AML/CTF Tranche 2 Reforms: introducing AUSTRAC’s Program Starter Kits
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By Carol Prasad -
Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regulatory regime is undergoing one of its most significant transformations in decades.
With the expansion of obligations to new professional sectors and industries in the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act), legal practitioners are preparing for a new generation of compliance expectations.
To support newly regulated businesses, AUSTRAC has released Program Starter Kits (Starter Kits), designed primarily to assist small, low complexity businesses build and implement an ‘AML/CTF program’.
This article introduces the Starter Kits, briefly outlines their structure and content, and considers some early challenges.
The two most relevant Starter Kits for the legal profession are the Legal Profession Starter Kit and the Conveyancing Starter Kit. These are part of a suite of sector-specific Starter Kits for newly regulated entities, including lawyers, accountants, real estate professionals, and precious metals and stones dealers.
Why are lawyers captured and how will the Starter Kits help
For the past two decades, Australia’s AML/CTF regime has primarily applied to banks, financial institutions and the gambling sector. Following amendments to the AML/CTF Act in December 2024, a broader range of professional services, including lawyers, providing ‘designated services’ will become ‘reporting entities’ and have compliance obligations from 1 July 2026 (Tranche 2 reforms). To determine whether the reforms will apply to you, try Am I captured?, Understanding Designated Services , or the AML/CTF Act itself.
Tranche 2 reforms respond to the risk that certain services, including those provided by lawyers, can be exploited to facilitate money laundering (ML), terrorism financing (TF), and proliferation financing (PF), for example, through real estate transactions, managing client funds, or structuring complex legal arrangements.
Small, low complexity legal practices
The Starter Kits provide practical guidance for small, low complexity legal practices.
The first of its kind globally, the Starter Kits will:
- support timely implementation for practices required to have an AML/CTF program by 1 July 2026 ultimately, reducing the regulatory burden for practices who would otherwise have needed to draft their own program. (Click here for a summary of key obligations under the AML/CTF Act), and
- support small low complexity practices to meet AUSTRAC’s regulatory expectations where the Starter Kit is appropriately implemented and maintained.
What is the Legal Profession Program Starter Kit
The Legal Profession Starter Kit is a comprehensive toolkit that will help small, low complexity legal practices develop an AML/CTF program tailored to their business profile, risk exposure, and operational practices.
The Legal Profession Starter Kit is not a one-size-fits-all template. Instead, it provides core building blocks that practices can customise and implement as their own AML/CTF program, providing a gateway into a compliance regime that, for many, represents their first engagement with AUSTRAC and AML/CTF obligations.
Mixed Practices – Providing both legal services and conveyancing
Importantly, the Legal Profession Starter Kit is not the only relevant resource that may apply to a practice’s operations. Where a firm also provides conveyancing services that fall within the scope of designated services, certain parts of the Conveyancing Starter Kit, for example, the risk assessment and accompanying forms, will apply. As such, a practice offering both legal and conveyancing services will need to maintain two separate risk assessments.
Who is the Legal Profession Program Starter Kit designed for?
The Legal Profession Program Starter Kit is chiefly designed for practices that have 15 or fewer personnel, including both legal practitioners and administrative staff. The practice will also be one that does not regularly handle high-risk clients or complex cross-border transactions.
Legal practices that fall outside these parameters, such as larger multi-jurisdictional practices, or smaller practices that regularly deal with high-risk clients or undertake sophisticated international work, cannot rely entirely on this kit to meet AUSTRAC’s expectations. They can, however, use it as a base on which to build and expand their AML/CTF frameworks. If a law practice that does not meet AUSTRAC’s criteria uses the Kit in its current form, the onus will be on that practice to set out the reasons why it considers that it is suitable for that practice.
Contents of the Legal Profession Program Starter Kit
The Legal Profession Program Starter Kit contains a layered step-by-step process intended to be used interactively. It includes components designed to become the firm’s AML/CTF program, once customised and approved by senior management (for sole practitioners, the approver will be the principal practitioner).
