Four Weeks Into Tranche 2: Where Law Firms Are Slipping
One month after the Tranche 2 deadline, the same three gaps keep showing up in Australian law firms. Here's what to fix first.
Four weeks after the 1 July 2026 Tranche 2 deadline, the gap showing up most in Australian law firms isn't a missing policy — it's a written AML/CTF programme that fee earners aren't actually following on live matters.
What's the most common gap four weeks in?
Firms enrolled, appointed an AML/CTF Compliance Officer (AMLCO), and signed off a risk assessment before 1 July — then went straight back to business as usual. The programme exists as a document, but matter intake, source-of-funds checks, and beneficial ownership mapping haven't actually changed on the file. AUSTRAC's early activity is testing exactly this: whether the programme is operating, not whether it was written.
Why are CDD files still lagging behind matter openings?
Under time pressure at matter opening, identity verification and source-of-funds checks are the first steps that get deferred — with the intention of "circling back before settlement." In practice, that follow-up often doesn't happen until a file is nearly ready to close, which is too late under the AML/CTF Act 2006. Building CDD into the intake step itself, rather than treating it as a task to remember later, is the single change firms report making the most difference.
Is beneficial ownership mapping still a weak spot?
Yes, particularly on trust and company matters. Firms are verifying the individual instructing them but stopping short of tracing through to the natural person who ultimately controls a corporate or trust structure. A director or trustee on file is not the same as a verified beneficial owner, and this is one of the first things an AUSTRAC review will ask a firm to demonstrate.
What should a firm prioritise fixing this week?
- Audit open matters, not just new ones — check whether CDD was actually completed on files opened since 1 July, not just going forward
- Push identity and source-of-funds checks to matter opening — not settlement week
- Trace beneficial ownership to the natural person on every trust or company matter, not just the instructing director
- Give the AMLCO real visibility across open matters, not a title with no reporting line
- AMLify's audit readiness tools for law firms keep CDD status, beneficial ownership evidence, and AMLCO oversight in one place, so a firm can see these gaps before AUSTRAC does.
Key Takeaways
- A written programme isn't enough — AUSTRAC's early activity tests whether it's actually operating on live matters
- CDD deferred to settlement is CDD done too late — build it into matter opening instead
- Beneficial ownership must trace to the natural person, not stop at the instructing director or trustee
- Audit matters opened since 1 July, not just new files going forward
- A 14-day free trial at [/pricing](/pricing) puts CDD, beneficial ownership, and AMLCO oversight in one auditable workflow
Frequently Asked Questions
Q: Is it too late for a law firm to fix gaps found a month after the deadline?
No. AUSTRAC treats a firm that identifies and remediates gaps promptly far more favourably than one that ignores them. Auditing matters opened since 1 July 2026 and correcting CDD and beneficial ownership gaps now is exactly the right response.
Q: Does every matter opened since 1 July need to be checked?
Yes, in principle. Any matter involving a designated service under the AML/CTF Act 2006 needed CDD from the deadline onward, so a retrospective check of matters opened since then is the fastest way to find where the programme wasn't followed.
Q: Who is responsible for spotting these gaps inside a firm?
The AMLCO named in the firm's programme is accountable for oversight, but the gap usually shows up at fee-earner level — where matter intake happens. An effective AMLCO needs visibility across open matters, not just a policy document to point to.
Q: Does a smaller firm face the same expectations as a large practice?
Yes. The AML/CTF Act 2006 applies regardless of firm size, though AUSTRAC expects the programme's scale to match the firm's risk profile. A sole practitioner still needs CDD, beneficial ownership mapping, and AMLCO oversight — just proportionate to a smaller practice.
This is general information only and not a substitute for legal advice.