As Australia's Tranche 2 AML/CTF reforms approach, many law firms, accounting practices, conveyancers and real estate agencies are beginning to evaluate AML software for the first time.

A common assumption is that all AML software performs the same function. In reality, AML platforms can vary significantly depending on the industries they were originally designed to serve.

Many AML solutions were developed for banks, lenders, remittance providers and other financial institutions already operating under Australia's AML/CTF regime. These businesses often have dedicated compliance teams, established onboarding processes and high transaction volumes.

Tranche 2 businesses face a different challenge.

Many smaller law firms, accounting practices and real estate agencies are not looking for another piece of software. They are looking for a practical way to understand, implement and maintain their AML obligations.

As a result, the features that matter most to a Tranche 2 business may differ significantly from those that matter to a large financial institution.

Look Beyond Identity Verification

When firms first begin researching AML software, they often focus on identity verification and sanctions screening. These functions are important; however, they represent only part of the compliance process.

A Tranche 2 business must also consider customer due diligence (KYC), beneficial ownership identification, ML/TF risk assessments, enhanced due diligence (EDD), ongoing monitoring, record keeping and compliance governance.

The practical challenge is often not conducting a single identity check. The challenge is ensuring that all compliance activities occur consistently and can be demonstrated later if required.

For many firms, the real question is, does the software help us manage our compliance program, or does it simply perform individual checks?

Tranche 2 Businesses Need Workflow, Not Just Checks

Many financial institutions already have dedicated compliance teams who understand AML obligations and internal procedures. Smaller professional firms often do not.

A suburban law firm, accounting practice or real estate agency may be implementing AML processes for the first time. Staff may be learning new obligations while continuing to serve clients and manage existing workloads.

In these circumstances, workflow becomes critically important. A useful AML platform should help firms understand what happens next. For example:

These questions often become more important than the individual identity check itself.

Many firms evaluating Tranche 2 AML software are now comparing workflow-focused platforms, identity verification providers and enterprise compliance systems. Firms should carefully consider which model best aligns with their size, risk profile and compliance obligations.

Beneficial Ownership Will Become Increasingly Important

Beneficial ownership is one of the areas where many Tranche 2 businesses may encounter difficulties.

A simple individual client may present little complexity. However, many professional firms regularly deal with companies, trusts, partnerships and layered ownership structures.

Consider a real estate agency acting on the sale of a commercial property owned by a corporate trustee. The trustee company may itself be owned by another company, which is in turn owned by a family trust.

The agency must identify the individuals who ultimately own or control the structure.

Many firms initially attempt to perform this exercise manually using spreadsheets and ownership diagrams. While this approach may work for simple structures, it can become increasingly difficult to manage as complexity increases. See The Spreadsheet Problem: Beneficial Ownership Under Tranche 2.

When evaluating AML software, firms should consider how beneficial ownership information is captured, assessed and documented.

Enhanced Due Diligence Requires More Than a Checklist

Enhanced Due Diligence is another area where workflow is critical. Many firms focus on whether EDD was completed. However, regulators are often interested in understanding why decisions were made.

For example, a law firm may identify a higher-risk client because of a complex ownership structure, foreign jurisdiction exposure or unusual source of funds information. The firm's compliance process should document the risks identified, the enquiries undertaken, the information obtained, the reasoning applied and the final decision.

In practice, EDD often operates like a structured compliance file note. The objective is not merely to complete a form. The objective is to create a defensible record of the firm's decision-making process. Read The AML File Note That Could Save Your Law Firm.

Consider Ongoing Monitoring From the Beginning

Many firms focus heavily on onboarding because it is the most visible part of AML compliance. However, AML obligations do not end once a client has been accepted.

Businesses may need to review client information periodically, reassess risk profiles and respond to changes in ownership structures or circumstances.

A useful AML platform should therefore help firms manage monitoring obligations as part of an ongoing compliance process rather than treating onboarding as a one-off event.

Balance AML Obligations with Privacy Obligations

Professional firms should also consider how AML compliance interacts with privacy obligations. A common misconception is that collecting more information automatically produces better compliance outcomes.

In reality, Australia's AML/CTF framework adopts a risk-based approach.

The objective is not necessarily to collect the maximum amount of information possible. The objective is to collect sufficient information appropriate to the risks presented by the client and engagement.

At the same time, firms remain responsible for protecting client information and complying with privacy obligations. Collecting unnecessary personal information can create additional storage, security and administrative risks. See AML Compliance Beyond Identity ‘Checks’: A Risk Based and Privacy Aligned Approach.

When evaluating AML software, firms should consider whether the platform supports a risk-based approach that allows compliance measures to align with the level of risk presented.

Choosing Software for Tranche 2

Many Tranche 2 businesses will discover that their software requirements differ from those of traditional reporting entities. Large financial institutions often prioritise transaction volume, automation and enterprise integrations.

Smaller law firms, accounting practices, conveyancers and real estate agencies are more likely to prioritise practical workflows, beneficial ownership identification, ML/TF risk assessments, EDD processes, monitoring schedules, audit readiness and ease of implementation.

The challenge for many firms is not understanding that obligations exist. The challenge is operationalising those obligations in a practical and repeatable way.

Before selecting an AML platform, firms should consider not only what checks the software can perform, but also whether it can support the broader compliance framework they will need to maintain under Australia's Tranche 2 AML/CTF reforms.

By Amira Ward and Daniel Ward
Flagship AML
Published May 2026
Estimated reading time: 7 minutes

© 2026 Flagship AML. All rights reserved. This article is for general informational purposes only and does not constitute legal advice.