The Kit contains:
- a number of downloadable documents,
- information that is educational in nature,
- documents that require customisation including:
| 1 | Risk Assessment |
Practices will need to understand and document the specific ML, TF and PF risks they could reasonably face when providing their services. The risk assessment framework outlines common risk categories (services, client types, jurisdictions and delivery channels used to provide services) and helps firms evaluate where they are most vulnerable. A client of the practice will either have a ‘low’, ‘medium’ or ‘high’ risk rating. The risk assessment must be updated to reflect changes.[1]Once completed, the risk assessment guides policy and processes.
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| 2 | Policy | This document outlines what actions the practice will take and when it will take them to meet its AML/CTF obligations when dealing with its personnel and clients. It also outlines how they will maintain their AML/CTF program. |
| 3 | Processes | This document details how a practice’s AML/CTF processes and procedures are executed on a day-to-day basis to meet their AML/CTF obligations. The processes relate, for example, to how client risk ratings will be allocated, how the practice will conduct ongoing customer due diligence, what processes they will use to collect further information, including source of wealth/source of funds, and a range of other matters. |
- a document library that contains a whole raft of forms, including operational forms practitioners can use to document decision points, client contact details, risk ratings, and compliance actions. The forms facilitate adherence to the policy and processes, and provide an audit trail for regulatory reporting or internal review.
The Legal Profession Starter Kit is meant to be used as a complete package, but mixed practices that provide real property conveyancing services will also need to be familiar with the Conveyancing Starter Kit and carry out a risk assessment of their property practice.
Navigating the Legal Profession Program Starter Kit
The best way to navigate the Legal Profession Program Starter Kit is to start at ‘Getting Started ’ and follow the prompts. The Kit is designed to operate in several sequential phases including:
- Preparation and Confirmation: practices must first confirm they provide a designated service and prepare for enrolment with AUSTRAC. Enrolment commences on 31 March 2026.
- Customisation: practices will need to customise their risk assessment (or risk assessments if the practice provides both legal and conveyancing services), policies, and processes which reflect the practices operations and risk exposure This also involves appointing an AML/CTF compliance officer with delegated responsibility for compliance oversight. This must be completed before 1 July 2026.
- Implementation: Once customised and approved by senior management (or the sole practitioner), the materials become the practice’s AML/CTF program. This is followed by staff training, personnel due diligence and operational roll-out. Practices should be ready, including to conduct customer due diligence and make certain reports to AUSTRAC, from 1 July 2026.
- Maintenance and Review: AML/CTF compliance is iterative. Practices must use ongoing efforts to review client risk profiles, update policies and processes as relevant, provide ongoing personnel training, and adjust processes as regulations or risks evolve.
Early challenges and considerations
While the Starter Kits are a welcome foundation for AML/CTF compliance, their implementation will inevitably present early challenges for many practitioners, as they learn to navigate the Kits and translate processes into day-to-day practice. This could include resource constraints, or, more broadly, practical challenges as firms grapple with the interpretative complexity of the AML/CTF legislation, manage cultural change, while at the same time balancing commercial realities.
AUSTRAC is committed to supporting its newly regulated population by providing comprehensive education resources through multiple channels, as well as a contact centre and dedicated email address. In addition, the Law Society of NSW also has resources on its AML/CTF Hub. Both sites (details below) will continue to be updated as new resources become available.
As the 1 July 2026 commencement date approaches, early engagement with the Starter Kits is essential, not merely to meet new statutory obligations, but also to reduce the risk that legal practices are unwittingly used to facilitate ML/TF/PF in an increasingly complex regulatory environment.
Endnote
[1] How to make updates is covered off in the kit at ‘Step 3: Maintain and review your legal profession program’
Carol Prasad is a Professional Support Solicitor (AML) at the Law Society of NSW. Her background includes experience in AML/CTF, sanctions and privacy.
This article originally appeared on LSJ Online, and in the Law Society of New South Wales Ethics and Standards Quarterly Newsletter. It is reproduced with permission.
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