Transitioning pre-commencement customers after 1 July 2026

Define the population by service and relationship

AUSTRAC's transition guidance addresses customers of professional services, real-estate services and precious-metals, stones and products services. A person may be a pre-commencement customer where a designated service was being provided on 1 July 2026, or where there was an existing business relationship involving a designated service that had been provided before that date. The analysis therefore starts with the service and relationship, not the date a contact was first entered into practice software.

Assess duration, recency and whether both sides reasonably expected the relationship involving the designated service to continue. An old conveyancing file closed years ago, a newsletter subscriber or a person who obtained general information may not belong in the same population as a client with a live retainer or an ongoing arrangement. Conversely, a transaction begun before commencement and completed after it may require careful transition treatment. Record the facts and the applicable transitional provision for each cohort.

Do not confuse transition treatment with permanent grandfathering

Pre-commencement classification affects how initial CDD obligations transition, but it does not switch off ongoing customer due diligence. AUSTRAC makes clear that existing customers remain subject to risk-based monitoring and review. New information, a material change in ownership or instructions, unusual activity, a higher-risk service, a sanctions or PEP issue, or doubts about identity information can require updated KYC, verification or enhanced measures.

Avoid policies stating that every customer opened before 1 July 2026 is verified or exempt. Instead, state which transitional rule is relied on, what minimum information is held, how risk was assessed, what monitoring applies and which events trigger remediation. If the facts do not meet the transition conditions, apply the ordinary initial CDD requirements before providing the designated service unless a lawful delayed process is available under current rules and policy.

Create an evidence-led customer inventory

Extract open matters, recurring engagements and recently completed designated-service work from practice, trust-account, property, billing and customer systems. Include the provider entity, customer, relevant designated service, last and next expected activity, relationship status, identity information held, beneficial-ownership information, risk indicators and responsible professional. Deduplicate records carefully so that related entities and individuals remain linked without being collapsed into one customer.

Divide the population into defensible cohorts: live service on commencement, continuing business relationship, new post-commencement customer, dormant or closed contact, and unresolved. Sample the underlying files rather than relying solely on a database status. Preserve evidence such as retainers, instructions, transaction milestones, recurring-service arrangements, invoices and correspondence. An unresolved cohort should have an owner and a deadline; it should not quietly inherit the lowest-risk treatment.

Prioritise remediation by risk and service activity

A transition plan should bring the highest-risk and most active relationships forward. Relevant factors include opaque ownership, foreign or high-risk jurisdiction exposure, unexplained third-party funding, client-money handling, nominees, rapid property or entity transactions, precious-item purchases, PEP status, sanctions proximity and inconsistent KYC. Also prioritise customers about to receive a new or materially different designated service because the new work can alter both scope and risk.

For each file, record the classification, risk rating, information gaps, required action, due date and approval. Possible actions include confirming authority, updating entity extracts, remapping beneficial ownership, refreshing identity evidence, establishing source of funds or wealth, enhanced monitoring, declining new work or considering an SMR. A gap does not automatically mean suspicion, but unexplained facts must be assessed rather than treated as an administrative backlog. Preserve confidentiality and tipping-off controls during escalation.

Operate the transition as a controlled programme

Management information should distinguish completed classification from completed CDD remediation. A customer can be correctly classified as pre-commencement while still requiring an urgent risk review. Quality assurance should sample both low-risk closures and high-risk escalations, test whether evidence supports the label, and ensure frontline teams do not restart a designated service while a required action remains open.

• Map the designated services the business provided before and after 1 July 2026.
• Extract potential customer relationships from source systems and reconcile them to live and recurring matters.
• Classify each cohort against the current transitional rules and retain the supporting facts.
• Risk-rank active files and set remediation actions, owners, approvals and deadlines.
• Apply ongoing CDD and event triggers to all relationships for which a designated service continues.
• Report population size, unresolved cases, overdue remediation and material exceptions to accountable governance roles.