure.
3. A phased or tiered implementation model that reflects the size and risk profile of different venues.

Conclusion

While the goals of Tranche 2 — enhancing transparency and reducing financial crime — are widely supported, its implementation poses real and immediate challenges for Australia’s pubs and clubs. Balancing regulatory expectations with the practical realities of hospitality operations will require collaboration, clarity, and support. Without these, there’s a risk that compliance burdens could undermine the viability of many community institutions, particularly smaller venues with limited capacity to adapt.

‍