Tranche 2 for Law Firms in Australia

Tranche 2 for law firms will bring AML/CTF obligations into client intake, matter assessment and legal service workflows from 1 July 2026. This guide explains which legal services may be captured, where risk can appear in legal matters, and how firms can prepare practical onboarding, screening and record keeping processes.

Tranche 2 Lawyers
Tranche 2 Guide  ·  June 2026  ·  Law Firms

Tranche 2 for law firms will bring AML/CTF controls into client intake, matter assessment and legal service workflows where designated services are provided.

Tranche 2 for law firms is not just a regulatory update for compliance teams. It changes how affected legal practices assess clients, review matter types, identify higher-risk work and keep records before providing captured professional services.

From 1 July 2026, legal practices that provide relevant designated services will need to comply with AML/CTF obligations. This does not mean every legal matter is treated the same way. The key question is whether the firm provides a captured service, who the client is, what the matter involves and where money laundering or terrorism financing risk may appear.

For a broader view of the reforms, read our guide on what Tranche 2 AML reforms mean for Australian businesses. If your firm is still assessing whether it is captured, start with our guide to Tranche 2 designated services in Australia.

For law firms, practical preparation should connect matter intake with ID Verification, Business Screening, PEP and Sanctions Screening, Adverse Media Screening and Jurisdictional Risk Checks.

Quick answer

Tranche 2 for law firms means affected legal practices may need to enrol with AUSTRAC, maintain an AML/CTF program, conduct customer due diligence, screen relevant clients and parties, train staff, keep records and report suspicious matters where required.

Key date Legal practices providing captured professional designated services need AML/CTF controls in place from 1 July 2026.
Tranche 2 for law firms workflow showing client intake, matter type, verification, screening and AML review

Tranche 2 for law firms should be planned around the legal matter lifecycle, from client intake and matter scoping through to screening, escalation and record keeping.

Where Tranche 2 fits into a legal matter

A useful way to prepare is to place AML/CTF controls at the points where risk enters the legal workflow. This keeps the article aligned with how law firms actually operate.

1

Client intake

Identify who the client is and whether the matter may involve captured services.

2

Matter scoping

Review whether the legal work relates to property, companies, trusts or transactions.

3

Risk checks

Run identity, business, beneficial ownership, PEP, sanctions and adverse media checks.

4

Decision record

Document the risk decision, approval, escalation or reason for not proceeding.

What Tranche 2 for Law Firms Means

Tranche 2 for law firms means certain legal practices will need to treat AML/CTF compliance as part of their client and matter process when they provide captured professional designated services.

The reforms do not make every legal service the same from an AML/CTF perspective. The focus is on whether the legal practice provides a designated service, whether that service has the required connection to Australia and whether the matter creates money laundering, terrorism financing or proliferation financing risk.

AUSTRAC’s professional designated services guidance includes services such as assisting with real estate transactions, assisting with transactions involving body corporates or legal arrangements, holding or managing property to assist a transaction, arranging equity or debt financing, selling or transferring shelf companies, and assisting with the creation or restructuring of body corporates or legal arrangements. Review AUSTRAC’s professional designated services guidance.

Why Tranche 2 for Law Firms Matters

Tranche 2 for law firms matters because legal services can be misused to move, hide or legitimise illicit funds. This risk is especially relevant where legal work involves property, companies, trusts, client money, complex ownership or transactions.

AUSTRAC’s legal profession starter kit notes that legal professionals are commonly used for money laundering in Australia because they can handle physical currency, facilitate international transactions and create complex legal structures that obscure the origins of illicit funds. Read AUSTRAC’s legal profession program starter kit guidance.

For law firms, this means AML/CTF readiness cannot sit only in a policy document. It needs to be reflected in how the firm accepts new clients, opens matters, checks related parties, escalates concerns and records decisions.

Some legal matters are more likely to require closer AML/CTF review because they involve assets, structures, transactions or parties that can create higher financial crime exposure.

The examples below are not a substitute for legal advice. They are practical prompts to help firms identify where Tranche 2 for law firms may affect matter workflows.

