AML Tranche 2 for lawyers and conveyancers: the compliance checklist

Are lawyers and conveyancers captured?

Lawyers and conveyancers are among the five sectors brought into the AML/CTF regime by Tranche 2 from 1 July 2026. This expansion of the regime means firms providing legal services will be subject to new obligations. Firms can use the AML Tranche 2 scope checker to assist with determining their obligations.

The designated services that bring a firm into the regime include assisting with real-estate transactions, forming or restructuring companies and trusts, managing client trust accounts, and managing client money or assets. It is important to recognise that providing only one of these designated services is sufficient to trigger AML/CTF obligations.

To clarify, a firm does not need to provide all designated services to be captured.

Legal professional privilege

The Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) reforms recognise the existence of legal professional privilege. Lawyers and conveyancers are not required to disclose information protected by privilege when fulfilling their AML reporting obligations.

Compliance with AML/CTF obligations must be managed in a way that does not compromise existing protections afforded by legal professional privilege. Firms should establish and maintain clear internal procedures to accurately identify information that falls within the scope of privilege.

These procedures should assist in distinguishing between information that is subject to privilege and that which is not, when determining whether and what to report.

• Documenting the rationale for privilege claims is recommended.

Key dates and program

The Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Tranche 2 program requires lawyers and conveyancers to establish a comprehensive AML/CTF program. Under the reformed AML/CTF Act this means an ML/TF risk assessment plus AML/CTF policies (replacing the former Part A / Part B structure), and designating an AML/CTF compliance officer at management level. The whole program must be independently evaluated at least once every 3 years; for newly regulated firms the first evaluation is due between 30 June 2029 and 31 December 2030, depending on the AUSTRAC account number.

Tranche 2 small businesses are also covered by the Privacy Act for their AML/CTF activities: under s 6E(1A) of the Privacy Act 1988, a small business operator that is an AML/CTF reporting entity is treated as an organisation for those activities, so the Australian Privacy Principles apply to the customer identification material you collect, even if your turnover is under $3M (Privacy Act 1988).

Enrolment with AUSTRAC is mandatory for Tranche 2 entities. Obligations commenced on 1 July 2026 and enrolment opened on 31 March 2026. Enrolment is due 28 days after first providing a designated service — 29 July 2026 for firms providing designated services from 1 July 2026. If you missed it, enrol now. Further information on the enrolment process can be found in the AUSTRAC enrolment guide.

Each day you provide a designated service while unenrolled can be a separate contravention. AUSTRAC can issue an infringement notice of $21,840 (company) or $4,368 (individual) per contravention, or seek a civil penalty of up to $36.4M for a body corporate (maximum per contravention). AUSTRAC began issuing information notices to apparently unenrolled accountants, lawyers, real estate agents and jewellers on 28 August 2026.

CDD, monitoring and reporting

Lawyers and conveyancers must undertake customer due diligence (CDD) to verify customer identity. This includes identifying beneficial owners – those holding at least 25% ownership or control – and politically exposed persons before providing a designated service. Firms should utilise tools such as the beneficial owner identifier to assist in this process.

Ongoing monitoring is also a compliance requirement. Once a suspicion is formed, a Suspicious Matter Report must be filed within 3 business days (24 hours where it relates to terrorism financing; 5 business days where some information may be privileged). Threshold Transaction Reports are required for cash transactions of $10,000 or more, and these must be filed within 10 business days.

It is critical to understand that tipping off a client about a Suspicious Matter Report is a separate criminal offence under s 123 of the AML/CTF Act (up to 2 years imprisonment and/or 120 penalty units).