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Why International Sanctions Matter for Australian Law Firms
- Simon Harbord
- Jul 15
- 4 min read
Simon Harbord is an AML, Sanctions, Bribery and Regulatory Specialist at AML Sorted and Teal Compliance
AUSTRAC’s Tranche 2 reforms are coming and global sanctions are part of the package
If you’re working in a law firm in Australia, the words “AML/CTF compliance” might be starting to ring a little louder in your ears. That’s no coincidence, 2025 marks a crucial turning point as Australia prepares to roll out the long-awaited Tranche 2 AML reforms, extending obligations under the Anti-Money Laundering and Counter-Terrorism Financing
Act to include lawyers, conveyancers, and other professionals.
But what often flies under the radar is that sanctions compliance is inextricably linked to these AML/CTF changes.
The global regulatory landscape shifted significantly at the FATF (Financial Action Task Force) Plenary in June 2025, and AUSTRAC is rapidly aligning with these expectations, not only to strengthen Australia’s AML regime, but also to prepare for a full FATF evaluation in 2026.
Here’s what your firm needs to know, and why now is the time to get ahead of the curve.
What’s changing and why international sanctions now matter more than ever
Until now, sanctions compliance has mostly been seen as the domain of banks and big corporates. But that’s no longer the case. With Tranche 2 on the horizon, law firms and conveyancers will soon need robust systems in place to identify and respond to international sanctions risks.
This includes screening clients, counterparties, and transactions against sanction lists, and flagging any dealings with restricted jurisdictions or individuals. Importantly, AUSTRAC has flagged this as a core area of regulatory focus in the lead-up to 2026.
Sanctions regimes change rapidly, particularly in response to geopolitical tensions like those involving Russia, Iran, North Korea, and others. Firms will need to implement real-time or near-real-time screening, or risk unwittingly facilitating prohibited activity.
What’s driving the urgency? FATF and Australia’s global obligations
In June 2025, the FATF agreed a series of updates aimed at tightening global standards around:
Cross-border payments transparency
Sanctions screening and enforcement
Ultimate Beneficial Ownership (UBO) disclosures
These updates were a clear signal: countries that want to avoid the reputational damage of being grey-listed or non-compliant must step up.
Australia’s next FATF mutual evaluation is due in 2026, and the government has committed to ensuring that the Tranche 2 reforms meet these expectations. That’s why AUSTRAC is now building its regulatory posture around sanctions compliance, beneficial ownership, and customer due diligence.
What law firms will be expected to do under Tranche 2
From 1 July 2026, law firms will be considered “reporting entities” under the AML/CTF Act.
That means you’ll need to:
Enrol with AUSTRAC within 28 days of providing a designated service (e.g. managing client funds, facilitating property sales, setting up trusts or companies)
Appoint an AML/CTF Compliance Officer
Develop a written AML/CTF Program, including controls for sanctions screening
Perform customer due diligence, including enhanced checks for high-risk clients such as politically exposed persons (PEPs)
Screen for sanctions and high-risk jurisdictions
Submit Suspicious Matter Reports (SMRs) when appropriate
Retain records and review your program independently at least every three years
The sanctions element is woven throughout, and will be scrutinised closely by regulators.
Real-life examples where sanctions screening matters
Let’s say your firm is handling the purchase of a property in New South Wales. The funds come from a client based overseas, routed through a third party in Dubai.
Without appropriate systems in place, your team may not:
Check whether the client or the third party is on a UN or Australian sanctions list
Recognise that the country involved is subject to targeted financial restrictions
Understand that the source of funds may trigger an SMR obligation under the new rules
Under Tranche 2, failing to pick up on these red flags could expose your firm to serious regulatory penalties, and reputational harm.
What’s the timeline for all of this?
Date | Milestone |
July 2025 | AUSTRAC publishes its AML/CTF implementation timeline and regulatory expectations |
Late 2025 | Final AML/CTF rules and sector-specific guidance released |
1 July 2026 | Tranche 2 obligations commence for lawyers, conveyancers, real estate agents, accountants |
2026 | Australia undergoes FATF mutual evaluation |
How your firm can prepare now
Law firms don’t need to wait for the rules to be finalised to get started. In fact, getting ahead now will give your team the best chance of bedding in good habits before regulators come knocking.
Here’s how to start:
Understand your risk profile – What services do you offer that fall under Tranche 2? Are you working with international clients or jurisdictions?
Review your onboarding process – Are you collecting enough information to screen for sanctions and beneficial ownership?
Choose a sanctions screening solution – Whether automated or manual, you need a process to check names and countries involved in your matters.
Train your team – Ensure your staff know what sanctions are, how to spot red flags, and when to raise concerns.
Keep an eye on AUSTRAC updates – New guidance is expected by the end of 2025. Subscribe to updates or work with a compliance partner.
Final thoughts: Compliance isn’t just a box-tick, it’s a risk shield
Sanctions compliance might feel like a step too far for firms used to operating without this level of regulation. But with AUSTRAC ramping up its enforcement powers, and FATF watching closely, the cost of inaction is far greater than the effort to prepare.
By embracing the reforms now, law firms can protect their clients, their reputation, and the integrity of the legal profession.
Give us a call or drop us an email if you have any questions on this AML topic, or indeed any questions that surround Tranche 2 in its entirety!
Simon
