Australia’s financial crime landscape is evolving, and with the impending Tranche 2 AML/CTF reforms, motor vehicle dealers (MVDs)—especially those operating as small to medium-sized enterprises (SMEs)—need to prepare for increased scrutiny and new regulatory responsibilities.

Historically excluded from the scope of Australia’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regime, motor vehicle dealers may soon be designated as reporting entities, especially when handling high-value cash transactions or providing certain types of financial arrangements like loans or consignment sales. Now is the time to get ahead of the curve.

Why Are Motor Vehicle Dealers Being Included in Tranche 2?

The Tranche 2 reforms aim to align Australia with global standards set by the Financial Action Task Force (FATF), which has long called on Australia to include high-risk professions and non-financial businesses in its AML/CTF framework.

Motor vehicle dealers are seen as a risk due to:

• The high-value nature of vehicles, often used to launder illicit funds
• Acceptance of large cash payments
• Third-party financing arrangements, which can obscure ownership
• The use of luxury vehicles to store or move value across borders

Your Key Priorities as an SME Motor Vehicle Dealer

1. Understand Your Risk Profile

Start with a risk assessment:

• Do you accept cash payments over $10,000?
• Do you facilitate vehicle sales on consignment?
• Do you offer in-house or third-party financing?
• Are you selling high-end, luxury, or collectible vehicles?

The answers will help you determine how exposed your business is to financial crime and where compliance obligations may apply.

2. Get Ahead by Designing an AML/CTF Compliance Program

If Tranche 2 includes motor vehicle dealers as reporting entities, you will likely be required to implement a risk-based AML/CTF program. Your program should:

• Identify high-risk transactions and customer types
• Outline how you’ll monitor and report suspicious activity
• Include ongoing due diligence and customer verification steps
• Be documented, regularly reviewed, and tailored to your operations

3. Implement Robust Customer Due Diligence (CDD)

KYC (Know Your Customer) isn’t just for banks anymore. Your dealership should prepare to:

• Verify customer identity, especially when large sums or cash are involved
• Confirm source of funds for high-value transactions
• Flag and escalate suspicious customer behaviour (e.g. reluctance to provide ID, rapid bulk purchases, unusual payment methods)

4. Monitor Transactions and Record Activities

Transaction monitoring should become a routine part of your operations. Ensure you:

• Track how vehicles are paid for (cash, crypto, third-party financing)
• Retain detailed records of transactions and customer interactions for at least 7 years
• Establish thresholds and triggers for reporting to AUSTRAC—such as for cash payments over $10,000

5. Train Your Team

Your frontline staff, sales team, and finance staff should all:

• Understand the basics of AML/CTF laws
• Recognise red flags (e.g. multiple vehicles purchased in a short time, structured payments to avoid thresholds)
• Know what to do and who to report concerns to

Training should be role-specific, regular, and evidence-based (tracked and recorded).

6. Upgrade Your Technology and Record-Keeping

If you're still relying on manual systems, now's the time to consider:

• Integrating AML tools for ID verification and customer screening
• Using digital records for transaction logging
• Creating templates for due diligence and suspicious matter reporting (SMRs)

Even simple tech upgrades can significantly streamline compliance efforts.

7. Engage with Industry Associations and Regulators

Industry bodies such as the Motor Traders’ Association (MTA) are actively monitoring regulatory changes. Join these conversations, stay updated with AUSTRAC announcements, and:

• Participate in webinars or training events
• Collaborate with legal or compliance experts
• Benchmark your efforts with peers

Being proactive signals credibility to both customers and regulators.

The Upside of Early Compliance

While compliance may seem like a burden, becoming AML/CTF-ready can:

• Build customer trust
• Protect your business from reputational damage
• Help you identify fraudulent behaviour before it hurts your bottom line
• Give you an edge over competitors who wait too long to adapt

In many ways, Tranche 2 is not just a regulatory requirement—it’s a business enabler, especially for SMEs ready to modernise and scale responsibly.

Final Thoughts

Tranche 2 AML/CTF compliance is no longer a “maybe” for motor vehicle dealers. As an SME business owner in the industry, your top priorities should include:

1. Conducting a risk assessment
2. Building an AML/CTF program
3. Training your staff
4. Implementing KYC processes
5. Monitoring high-risk transactions
6. Staying connected to industry updates

This isn’t just about regulation—it’s about future-proofing your dealership and operating with integrity in a changing financial environment.

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