Property transactions

Property can be used to store value, move funds and disguise beneficial ownership.

  • Buying or selling property
  • Transfers of real estate
  • Source of funds concerns

Companies and trusts

Corporate and trust structures can obscure ownership, control or the source of wealth.

  • Company creation
  • Trust establishment
  • Restructuring work

Client money and assets

Holding or managing property for a person as part of a transaction can create additional risk.

  • Client account activity
  • Managed property
  • Transaction support

Business transactions

Buying, selling, financing or transferring businesses can involve complex parties and ownership chains.

  • Body corporate transfers
  • Equity or debt financing
  • Beneficial ownership checks

Cross-border clients

Overseas clients, funds or ownership links may introduce jurisdictional risk.

  • Foreign beneficial owners
  • Overseas source of funds
  • High-risk jurisdictions

Unclear control

Nominees, layered entities or unexplained instructions can make it harder to know who benefits.

  • Nominee arrangements
  • Layered ownership
  • Third-party instructions

Tranche 2 for Law Firms Client and Matter Review

Law firms should think about AML/CTF controls as part of the client and matter opening process. This is where the firm can identify whether a matter may involve a captured service and whether further checks are needed before work begins.

That review should not be treated as a box-ticking exercise. It should help the firm understand who the client is, what the matter involves, who benefits from the work and whether there are risk indicators that should be escalated.

Client review

The client review should confirm who the firm is acting for and whether the client is an individual, company, trust, partnership or other legal arrangement.

  • Identify and verify the client.
  • Check directors, controllers and beneficial owners.
  • Review PEP, sanctions and adverse media exposure.
  • Consider jurisdiction and source of funds risk.

Matter review

The matter review should confirm whether the work may involve a captured designated service and whether the legal work creates higher financial crime exposure.

  • Check whether the matter involves property, companies, trusts or transactions.
  • Identify who gives instructions and who benefits from the work.
  • Assess whether source of funds or source of wealth should be reviewed.
  • Document the risk decision before proceeding.

AML Controls Law Firms Should Prepare

Once a firm understands where Tranche 2 for law firms applies, it can translate obligations into practical controls. The aim is to give lawyers and support staff a workflow they can apply consistently.

Control area What it means in practice Why it matters
Client identification Identify and verify individual clients before providing a captured service. Core
Business and UBO checks Review companies, trusts, directors, controllers and beneficial owners. Core
Screening Check relevant parties for PEP, sanctions and adverse media risk. Core
Matter risk assessment Assess the matter type, transaction, source of funds and jurisdiction exposure. Important
Escalation and record keeping Record approvals, concerns, enhanced due diligence and suspicious matter review. Important

Risk signals law firms should watch

These signals can help firms identify matters that may need closer review, enhanced due diligence or senior approval.

Unclear beneficial ownership The client uses companies, trusts, nominees or layered structures that make control difficult to verify.
Unusual source of funds The client cannot clearly explain where funds came from or why a transaction is structured in a certain way.
Third-party instructions Instructions are given by someone other than the apparent client or beneficial owner.
Jurisdiction risk The matter involves countries with elevated sanctions, corruption, secrecy or financial crime risk.

How Law Firms Can Prepare for Tranche 2

Preparing for Tranche 2 for law firms should begin with a review of services and matter types. From there, firms can decide which controls are needed, who owns each step and how records will be maintained.

AUSTRAC expects newly regulated entities to be enrolled, have an AML/CTF program, appoint an AML/CTF compliance officer, train staff and be ready to engage with clients and report suspicious matters by 1 July 2026. Review AUSTRAC’s regulatory expectations.

Step 1

Map legal services and matter types

Identify which practice areas and legal services may fall within professional designated services.

Step 2

Build client and matter intake questions

Add practical questions that help staff identify client type, matter type, beneficial ownership and risk indicators.

Step 3

Set screening and verification workflows

Decide when to run ID verification, business screening, PEP and sanctions checks, adverse media and jurisdiction risk review.

Step 4

Train staff and keep records

Make sure lawyers and support teams know what to check, when to escalate and how to document decisions.

