{"id":14431,"date":"2026-10-07T10:02:44","date_gmt":"2026-10-07T00:02:44","guid":{"rendered":"https:\/\/namescan.io\/insights\/?p=14431"},"modified":"2026-10-07T10:02:44","modified_gmt":"2026-10-07T00:02:44","slug":"proportionate-client-checks-tranche-2","status":"publish","type":"post","link":"https:\/\/namescan.io\/insights\/proportionate-client-checks-tranche-2\/","title":{"rendered":"Proportionate Client Checks for Small Firms Three Months Into Tranche 2"},"content":{"rendered":"

Three months after Tranche 2 obligations began on 1 July 2026, many small real estate agencies, accounting practices, law firms and conveyancers have enrolled and adopted an AML\/CTF program. The question now is a practical one: how much checking does each client actually need?<\/p>\n

The answer under AUSTRAC’s rules is ‘it depends on the risk’, which is accurate but not much help on a busy Tuesday. This guide turns the risk-based approach into a working routine for a small firm: what to collect for everyone, when a lighter approach is allowed, when to go further, and what to write down. It is general information, not legal advice, and your own AML\/CTF program sets the rules your firm must follow.<\/p>\n

What ‘proportionate’ means under AUSTRAC’s rules<\/h2>\n

Initial customer due diligence (CDD) has to be completed before you start providing a client with a designated service. AUSTRAC’s guidance expects you to identify each client’s money laundering and terrorism financing risk, and to collect more information about higher-risk clients, and about people associated with them such as beneficial owners, than you would for low-risk clients.<\/p>\n

That is the core of proportionality: the depth of your checks follows the risk, and the risk rating comes first.<\/p>\n

The three levels of checking<\/h2>\n

Simplified checks for genuinely low-risk clients<\/h3>\n

Simplified CDD lets you streamline identification and verification for certain low-risk clients. Two things must both be true: the client’s risk is low, and none of the triggers for enhanced CDD apply. AUSTRAC is clear that simplified CDD is not an exemption from your CDD obligations. You still identify the client, assess their risk and keep records. You are just allowed to do less verification work.<\/p>\n

A typical example might be a long-standing individual client, resident in Australia, using a straightforward service in the way they always have. Your program should say what ‘low risk’ means for your firm, so staff are not deciding it case by case.<\/p>\n

Standard checks as the default<\/h3>\n

Most clients sit here. Identify and verify who they are, understand what they want from you and why, identify any beneficial owners for companies and trusts, and screen the client and key associated people for PEP status, sanctions and relevant adverse media.<\/p>\n

Enhanced checks when risk is higher<\/h3>\n

Go further when something raises the risk: a foreign politically exposed person (PEP), a complex ownership structure you cannot easily explain, links to higher-risk countries, or a transaction that does not fit what you know about the client. Enhanced checks usually mean understanding where the money comes from, more senior sign-off, and closer ongoing monitoring.<\/p>\n

A working routine for a small firm<\/h2>\n

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The order matters. Screening before you rate the risk means a PEP or sanctions result feeds into the rating, rather than being discovered after you have decided a client is low risk.<\/p>\n

Clients you had before 1 July<\/h2>\n

Many small firms have clients who pre-date Tranche 2. AUSTRAC’s guidance on transitioning existing customers explains that initial CDD is needed on a pre-commencement client in some circumstances, for example where there is a significant change in the nature and purpose of the relationship that makes the client’s risk medium or high, such as asking for a new service in a different way from before. Check AUSTRAC’s transition guidance and your program for how this applies to your existing client book, rather than assuming either ‘everyone’ or ‘no one’.<\/p>\n

Common mistakes three months in<\/h2>\n