Easy as 1, 2, 3:
Turning Tranche 2 into 3 strategic wins
The countdown to Tranche 2 is on. Here’s how you can turn that into a milestone celebration instead of a doomsday clock.
In July 2026, Australian law firms will be held to new customer due diligence (CDD), anti-money laundering (AML) and counter-terrorism financing (CTF) requirements under the Tranche 2 reforms.
Leading firms are already looking beyond the requirements as a checklist to complete and are instead using it as an opportunity to consider how they continue to uphold a high standard of client experience. Client expectations, like regulations, are always changing, and Tranche 2 is a moment in time to align both.
The three biggest opportunities for firms to capitalise on are:
- Operational excellence
Tranche 2’s requirements intersect with multiple already-existing, daily workflows. Before looking for a bolt-on technology solution to address Tranche 2, taking a workflow-first approach to assessing firm operations will spotlight opportunities to streamline, combine, or even automate them. This equips firms to evaluate what technology can achieve that vision and avoid adding even more bloated tech to their workflows. - A first-rate client intake experience
When was the last time you reviewed your client intake experience, from start to finish? You’ve likely added pieces to it here and there over time, spanning emails, phone calls, wet signatures, e-signatures, and manual document filing. Tranche 2 will change your client intake process, and astute firms will turn this into an advantage and a differentiator by baking it into their processes, not treating it like a bolt-on. - Building a culture of compliance
A key part of the Tranche 2 is the audit trail of activity showing your efforts to be and remain compliant. From staff training initiatives, to paperwork trails, to ongoing and proactive client risk monitoring, implementing this work is just step one. Step two is making sure what you implement sticks, and that’s a question of firm culture.
Firms that view Tranche 2 as an opener rather than a deadline are primed to benefit from increased client trust, firm efficiency, fee-earner productivity, and overall business growth.
In summary: Tranche 2 requirements
Enrol and register with AUSTRAC as a reporting entity
Develop and maintain an AML and CTF program
Conduct initial and ongoing customer due diligence
Report any suspicious activities and submit transaction reports
Make and keep records of your efforts to adhere to requirements
Tranche 2 summary
Australia's AML/CTF regime has evolved significantly since its introduction in 2006. Initially, the legislation applied primarily to financial institutions and gambling services under "Tranche 1." Tranche 2 refers to the expansion of these regulations to professional service providers that have been identified as areas where money laundering poses a risk. Tranche 2 explicitly includes lawyers as one of these services..
After years of consultation and legislative development, Tranche 2 is set to commence on 1 July 2026, bringing Australian law firms into line with international standards and closing a significant vulnerability in the country's financial crime defenses. This reform directly addresses longstanding recommendations from the Financial Action Task Force (FATF), the global standard-setter for combating money laundering and terrorism financing.
From July 2026, firms must enroll with AUSTRAC, develop and maintain comprehensive AML/CTF programs, conduct initial and ongoing CDD, report suspicious activities, and maintain detailed records of their compliance efforts.
Starting sooner means less rush and better preparation
What’s ahead: Key national milestones for Tranche 2
Shifting your firm’s perspective
Your transformation blueprint starts with the end in mind
In order to plan out how your firm will adapt to Tranche 2, you first have to envision the possibilities. As inspiration, we’ll take a look at how leading firms are proactively addressing transformation across workflows, client intake, and culture.
1. Operational excellence
Compliance workflows are often viewed as a bolt on. Get the work done, then take additional steps to ensure and track compliance. When compliance is built into the workflows themselves, it happens without you even noticing.
Replacing manual workflows – that is, emails, phone call follow ups, multiple staff members managing different tools, documents, and signatures – with an end-to-end system saves time, keeps documents organised, and maintains a consistent activity trail. Administrative burden drops dramatically, increasing your team’s capacity to focus on clients.
