AUSTRAC Tranche 2 for Lawyers and Law Firms

For the first time in Australian regulatory history, lawyers are inside AUSTRAC’s supervisory net. The Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 brought legal practitioners into Tranche 2 from 1 July 2026, with all the customer due diligence, reporting and program obligations Tranche 1 entities have carried since 2006.

The reform is targeted, not blanket. Only “designated service” work — broadly, transactional work that touches money movement, real property, company structures or trust arrangements — triggers the obligations. Pure litigation work is largely carved out.

Who is caught

• Property and conveyancing lawyers (every transfer, mortgage, lease)
• Commercial lawyers handling business sales, share transfers, restructures
• Trust and estate lawyers setting up or administering structures
• Lawyers running client trust accounts that move funds for clients
• Migration lawyers handling investment-pathway visas

What an AML/CTF program means for a firm

• An ML/TF risk assessment and AML/CTF policies — governance, training, oversight
• Customer due diligence on every client and beneficial owner
• Risk-rate every matter at file-opening
• Suspicious matter reports lodged with AUSTRAC within 3 business days (24 hours for terrorism financing), with statutory protection from breach-of-confidence claims
• Threshold transaction reports for $10,000+ cash movements
• Seven-year record retention
• Annual compliance reporting and an appointed AML/CTF compliance officer

What is new vs Tranche 1

Tranche 1 (banks, money remitters, casinos) has run this regime for nearly two decades. Tranche 2 closes the FATF “gatekeeper” gap. The amended Act protects legal professional privilege; check AUSTRAC’s guidance on how privileged material is treated before lodging a report.

What contracts and documents need updating

• Client engagement letters — AML/CTF disclosure, ID and beneficial-ownership consent, source-of-funds enquiry, refusal/delay rights, retainer-termination triggers
• Trust account terms and authority forms
• Privacy collection notices — sensitive ID and source-of-funds data
• Subcontractor / agent / barrister briefing templates — flow-down of AML obligations
• Retainer-variation letters when a matter’s scope crosses into a designated service mid-engagement

The deadlines and penalties

Commencement 1 July 2026, AUSTRAC enrolment first, full obligations from commencement with limited transitional relief. Civil penalties up to 100,000 penalty units per contravention for a body corporate.

How an updated Service Agreement helps

Claim Done’s Service Agreement wizard produces an engagement letter — AML/CTF disclosures, ID and beneficial-ownership consent, source-of-funds language and refusal/delay rights. $49 flat fee, delivered as a PDF, ready to deploy across the firm.

Next step

Appoint a compliance officer, enrol with AUSTRAC, prepare your ML/TF risk assessment and AML/CTF policies, and re-paper every engagement letter now, if you have not already.