Common Tranche 2 for Law Firms Problems

Law firms may already collect useful client information, but that does not mean the process is ready for AML/CTF obligations. The challenge is to make the process consistent, risk-based and recordable.

Common problems include:

  • Assuming all legal matters are outside scope because the firm is not a financial institution.
  • Assessing the client but not the matter type or transaction purpose.
  • Screening only the direct client and missing beneficial owners or controllers.
  • Using informal knowledge of clients instead of documented due diligence.
  • Failing to create an escalation pathway for suspicious or high-risk matters.
  • Leaving staff training and workflow design too close to the deadline.
Compliance note

Whether a legal practice is captured by Tranche 2 depends on the services provided, the client, the matter and the specific circumstances. Firms should seek qualified professional advice before making scope and compliance decisions.

How Nexiant Supports Tranche 2 for Law Firms

Nexiant supports Tranche 2 for law firms by helping legal practices connect client onboarding, identity verification, business checks, screening and risk review into a more consistent workflow.

For individual clients, ID Verification can support client identity checks. For company, trust or business clients, Business Screening can help assess entities, directors and beneficial owners.

Risk review can be strengthened through PEP and Sanctions Screening, Adverse Media Screening, Jurisdictional Risk Checks and Transaction Monitoring where ongoing activity or suspicious transaction review is relevant.

Relevant Nexiant workflows for legal practices

Legal practices preparing for Tranche 2 may need more than a one-off search. A practical AML/CTF workflow should connect client identity, business ownership, screening, matter risk and record keeping.

ID Verification Business Screening PEP and Sanctions Screening Adverse Media Screening Jurisdictional Risk Checks Transaction Monitoring

Questions Law Firms Should Ask Before Choosing Tranche 2 Software

Before selecting technology, law firms should check whether the platform supports real matter workflows rather than isolated checks.

Useful questions include:

  • Can the platform verify individual clients before a matter progresses?
  • Can it assess companies, trusts, directors, controllers and beneficial owners?
  • Can it screen clients and related parties for PEP, sanctions and adverse media risk?
  • Can jurisdiction risk be included in client or matter assessment?
  • Can lawyers and support staff record decisions and escalation outcomes?
  • Can workflows be adapted by practice area, matter type and client risk?
  • Can the system support ongoing review if a client or matter risk changes?
  • Can the firm produce clear records if asked to explain its AML/CTF controls?

These questions help law firms choose a workflow that supports client service while maintaining AML/CTF readiness.

Related Tranche 2 guides

Continue building your Tranche 2 readiness plan with related Nexiant guides covering the broader reforms, designated services and practical AML/CTF workflows.

What Tranche 2 AML Reforms Mean for Australian Businesses Understanding Tranche 2 Designated Services in Australia

Frequently Asked Questions

Tranche 2 for law firms means affected legal practices may need to comply with AML/CTF obligations when they provide captured professional designated services. This can affect client intake, matter assessment, due diligence, screening, reporting and record keeping.
Not automatically. Whether a legal practice is captured depends on the services it provides, whether those services are designated services and whether they have the required connection to Australia. Firms should review their specific services and seek advice if unsure.
AUSTRAC guidance states that from 1 July 2026, legal practices must have an AML/CTF program in place before they provide designated services that are professional services.
Matters involving property, companies, trusts, client money, business transactions, cross-border parties, unclear beneficial ownership or unusual source of funds may require closer AML/CTF review.
Technology can help law firms verify client identity, screen companies and beneficial owners, check PEP and sanctions exposure, review adverse media, assess jurisdiction risk and maintain records for AML/CTF decisions.

Prepare legal matter workflows for Tranche 2

Nexiant helps law firms connect client onboarding, identity verification, business screening, risk assessment and monitoring into a more consistent AML/CTF readiness workflow.

Speak to our AML compliance team

This article was accurate at the time of publication in June 2026 and is intended for general informational purposes only. It does not constitute legal, regulatory or compliance advice. Organisations should seek qualified professional guidance in relation to their specific obligations.

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