What the Tranche 2 Deadline Passing Means for Law Firms
The Tranche 2 deadline has passed. Here's what AUSTRAC expects from law firms now, and how to close compliance gaps fast.
The 1 July 2026 Tranche 2 deadline has now passed, and law firms providing designated services without a functioning AML/CTF programme are operating in breach of the AML/CTF Act 2006. AUSTRAC's posture has shifted from awareness campaigns to active supervision, and law firms sit squarely in scope wherever they handle trust money, conveyancing settlements, or company and trust structuring on a client's behalf.
What obligations apply to law firms now the deadline has passed?
Any law firm providing a designated service -- managing trust money, conveyancing a property settlement, or forming companies and trusts for a client -- must be enrolled with AUSTRAC, operating a documented AML/CTF programme, and conducting customer due diligence (CDD) on every relevant client relationship. Legal professional privilege doesn't exempt a firm from these obligations: privilege can limit what must be disclosed in a suspicious matter report, but it doesn't remove the underlying duty to enrol, assess risk, and monitor client relationships.
What is AUSTRAC likely to prioritise first for law firms?
AUSTRAC's early Tranche 2 supervision is focused on firms that haven't enrolled at all, since enrolment is the precondition for everything else. Beyond enrolment, expect scrutiny to fall on: - Trust account transactions that don't match a client's stated purpose or source of funds - Conveyancing and property settlement work, a designated service captured directly by the reforms - Beneficial ownership checks on company and trust structuring instructions - Staff training records showing lawyers can recognise structuring and layering red flags
What happens if a firm still hasn't enrolled?
Operating a designated service without enrolling with AUSTRAC is a contravention in itself, separate from any finding about the quality of a firm's CDD or record-keeping. Civil penalties under the AML/CTF Act 2006 can run into the millions of dollars per contravention, and enforcement doesn't require evidence of actual money laundering -- an unenrolled status or missing programme is enough on its own. For law firms, the practical starting point is enrolment, followed immediately by a risk assessment scoped to conveyancing, trust account, and structuring work.
How can a law firm close the gap quickly?
Catching up after the deadline doesn't mean rebuilding from scratch. The fastest path is: enrol with AUSTRAC, adopt a risk assessment specific to the designated services your firm actually provides, backfill CDD on existing trust account and conveyancing clients starting with the highest-risk matters, and put ongoing monitoring in place so new red flags aren't missed. AMLify for law firms builds a firm-specific programme and risk assessment in under 30 minutes, so catching up doesn't mean months of manual policy drafting. See pricing to start a free trial.
Key Takeaways
- The Tranche 2 deadline has passed -- law firms without a programme are already in breach, not approaching one
- AUSTRAC's early focus is enrolment, since it's the precondition for every other obligation
- Trust account and conveyancing work attracts extra scrutiny, alongside beneficial ownership checks on structuring instructions
- Legal professional privilege doesn't remove the duty to enrol or operate a compliant programme
- AMLify builds a firm-specific programme fast -- see pricing for a free trial
Frequently Asked Questions
Q: Is there a grace period for law firms that missed the 1 July 2026 deadline?
No. The AML/CTF Act 2006 doesn't provide a grace period once Tranche 2 commenced -- obligations apply immediately, and AUSTRAC can take supervisory action regardless of how recently a firm became aware of the requirement.
Q: Does legal professional privilege exempt a firm from Tranche 2 obligations?
No. Privilege can affect what a firm must disclose in a suspicious matter report, but it doesn't remove the underlying duty to enrol with AUSTRAC, maintain a programme, or conduct CDD on relevant client relationships.
Q: Which legal services actually trigger Tranche 2 obligations?
Designated services -- such as managing trust money, conveyancing a property transaction, or forming companies and trusts on a client's behalf -- are captured. General litigation or advisory work with no transactional element generally falls outside scope, though firms should confirm their own position.
Q: What is the fastest first step for a firm that hasn't started?
Enrol with AUSTRAC. Enrolment is the precondition for every other obligation, and AUSTRAC's early Tranche 2 supervision has signalled it will prioritise unenrolled entities first.
This is general information only and not a substitute for legal advice.