Legal industry in Australia is facing a significant regulatory shift. Under the AML/CTF Amendment Act 2024, legal firms must soon take actions to comply with stringent anti-money laundering obligations. Professionals in this sector must understand their new duties and develop a strong, risk-based AML programme. 

Combating Money Laundering in the Legal Industry in Australia 

AUSTRAC’s latest National Risk Assessment classifies the legal profession as having ‘high and stable’ vulnerability to money laundering, commonly playing roles in establishing onshore and offshore structures to obscure transactions and beneficial ownerships. Extending AML obligations to lawyers meets the FATF’s requirement to regulate ‘gatekeeper’ professions, addressing a major gap in Australia’s AML regime.

Legal reporting entities must enrol with AUSTRAC by 31 March 2026 and achieve full compliance by 1 July 2026.

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Designated Services Triggering Obligations 

Law firms must comply when providing designated services like: 

  • Buying, selling, or transferring real estate (excluding transfers pursuant to court or tribunal orders)
  • Buying, selling, or transferring legal entities such as companies, trusts, or other legal arrangements
  • Managing customer funds, accounts, securities, or property, including receiving, holding, or controlling a person’s money, assets, or virtual assets (but usually excluding funds held in trust for professional fees and disbursements)
  • Creating, operating, or managing legal persons or arrangements, including restructuring bodies corporate or legal arrangements
  • Acting as or arranging for another person to act as a company director, secretary, partner, trustee, nominee shareholder, or providing registered office/principal place of business services
  • Certain transactional/corporate finance work including equity and debt financing
  • Sale or transfer of companies

Common Money Laundering Typologies in the Industry

Criminals may misuse legal services via: 

  • Creation of layered corporate or trust structures to hide beneficial ownership
  • Use of lawyers to execute or attest documents enabling illicit transfers
  • Weak or nominal KYC in customer onboarding and transaction monitoring 

Compliance Obligations for Legal Reporting Entities 

Once designated, law practitioners must implement: 

  • ML/TF risk assessments
  • Customer Due Diligence (CDD)
  • Transaction monitoring and suspicious matter reporting (SMRs) to AUSTRAC 
  • AML/CTF program documentation and policies 
  • Independent reviews every 3 years; record retention up to 7 years 

Conclusion 

The legal sector in Australia is now clearly identified as high-risk, and from mid‑2026 will be required to operate under Australia’s enhanced AML/CTF regime. Firms providing designated services must enrol with AUSTRAC, implement risk-based AML/CTF programs, conduct CDD and training, monitor transactions, and report suspicious activity. These measures are part of a broader government effort to close persistent enforcement gaps exploited by organised crime groups. 

Navigate the New Compliance Landscape Smoothly by Partnering with NameScan 

NameScan helps businesses of all sizes – from small firms and mid-tier practices to large enterprises – navigate the complexities of Tranche 2 compliance with ease. Our flexible screening and verification solutions help entities in meeting the unique needs of each organisation, ensuring they can identify risks, and remain compliant without unnecessary overheads. Our Pay-As-You-Go (PAYG) model allows businesses to access powerful compliance tools without committing to long-term contracts or large upfront costs. 

FAQs 

What is Tranche 2 in Australia? 

Tranche 2 refers to the long-anticipated reforms to Australia’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regime. It extends obligations to ‘Designated Non-Financial Businesses and Professions’ (DNFBPs), such as lawyers, accountants, real estate agents, trust and company service providers, and dealers in precious metals and stones. 

Why is Tranche 2 being introduced? 

Australia has been under pressure from the Financial Action Task Force (FATF) to bring DNFBPs into the AML/CTF regime, as these sectors are often exploited by criminals to launder money and finance terrorism. Tranche 2 aims to close regulatory gaps and strengthen Australia’s defences against financial crime. 

Who will be affected by Tranche 2? 

Lawyers, conveyancers, accountants, real estate agents, trust and company service providers, and dealers in precious metals and stones will need to comply with AML/CTF obligations such as customer due diligence, record-keeping, reporting, and risk assessments. 

What obligations will businesses have under Tranche 2? 

Obligations will include Customer Due Diligence (CDD), ongoing monitoring, suspicious matter reporting, record-keeping, and establishing an AML/CTF compliance program tailored to the business’s risk exposure. 

How can businesses prepare for Tranche 2? 

Businesses should start assessing their risk exposure, reviewing customer onboarding processes, and exploring AML/CTF solutions for due diligence and ongoing monitoring. Early preparation will make the transition smoother once the reforms take effect.