What’s more, AML compliance officers (AMLCOs) having access to this system makes their compliance reviews easy. Without having to chase busy staff members and distract fee-earners from their client facing work, they’re just as empowered to get on with their work.
Perspective shift 1: From cost centre to time saver.
Some firms view compliance infrastructure as additional, non-productive overhead. Flipping this on its head, how many hours does your staff spend collecting the necessary documents and client responses for:
- Engagement letters
- Terms of services
- ID checks and employment details
- Payments and source of funds
- Company structure details
- Declaration forms
- Tenancy agreements
- Money on Trust
All of that manual chasing, confirmation of receipt, and storage of files is inefficient use of time. Not to mention, that doesn’t even touch on how drawn out this can be if there’s a mistake, forgotten file, or an email goes to spam.
Manual processes create compliance risk and drain billable hours. Setting up a new system takes an initial time investment, but pays itself back many times over very quickly.
Using a technology platform to build workflows is one solution to bring all of this together and even introduce automation. Setting a workflow for each type of client intake and level of CDD needed (for example, having different workflows for an individual vs a business client) then means all you have to do is assign a workflow to a customer and let it run.
A workflow could include all of the relevant documents and ID checks needed for that particular client type sent to them via a single email, an alert to the relevant staff member when it’s received, activity tracking, and file storage, with access for the AMLCO to review when needed. All of this is done simply by selecting the correct workflow, it really is that easy.
Legl’s client intake workflows do all of this and more! Get full company structures, PEPs, and risk ratings automatically applied once a customer has completed KYC/KYB. Risk ratings are configured to your risk policy, with clear escalation processes when a high risk client is identified.
2. First-rate client intake experiences
Just as much as your staff don’t enjoy or want to spend their time chasing client intake documents, clients don’t want to be chased with endless “just one more thing” requests. A streamlined process for your team is a positive experience for your clients.
Sending a client exactly what they need in a digital-first, guided onboarding process is a dream for both sides. The client can work through the requests at their own pace, complete their ID checks and provide digital signatures in one place, and have a clear understanding of what’s expected of them.
Before you’ve even started working on their account, you’ve convinced them you’re organised and reliable, setting the stage for a healthy engagement.
Perspective shift 2: From blaming regulation for more paperwork to not even bringing it up.
Clients have an expectation that they’ll need to onboard with your firm. But rather than apologising for how much they have to fill out because of regulatory requirements, you can give them an intake experience they tell their friends and colleagues about.
With referrals being a primary source of new client acquisition, leaving a positive impression on your clients from day one has never been smoother.
Premium firms achieve their status through client experience, so start running your intake process and communicating it to clients as a premium experience. This is a scenario where you must “dress for the job you want!”
The client experience with Legl is straightforward. They receive an email with a link to their very own guided onboarding journey. Signatures, biometrics, and payment are all captured in one platform, in one sitting, and saved to your Legl account for auditing and historical tracking.
Need to conduct CDD in person? No problem, we have a solution for that too. Not all your clients will be comfortable with technology or providing biometric scans, and that’s ok.
3. Culture of compliance
Who owns compliance in your firm? Whether you have an AMLCO yet or not, the answer is all staff members. A culture of compliance means all firm staff are trained on compliance, they understand why it matters, and they uphold regulations at all times. One person not following a process can be all it takes to get your firm in hot water.
Partners make risk-informed decisions about which clients to accept, fee earners instinctively spot red flags and escalate them without hesitation, and admin teams know exactly where to find all the information they need for reporting and monitoring.
When compliance is baked into your workflows, and your culture reinforces it, it stops being a conversation and just starts being. You don’t need to take extra steps, you simply complete your work as you normally would. There’s less friction, it is easy to comply with, and actually results in your processes sticking long-term without needing to constantly hound your staff.
Perspective shift 3: From ‘policies to enforce’ to ‘strengths of the firm’Implementing new policies might fail because they’re communicated to staff as a burden they have to comply with, rather than a new capability of the firm that actually lifts the business up. If your staff view new policies, processes, and systems as an additional administrative burden, they’re more likely to find corners to cut.
