Legal Sector
Law practices with trust accounts or Table 6 designated services are reporting entities. Here's what you need to know before 1 July 2026.
From 1 July 2026, new AML/CTF compliance obligations reforms (called Tranche 2) will apply to the Legal Sector. AUSTRAC enrolment opens 31 March 2026.
The path to 1 July 2026 is defined by clear legislative and regulatory milestones
AML/CTF Amendment Act Passed
Nov 2024
Finalisation of AML/CTF Rules
Aug 2025
Finalisation of Core Guidance from AUSTRAC
Oct 2025
Finalisation of Sector-Specific Guidance for Lawyers
Jan 2026
AUSTRAC Enrolment Opens for Law Firms
31 Mar 2026
Mandatory Compliance Commences
1 Jul 2026
Note the critical six-month window between receiving final, lawyer-specific guidance and the mandatory start date. Preparation cannot wait.
These reforms are driven by
FATF Standards
The primary driver is the Financial Action Task Force (FATF), the global standard-setter for combating financial crime. Australia is a founding member and subject to its peer reviews.
2015 Evaluation Gap
Australia's 2015 FATF evaluation highlighted a key deficiency: the lack of regulation for "gatekeeper" professions like lawyers, accountants and real estate agents.
Criminal Exploitation
Criminals exploit these professional services to conceal illicit funds, hide beneficial ownership through complex structures and add a veneer of legality to the proceeds of crime.
Tranche 2 Reforms
The Tranche 2 reforms close this long-standing vulnerability, strengthening the integrity of Australia's financial system.
ML/TF/PF Risks in the Legal Sector
The legal sector faces many unique money laundering (ML), terrorism financing (TF) and proliferation financing (PF) risks. If an entity offers designated services, they will need to be aware of and assess the risks in relation to their business and services offered.
Cuckoo Smurfing
Wire transfer manipulation
Criminals exploit trust accounts by structuring payments through multiple client matters to obscure the origin of illicit funds.
Testamentary Trust Abuse
Estate planning exploitation
Complex trust structures used to layer proceeds of crime through legitimate estate planning arrangements.
DPRK Identity Fraud
Sanctions evasion
Sanctioned entities using sophisticated identity fraud to engage Australian law firms for legitimate-appearing transactions.
Shell Company Formations
Corporate veil exploitation
Requests to establish corporate structures designed to obscure beneficial ownership and facilitate money laundering.
Cash-Intensive Transactions
Physical currency risks
Large cash deposits into trust accounts for property settlements or litigation funding without clear source.
PEP Exposure
Political figure involvement
Politically exposed persons using law firms to acquire property or establish trusts to conceal wealth.
Your obligations are triggered only if you provide a 'designated service' in the course of your business
Reporting Entity Status
Your firm becomes a 'reporting entity' under the AML/CTF Act when it provides one or more services listed in the legislation.
Gatekeeper Focus
The focus is on transactional and structuring services where lawyers act as 'gatekeepers,' not on all legal work.
Service Mapping
The first critical step for every firm is to conduct a detailed mapping of its service offerings against the statutory definitions to determine its regulatory status.
Many core corporate, commercial and private client services are now in scope
Assisting in the sale, purchase, or transfer of real property.
General Practice, Conveyancing, Real Estate & Property Law.
Assisting in planning or executing the sale, purchase, or transfer of a body corporate or legal arrangement.
General Practice, M&A, Corporate Law, Private Equity, Commercial Law.
Receiving, holding, controlling, or managing a person's money, accounts, securities, or virtual assets for a transaction.
General Practice, Estate Planning & Administration, Restructuring, Commercial Law.
Assisting in organising, planning, or executing equity or debt financing for a corporate or legal arrangement.
General Practice, Commercial Law, Corporate Law.
Assisting in the creation or restructuring of a company or legal arrangement (e.g., an express trust).
General Practice, Corporate Law, Equity Law, Wills & Estates.
Assisting in the reorganisation, restructuring, or winding up of a company or legal arrangement.
General Practice, Insolvency Law, Corporate Law.
Acting as (or arranging for another to act as) a director, secretary, trustee, nominee shareholder, or registered office.
General Practice, Corporate Law, Equity Law.
| Service Category | Triggering Activity | Common Practice Areas Affected |
|---|---|---|
|
Real Estate Transactions
|
Assisting in the sale, purchase, or transfer of real property. | General Practice, Conveyancing, Real Estate & Property Law. |
|
Entity & Business Transactions
|
Assisting in planning or executing the sale, purchase, or transfer of a body corporate or legal arrangement. | General Practice, M&A, Corporate Law, Private Equity, Commercial Law. |
|
Client Asset Management
|
Receiving, holding, controlling, or managing a person's money, accounts, securities, or virtual assets for a transaction. | General Practice, Estate Planning & Administration, Restructuring, Commercial Law. |
|
Financing Transactions
|
Assisting in organising, planning, or executing equity or debt financing for a corporate or legal arrangement. | General Practice, Commercial Law, Corporate Law. |
|
Entity Creation & Structuring
|
Assisting in the creation or restructuring of a company or legal arrangement (e.g., an express trust). | General Practice, Corporate Law, Equity Law, Wills & Estates. |
|
Restructuring
|
Assisting in the reorganisation, restructuring, or winding up of a company or legal arrangement. | General Practice, Insolvency Law, Corporate Law. |
|
Trust & Company Services
|
Acting as (or arranging for another to act as) a director, secretary, trustee, nominee shareholder, or registered office. | General Practice, Corporate Law, Equity Law. |
Who May Be Captured?
The key trigger is designated services. If you are unsure whether you are covered, please take legal advice. Even if you are not covered, you may consider implementing guardrails.
