The Australian Government is introducing significant reforms to its Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) framework. From 1 July 2026, lawyers providing designated services will be required to enrol with AUSTRAC, the national financial intelligence agency. This article outlines the rationale behind the legislation, the obligations for lawyers, and the steps required to ensure compliance.

Why the New Legislation?

Australia's AML/CTF laws aim to combat money laundering and terrorism financing, which pose serious threats to national security and the integrity of financial systems. International standards set by the Financial Action Task Force (FATF) require that designated non- financial businesses and professionals (these include lawyers) implement preventative measures.

Lawyers often handle transactions involving large sums of money, making them potential targets for misuse by criminals. By extending AML/CTF obligations to legal professionals, the government seeks to close regulatory gaps and enhance transparency.

What is the status of the new legislation?

The Anti-Money Laundering and Counter-Terrorism Financing Act was originally passed in 2006.  The new provisions discussed in this article are generally referred to as “tranche 2”, and those new provisions have been passed by Parliament.  However, many of the provisions which will affect lawyers will not come into effect until 31 March 2026 or 1 July 2026.  In this article we refer to the provisions which will come into effect in 2026 as “the New Act”. 

As at the date of writing, the subsidiary legislation has not been passed.  The subsidiary legislation will be important as much of the detail is to be included in the Rules. 

What Are Designated Services?

Designated services are set out in section 6 of the New Act.

Designated services are in general terms related to the selling, buying or transferring of real estate, or a body corporate or legal arrangement (presumably this includes a partnership), receiving, holding and controlling another person’s property, equity or debt financing in relation to a body corporate or legal arrangement, corporate restructures, and arranging for another person to act in different legal capacities.  Because the wording of these activities will be important for lawyers, the relevant part of section 6 is reproduced at the end of this article.

An activity is only a designated service if it is done in the course of carrying on a business, and in some cases provided it is not pursuant to or resulting from a court or tribunal order.

If you provide any of these services on or after 1 July 2026, you will be classified as a reporting entity and must comply with the AML/CTF obligations.

Key Obligations for Lawyers

Lawyers providing designated services will need to:

1. Enrol with AUSTRAC: Registration is mandatory and must be completed by 1 July 2026.
2. Appoint an AML/CTF Compliance Officer: This individual, who must be employed or engaged at a management level (who can be an existing senior level employee or proprietor), will oversee compliance with AML/CTF laws and liaise with AUSTRAC.
3. Develop an AML/CTF Program: This program must outline how your firm will identify, mitigate, and manage risks associated with money laundering and terrorism financing.
4. Conduct Customer Due Diligence (CDD): Verify the identity of clients and assess the risk of their transactions.
5. Report Suspicious Activities: Notify AUSTRAC of any transactions or activities that raise suspicion (see comments on legal professional privilege below).
6. Maintain Records: Keep detailed records of transactions, client identification, and compliance measures.

Ongoing Compliance Obligations

Compliance does not end with enrolment. Lawyers must regularly review and update their AML/CTF programs and consider their clients and employees to address emerging risks.

It seems very likely that AUSTRAC will also require periodic compliance reports.

Failure to comply can result in significant penalties, both financial and reputational.

Penalties

Financial penalties for AML/CTF can be extreme. As a result of contraventions of the AML/CTF Act, Westpac was ordered to pay a civil penalty of $1.3 billion, Crown Melbourne and Crown Perth were ordered to pay penalties of $450 million, TAB was ordered to pay $45 million.

More likely, civil penalties will be around $20,000 (where the entity admits fault and agrees to pay the penalty without requiring litigation with AUSTRAC).

Will litigators be captured?

Many commercial litigators will likely be captured.  Many will at some stage be involved in drafting a settlement deed which will involve the restructure of a corporation.  While there is an exemption for some arrangements which are pursuant to or result from a court order, much litigation settles through a settlement deed which is neither pursuant to nor resulting from a court order.

Interestingly, most of the current materials discussing AML/CTF regarding lawyers refer to lawyers being targeted to facilitate phony settlement arrangements which are nothing more than a sham to cause funds to be paid from one criminal to another.

Barristers

Barristers are not required to enrol if the services provided by the barrister are on the instructions of a solicitor.

Legal professional privilege

Arrangements are being put in place to protect legal professional privilege.

Preparing for the Changes

To prepare for these changes, lawyers will need to:

• Familiarise themselves with the AML/CTF Act and AUSTRAC's guidelines.
• Identify whether their services fall under the category of designated services.
• Appoint a qualified AML/CTF compliance officer and allocate resources for compliance.
• Develop and implement a robust AML/CTF program tailored to their practice.

We can help you with all of these requirements.  As at the date of writing, it’s probably too early to take any helpful practical steps because the subsidiary legislation has not been passed.  However, it’s worth thinking about the steps to be taken.  We recommend law firms start planning in around September 2025.

Please email us if you would like to receive our updates on AML/CTF.

We are an Australian law firm, practising in financial services law.  We understand the issues you will face, because we have been involved in the AML/CTF area since 2010, due to our financial services work.

Conclusion

The new AML/CTF legislation represents a pivotal shift for the legal profession in Australia. By proactively embracing these changes, lawyers can not only comply with the law but also contribute to the broader fight against financial crime. For detailed guidance, visit AUSTRAC's official website.

Our Commitment to Supporting Lawyers

As a firm that has been providing AML/CTF services since 2010, we understand the complexities of navigating the regulatory requirements. We will continue to provide updates as the detailed rules and requirements are finalised, to help ensure smooth transitions and compliance within the legal sector.

If you'd like to receive further updates and insights about these changes, please email us to join our mailing list.

Extracts

 Section 6(5)(C)

          (5C)  For the purposes of item 3 of the table in subsection (5B), the circumstances are as follows:

                     (a)  the money, accounts, securities, securities accounts, virtual assets or other property being held or managed is payment by the person for the provision of goods or services by the business;

                     (b)  both:

                              (i)  the business does not provide any designated services other than the services referred to in item 3 of the table in subsection (5B); and

                             (ii)  the money, accounts, securities, securities accounts, virtual assets or other property being held or managed is for payments reasonably incidental to the provision by the business of a service that is not a designated service;

                     (c)  the money, accounts, securities, securities accounts, virtual assets or other property being held or managed is to be received or payable under an order of a court or tribunal;

                     (d)  the service provided by the business is the receipt or disbursement of a payment mentioned in subsection (5D);

                     (e)  the service is any other designated service;

                      (f)  a circumstance specified in the AML/CTF Rules.

Note:     An example of a circumstance to which paragraph (b) applies is fees paid to a barrister for representation in legal proceedings or property management services.

Section 6(5)(E)

          (5E)  For the purposes of item 7 of the table in subsection (5B), the circumstances are:

                     (a)  acting, or arranging for another person to act, in a fiduciary capacity pursuant to, or as a result of, an order of a court or a tribunal; or

                     (b)  acting as the trustee of a regulated debtor’s estate (within the meaning of Schedule 2 to the Bankruptcy Act 1966); or

                     (c)  a circumstance specified in the AML/CTF Rules.