Australia’s AML/CTF Tranche 2 Reforms — What Law Firms, Accountants and Property Professionals Must Know Before 1 July 2026

By Dr Gary Cheung, Senior Consultant — Compliance, Regulatory & Financial Law | Robinsons (AU) Pty Ltd | March 2026 | Estimated reading time: 8 minutes

⚠ DISCLAIMER: This article is for general informational purposes only and does not constitute legal advice. Laws and regulations change frequently and their application varies with individual circumstances. You should always seek independent legal advice specific to your situation before taking any action. Robinsons (AU) Pty Ltd accepts no liability for reliance on the contents of this article.

On 29 November 2024, Australia’s Parliament passed the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 — the most significant overhaul of Australia’s AML/CTF regime in nearly two decades. The Amendment Act received Royal Assent on 10 December 2024, and its implementing Rules — the AML/CTF Rules 2025 — were tabled in Parliament on 31 August 2025.

The centrepiece of these reforms is the ‘Tranche 2’ expansion, which extends Australia’s AML/CTF compliance obligations to a new class of regulated entities: lawyers, accountants, conveyancers, real estate agents, and dealers in precious metals and stones. For the legal profession in particular, these reforms represent a fundamental change to how law firms must approach client onboarding, transaction monitoring, and regulatory reporting — from 1 July 2026.

This article, written by Dr Gary Cheung, draws on his extensive background as a former Head of Compliance at both a securities broker and a major bank to explain the practical implications of these reforms for legal and professional services firms.

1. Why Australia Needed Tranche 2 — The FATF Context

The Financial Action Task Force (FATF) — the intergovernmental body that sets global AML/CTF standards — has long identified Australia as non-compliant in its coverage of non-financial businesses and professions (DNFBPs). In FATF’s most recent mutual evaluation, Australia was rated ‘Partially Compliant’ or ‘Non-Compliant’ on multiple recommendations relating to lawyers and accountants.

The Tranche 2 reforms bring Australia into line with jurisdictions including the United Kingdom, where solicitors and accountants have been subject to AML/CTF obligations for years. As AUSTRAC CEO Brendan Thomas has noted: ‘Australia is catching up.’

AML/CTF REFORM — KEY DATES

• 29 November 2024: AML/CTF Amendment Act 2024 passed by Parliament

• 10 December 2024: Royal Assent granted

• 31 March 2026: Existing Tranche 1 entities must comply with updated obligations

• 31 March 2026: Enrolment opens for Tranche 2 entities

• 1 July 2026: AML/CTF obligations commence for Tranche 2 entities (lawyers, accountants, real estate agents)

• Source: AUSTRAC; Department of Home Affairs; Norton Rose Fulbright (August 2025)

2. Who Is Captured as a Tranche 2 Entity?

The reforms extend AML/CTF obligations to entities providing certain ‘designated services’. For the legal profession, you are likely captured if your practice provides any of the following services:

Acting as a formation agent for legal persons or legal arrangements (including company incorporation services)
Acting as or arranging for another person to act as a director, secretary, partner, or trustee
Assisting in the planning or execution of a transaction to buy, sell, or transfer a body corporate or legal arrangement
Receiving, holding, controlling or managing a person’s property to assist in planning or execution of a real estate transaction
Assisting in organising, planning, or executing a transaction for equity or debt financing relating to a body corporate or legal arrangement

Important: not all legal work is captured. Purely advisory work, litigation and tribunal representation, and will preparation (without asset transfer) are generally not designated services. However, if your practice includes any of the above services even incidentally, you are likely a reporting entity.

AUSTRAC has released an online eligibility tool and sector-specific guidance to assist practices in determining whether they are captured. Law practices that are unsure should use the tool and seek legal advice before 31 March 2026.

3. What Obligations Apply?

For Tranche 2 entities from 1 July 2026, the core obligations are:

Obligation	What It Requires	Key Deadline
Enrolment with AUSTRAC	Register via the AUSTRAC Business Portal within 28 days of starting to provide a designated service	Enrolment opens 31 March 2026
AML/CTF Program	Develop and maintain a written, risk-based AML/CTF compliance program; approved by senior management; reviewed every 3 years minimum	In place by 1 July 2026
Customer Due Diligence (CDD)	Verify customer identity before establishing a business relationship; ongoing monitoring	From 1 July 2026
Suspicious Matter Reporting (SMR)	Report to AUSTRAC if you suspect a transaction is related to money laundering or terrorism financing	Ongoing — failure to report is a criminal offence
Threshold Transaction Reports (TTR)	Report cash transactions of A$10,000 or more	Ongoing
Record-keeping	Maintain identity verification records for 7 years	From 1 July 2026
Independent Review	AML/CTF program must be independently evaluated at least once every 3 years	From commencement

Source: AUSTRAC AML/CTF Reform Hub; Summary of Obligations for Tranche 2 Entities (March 2026).

