When Tranche 2 commences, providing designated legal services (trust account holding, company and trust formation, real estate transactions, business sales, and dealing with client money) moves into AUSTRAC supervision. This page covers what changes for trust accounts, beneficial-ownership identification, and the long-running question of how AML/CTF obligations interact with legal professional privilege.
The starting position changes from "trust account regulated by the state Law Society" to "trust account also a Tranche 2 transaction-monitoring surface." You will need an AML/CTF program, customer due diligence on every client at the point of engagement for a designated service, beneficial-ownership identification when establishing entities or trusts, and a documented Suspicious Matter Report procedure. The legal-professional-privilege interaction is the most-asked operational question, AUSTRAC has signalled that privilege is preserved for legal advice itself but not for the underlying customer information collected through KYC.
Beneficial-ownership identification applies. You identify the settlor, the trustee (and where the trustee is a corporate, its beneficial owners), and the beneficiaries to the extent identifiable. Senior-management sign-off applies for higher-risk structures.
The trust-account inflow is now a transaction-monitoring event. Source-of-funds enquiry on the deposit, suspicious-pattern detection across the customer relationship, and SMR within 3 business days if a suspicion crystallises.
Enhanced customer due diligence applies because of the cross-border and corporate-vehicle factors. Source of wealth and source of funds must be documented, senior-management sign-off is required, and ongoing monitoring is tightened.
If no designated service is provided, the AML/CTF obligations may not engage for this matter. The customer-identification baseline still applies if the firm is otherwise providing designated services to this client.
Every law firm providing designated services must enrol as a reporting entity. The principal partners (or the firm as a corporate entity) are the registered party. Enrolment opens 31 March 2026.
The program must address each designated service the firm provides: trust account, conveyancing, business sales, company formation, trust establishment. A firm-wide program with service-specific procedures is the typical structure.
Identity collection and verification at the start of every engagement for a designated service. KYC is performed on the natural-person client or, for entities, on the entity and its beneficial owners.
For corporate and trust clients, identify and verify the natural persons who ultimately own or control. For complex structures (multi-layered, off-shore, nominee), enhanced procedures apply.
Every deposit and disbursement is a monitoring event. The program defines the threshold and pattern rules. Suspicious patterns trigger SMR within 3 business days.
A designated officer with seniority and independence. For partnerships, typically a senior partner or general counsel; for incorporated practices, an officer reporting to the board.
Annual report to AUSTRAC covering the calendar year. Customer identification, transaction records, and training records retained for 7 years.
Drafts the AML/CTF program tailored to your matter mix (trust account, conveyancing, company formation), captures customer due diligence at engagement, maintains beneficial-ownership records as the structures change, and assembles the annual compliance report from the audit trail. Runs inside your tenancy, privileged client information stays on your infrastructure, not a third-party SaaS.
Every claim on this page draws on the AUSTRAC published guidance for Tranche 2 entities, plus the sector-specific commentary listed below.
Twenty-five questions, an inline readiness percentage, and a personalised PDF report mapped to lawyers obligations. Free, no commitment, no demo required.
This assessment provides general information about Tranche 2 obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth). It is not legal advice. For your specific obligations, consult an AML/CTF compliance professional.