Sole practitioners
Independent lawyers providing designated services
Independent practices
Small to medium law practices
Law firm partnerships
Traditional partnership structures
Multi-disciplinary practices
Firms offering legal and other professional services
Conveyancers
Real estate transactions are a key designated service
Outsourced legal service providers
In some cases
Whether you are captured depends on the designated services you provide. If unsure whether you're covered, please seek legal advice. Even if you are not covered, you may consider implementing guardrails to ensure you don't accidentally cross lines.
The reforms target gatekeeper roles, not the practice of law itself
The following activities are generally not designated services, provided they are not part of a broader in-scope service:
Litigation and Dispute Resolution
Including advocacy, running litigation and managing settlement payments under court order.
Pure Legal Advice
Providing legal opinions or advice on law and regulation that does not involve planning or executing a specific transaction listed in Table 6.
Employment Law
Work such as drafting employment contracts, enterprise agreements and unfair dismissal claims.
Standalone Document Drafting
Preparing contracts like supply agreements or NDAs where the firm is not involved in the underlying transaction or managing client assets.
Acting as Counsel/Barrister
Pure advocacy and advisory functions when instructed by a solicitor.
Simple Wills & Estate Administration
Drafting simple wills, following court orders and post-death estate administration are generally not designated services. However, complex pre-death estate planning involving the creation of trusts or companies for a living client is a designated service.
Once you are a reporting entity, you have six fundamental compliance obligations
1. Enrol with AUSTRAC
Formally register your practice as a reporting entity.
2. Develop & Maintain an AML/CTF Program
Create a written, risk-based program tailored to your firm's specific ML/TF risks. This is the cornerstone of your compliance.
3. Conduct Customer Due Diligence (CDD)
Identify and verify your clients and their beneficial owners before providing a designated service, and monitor them on an ongoing basis.
4. Report to AUSTRAC
Submit Suspicious Matter Reports (SMRs) and Threshold Transaction Reports (TTRs) as required.
5. Keep Records
Maintain all relevant records of CDD, transactions and your AML/CTF program for prescribed periods.
6. Appoint an AML/CTF Compliance Officer
Designate a senior individual responsible for the oversight of your program.
Legal Professional Privilege is protected by law, but managing it under SMR deadlines is a new, high-stakes operational challenge
The Statutory Protection
The AML/CTF Act (s 242) explicitly preserves your right to claim LPP. You are not required to disclose privileged communications to AUSTRAC.
Where you claim privilege in response to a notice, you must submit a specific LPP Form to AUSTRAC in lieu of the privileged information.
The Reporting Minefield
The obligation to report a Suspicious Matter (SMR) is not removed by LPP. You must report the suspicion based on non-privileged information.
Crucially, there are strict deadlines for submitting the LPP Form if privilege is the reason for withholding details in an SMR.
Suspected Terrorism Financing: LPP Form due within 24 HOURS of forming suspicion.
Other Suspicious Matters (e.g., Money Laundering): LPP Form due within 5 BUSINESS DAYS of forming suspicion.
Compliance Risk
Failure to have a rapid internal triage process for LPP claims could lead to a serious compliance breach. An "LPP Emergency Response Protocol" is essential.
Key AML/CTF Areas for Legal Professionals
Under Tranche 2, legal professionals face new obligations when providing designated services. Our documentation helps you navigate these requirements with confidence, covering all critical compliance areas specific to legal service delivery, including conveyancing for QLD and ACT practices.
Establishing Trusts and Power of Attorney
Documentation and verification procedures for trust establishment and power of attorney arrangements.
Trust Account Management
AML/CTF controls for trust accounts, including monitoring, transaction verification and suspicious activity detection.
Client Identity Verification
Initial and ongoing customer due diligence (CDD), including electronic verification methods and document requirements.
High-Value Transaction Protocols
Enhanced due diligence triggers and procedures for high-value matters and complex transactions.
Beneficial Ownership Records
Requirements for identifying and verifying beneficial owners of entities involved in transactions.
Suspicious Matter Reporting
Workflows for identifying, escalating and reporting suspicious matters to AUSTRAC, including indicators and thresholds.
Compliance Officer Duties
Appointment requirements, role description and ongoing responsibilities for AML/CTF compliance.
Building an AML Program
Building an AML/CTF program for a legal practice requires multiple steps.
- AML/CTF program framework for law practices
- Risk assessment worksheet (ML/TF/PF risks)
- Client identification and verification procedures
- Trust account AML controls and monitoring
- Conveyancing compliance workflows (QLD/ACT)
- Suspicious matter reporting procedures
- Staff Training Register for tracking completion
- Compliance officer role description
Ready to Get Started?
We can help you get a headstart on your AML/CTF program. Sector-specific program documents, no subscription. Portal included (subject to licence terms).
A HeadStart on Compliance
Sector-specific compliance documents to help you build your AML/CTF program.
Ready-to-Customise Resources
Lawyer-ready to review for your business.
Training & Record-Keeping
Staff Training Register, Compliance Officer appointment documents and portal-based training record-keeping.
From $249 inc GST · or bring your own program
HeadStart Docs™ products are developed with reference to publicly available regulatory guidance. This is general information only and does not constitute legal advice. You should seek advice specific to your circumstances before making compliance decisions.
Understanding the AML/CTF Reforms
AUSTRAC has published guidance on how the AML/CTF laws are changing for newly captured sectors, including legal practitioners.
Source: AUSTRAC, How Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) laws are changing (August 2025)
State law society AML/CTF hubs
Every Australian law society has published dedicated AML/CTF resources. Find your state's hub below.