4. Legal Professional Privilege — How It Interacts

The AML/CTF regime does not override legal professional privilege (LPP). Communications between a lawyer and client that are genuinely privileged are protected. However, the reforms introduce practical tensions:

CDD obligations apply to a client before a business relationship is established — information gathered for CDD purposes is not privileged
If suspicious activity is identified, the SMR obligation to report to AUSTRAC may conflict with confidentiality duties — legal advice on the scope of LPP in specific situations is recommended
SMR ‘tipping off’ provisions mean you cannot inform your client that you have made or are considering making a suspicious matter report

The Law Society of NSW and the Law Council of Australia are continuing to advocate for clarity around LPP protections within the new framework. Firms should monitor updated guidance from their law society.

5. Practical Compliance Steps for Small and Medium Law Firms

Step 1: Determine whether your firm provides ‘designated services’ — use the AUSTRAC online tool and review the AML/CTF Act definitions
Step 2: If captured, appoint an internal AML/CTF Compliance Officer — for sole practitioners, this is you
Step 3: Conduct a Money Laundering/Terrorism Financing (ML/TF) Risk Assessment — identify and assess the ML/TF risks specific to your practice, client base, and services
Step 4: Develop your AML/CTF Program — customise the AUSTRAC Legal Profession Program Starter Kit (released by AUSTRAC) as the foundation
Step 5: Implement CDD processes — client identity verification, beneficial ownership checks for corporate clients, ongoing monitoring
Step 6: Train all relevant staff on AML/CTF obligations, red flags, and reporting procedures
Step 7: Enrol with AUSTRAC via the Business Portal (opens 31 March 2026)
Step 8: Set up record-keeping systems for a 7-year retention period

AUSTRAC RESOURCE: Legal Profession Program Starter Kit

AUSTRAC has released sector-specific ‘Starter Kits’ — including a dedicated Legal Profession Starter Kit — designed primarily for small, low-complexity practices with 15 or fewer staff.

These provide a customisable foundation for your AML/CTF program.

Note: The Starter Kit is not suitable for larger multi-jurisdictional practices or those dealing regularly with high-risk international clients — these firms must build more comprehensive programs.

Source: Law Society Journal, March 2026; AUSTRAC Reform Hub

6. What the Reforms Mean for Cross-Border Legal Work

For law firms like Robinsons (AU) Pty Ltd that regularly handle cross-border transactions involving Hong Kong, Greater China, and Southeast Asia, the Tranche 2 reforms have specific implications:

Cross-border transactions are inherently higher risk for ML/TF purposes — enhanced due diligence (EDD) will typically be required
Clients who are foreign politically exposed persons (PEPs) — for example, senior public officials, directors of state-owned enterprises, or their family members — require EDD by default
Complex holding structures (BVI companies, Cayman Islands funds, offshore trusts) will trigger enhanced scrutiny and must be fully documented at the CDD stage
The new rules require identification and verification of beneficial owners through corporate structures — a task that can be complex for multi-layered offshore holding companies

From our experience in financial services compliance, the key message for law firms with cross-border practices is this: start building your AML/CTF framework now, not in June 2026. A comprehensive risk-based program takes months to develop and embed properly into firm culture and processes.

7. The Cost of Non-Compliance

AUSTRAC has made clear it will not show leniency for non-compliance once the July 2026 obligations commence. The regulator has significantly expanded its compliance resources in recent years. Key penalties include:

Civil penalty orders for non-compliance with AML/CTF obligations — substantial financial penalties
Criminal prosecution for certain serious failures, including failure to report suspicious matters
Regulatory sanctions and public reporting of enforcement actions
Reputational damage — AUSTRAC publishes enforcement outcomes publicly

For context: in 2020, AUSTRAC imposed a A$1.3 billion penalty on Westpac Bank for AML/CTF failures. While law firm penalties will be at a different scale, the regulatory intent is clear.

8. How Robinsons (AU) Pty Ltd Can Help

Dr Gary Cheung, our Senior Consultant for Compliance and Regulatory matters, brings direct institutional experience of building and managing AML/CTF compliance programs at a major securities broker and a major bank. We are well-placed to advise law firms, accounting practices, and real estate professionals on their Tranche 2 compliance obligations.

Our services include: regulatory eligibility assessment; ML/TF risk assessment; AML/CTF program development; CDD framework design; staff training; and assistance with AUSTRAC enrolment.

Sources & References:

• Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth)

• AML/CTF Rules 2025 (tabled in Parliament 31 August 2025)

• AUSTRAC: Summary of Obligations for Tranche 2 Entities (austrac.gov.au)

• Norton Rose Fulbright: Australia’s AML/CTF Reforms — A New Era (August 2025)

• CPA Australia: AML/CTF Legislation — The Legal Lowdown (2025)

• Law Society Journal: AUSTRAC Program Starter Kits (March 2026)

• ACT Law Society: AML/CTF Hub (2026)