From 1 July 2026, real estate, legal, conveyancing and accounting practices became reporting entities under the AML/CTF Amendment Act 2024, and with that came an obligation many practitioners had not previously carried in any formal sense: identifying and assessing every client to a consistent, defensible standard. For firms used to verification as a procedural step before settlement, the shift is significant. Identity is no longer simply a box to tick before a matter proceeds, it is now the foundation of an ongoing compliance obligation that regulators expect firms to be able to demonstrate, not just perform.

This changes the question practitioners need to be asking. It is no longer only “how do we comply.” It is “how do we build identity verification into an onboarding process that is efficient enough to sustain, and robust enough to withstand scrutiny.”

Why identity sits at the heart of AML/CTF

Anti-money laundering and counter-terrorism financing obligations are built on a simple premise, a firm cannot assess the risk a client presents if it cannot first establish who that client actually is. Know Your Customer requirements, ongoing due diligence, and suspicious matter reporting all depend on an accurate, well-evidenced identity as their starting point. For lawyers and conveyancers newly captured under Tranche 2, this means identity verification is no longer a discrete task performed once at the start of a matter. It is the first link in a compliance chain that regulators expect to be able to trace, end to end, if a transaction is ever reviewed.

This is precisely why the quality of that first identity check matters so much more now than it did under previous, lighter-touch obligations.

The limitations of document-based verification

Traditional verification of identity, built around sighting a passport, driver licence or Medicare card, has served the profession for decades, and it remains a required part of most verification of identity standards today. But it carries limitations that Tranche 2 has made harder to ignore.

Document-based checks rely heavily on the skill and attention of the person conducting them, and even a well-trained practitioner can struggle to detect a sophisticated forgery by eye. The process is also repetitive in a way that adds friction without adding assurance, a single property transaction can require the same buyer to produce the same documents to a real estate agent, a conveyancer, a lender and a settlement agent, each running an independent check and building an independent compliance file. Every one of those files becomes both a cost centre and a data security exposure. None of this reduces underlying risk, it simply multiplies the number of places that risk, and the client’s personal information, comes to rest.

Where digital ID fits

The Digital ID Act 2024 established the Australian Government Digital ID System, giving individuals a secure, accredited way to verify their identity, co-regulated by the ACCC and the OAIC. From 30 November 2026, private sector entities become eligible to participate for the first time, opening the door for industries with high identity-risk profiles, including legal and conveyancing services, to draw on accredited digital identity providers such as myID and ConnectID as part of their own verification processes.

For a profession still working largely from physical documents and in-person or video interviews, this represents a meaningful shift in the tools available, not a replacement for the framework practitioners already operate within. Digital ID is best understood as an additional layer of assurance that can sit alongside existing verification of identity and AML/CTF processes, strengthening the evidence base a firm relies on rather than substituting for it.

What digital ID can, and cannot, solve

It is worth being precise about where digital ID actually helps. It can reduce reliance on physically sighting documents that can be altered or forged. It can give practitioners a verification method that has already been through an accredited assurance process, rather than one assessed solely on the day by whoever is sitting across the desk. It can, over time, reduce the number of times a client is asked to produce the same evidence of identity across a single transaction.

It cannot, on its own, satisfy a firm’s full AML/CTF obligations. Ongoing customer due diligence, source of funds enquiries, risk assessment and suspicious matter reporting all sit outside what an identity credential establishes. Digital ID confirms who a client is, it does not assess why a transaction looks unusual or whether a client’s circumstances have changed since onboarding. Firms that treat digital ID as a compliance shortcut, rather than a stronger input into a compliance process they still own, are likely to find the gap exposed at the worst possible time, during a regulatory review.

The Model Participation Rules that govern electronic conveyancing are being updated with this distinction in mind, with the next version due to commence in October 2026, ahead of private sector Digital ID participation opening the following month. Firms that understand where digital ID sits within that framework, rather than assuming it replaces any part of it, will be better placed as the rules evolve.

Building a more efficient client onboarding process

Start layering stronger verification methods into onboarding now, in a way that reduces friction for clients without reducing rigour for the firm.

That can look like:

Reviewing where a firm’s current onboarding process asks a client to repeat the same evidence unnecessarily, and identifying which of those steps a stronger initial identity check could genuinely remove.
Keeping ongoing due diligence, risk assessment and reporting obligations clearly separated from identity verification, so that digital ID strengthens the front end of onboarding without being mistaken for the whole of it.
Tracking the Model Participation Rules and state-based verification of identity standards as they are updated through 2026, since these will set out precisely how digital verification methods are formally recognised.

Firms that get this sequencing right stand to gain on both sides of the ledger, a faster, less repetitive experience for clients, and a more defensible, better-evidenced compliance file for the firm.

To learn more about this topic, join me on September 3 when I interview Victor Dominello to unpack where digital identity law still has catching up to do. Register Now.

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