While using tools that will do much of the heavy lifting for them will help enforce compliance, the culture of the firm shouldn’t be discounted. Having the entire firm aligned and on board with a change is not only good for implementation, it’s good for morale and teamwork.
Creating an environment where staff feel comfortable to speak up when a client is high risk, to escalate a suspicious client activity, and protect the firm’s standing with regards to compliance is how you’ll stay compliant. If staff see something suspicious but don’t feel like they can raise it, you might experience high risk incidents flying under the radar that are caught when it’s too late.
Louise Lane, Principal at Lane Consulting & Advisory, gives valuable advice for ensuring new policies are adopted:
“Pretty Programs, Policies and Procedures are not enough: they need to operate properly. Take the time to document, train and test new procedures with those firm teams responsible for implementing your controls framework. Conduct trial runs, does your customer onboarding system work the way you think it should? Does your team know what ‘suspicious activity looks like’ and what to do when they see it? Acknowledge you won’t be perfect Day 1, but this is an evolving exercise.”
Legl's configurable workflows work to your AML policy and how your team operates. With built-in collaboration tools to keep the right people informed with relevant information you can prevent overwhelm. With your tailored workflows in Legl, match what works before for your team, maintaining your competitive edge, and unique value to your clients.
Work collaboratively with your team to test that policies and procedures are functional as intended to ensure uptake.
These three benefits and perspective shifts are deeply intertwined with each other. By addressing each of them systematically, together, you magnify the benefits. Tranche 2 is the catalyst, but it is far from an uncontrollable, external, forcing factor.
Making it happen, making it stick
Use this to guide your journey to compliance. Add your own dates as targets.
Embed reporting in your firm’s culture
Amy Bell, CEO of AML Sorted, started working in AML within law firms 20 years ago when it was introduced in the UK. She says Tranche 2 is made of two parts: compliance and reporting. The reporting is where lawyers and firms may have the most difficulty adjusting in terms of culture.
Client privilege has been so ingrained in the law profession that the idea of proactively reporting a client’s suspicious activity to the police will be jarring. To protect the firm, a cultural change is needed to make staff members feel comfortable and supported when they need to escalate a concern. Bell says:
“what [lawyers] need to understand about it is that the aim of AML is to furnish law enforcement with intelligence. They want to know what criminals are up to and they believe that the industries that fall into the scope of the AML legislation will be able to see things that could indicate money laundering.
And that is a real challenge particularly in the legal sector because the first thing you learn as a solicitor is to keep a client's information confidential. The mistake that I see people making is that they treat the client due diligence part of it as just an admin activity without understanding what the purpose of it is.”
Taking a consultative approach to workflow design
Bringing your staff along for the development of new policies and procedures is one way to gain buy-in for any related implementation. It not only helps them understand the why, it also gives them a sense of contribution which in turn builds their commitment to it being a success.
The theory of a new policy or workflow might not always work the way it’s intended in practice. That’s why taking an iterative approach together with your staff will give you the best chance of a successful adoption.
Don’t forget to celebrate the milestones, too. Stopping to acknowledge the level of work it takes to adjust to new regulation will help with avoiding feeling overwhelmed.
Tranche 2 with Legl
With over 500 leading firms using Legl to comply with CDD, AML, and CTF regulation whilst delivering richer client experiences, we know how to get you set up in time for Tranche 2 without the mad rush right before the deadline.
From mapping your processes to building your workflows and training your team on how Legl’s end-to-end platform enhances the client intake experience, our in-house experts will guide you through it.
Unify your intake processes, risk monitoring, payments, and compliance with Legl.
No lock-in contracts and pay-as-you-go pricing makes it easy to get started.
Ready to get started?
Reach out for a discussion of your firm’s needs and a walk-through of the Legl platform.
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