Law Letter Hub Articles
On Your Firm’s Radar? Anti-Money Laundering Reforms Soon to Affect Private Practices
31 January 2025
By now you may already be aware that many Australian legal service providers will need to brace for potentially significant compliance challenges with several anti-money laundering (AML) reforms on the horizon.
These changes, for those firms that fall within the definition of reporting entities (those providing designated services), will add to an already extensive list of compliance obligations for lawyers, including those associated with electronic conveyancing and State Revenue Office TRO agent work.
The legal profession will need time and resources to implement the new requirements. Law societies across Australia may also need to consider whether amendments to the Legal Profession Act 2007 or professional conduct rules are required.
This article provides an overview to help legal practices start considering what preparations might be required for these imminent reforms.
While more information and guidance will be provided by the Law Society of Tasmania and other regulatory bodies, it’s important for legal service providers to stay informed through their own initiatives and begin preparing as appropriate in advance.
Anti-Money Laundering and Counter-Terrorism Financing (the Act) Amendment Act
The Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (AML Act) has introduced substantial changes to Australia’s AML/CTF regime. See here for an Overview and Objectives and to access the Bill (which makes for an easier read as to the changes to the Act).
The Act expands the AML/CTF regime to cover certain services provided by “gatekeeper” professions, including lawyers, accountants, and real estate professionals.
Why are these changes being introduced?
Lawyers can, at times, knowingly or unknowingly, be involved in facilitating money laundering activities. The new AML/CTF Act addresses this regulatory gap, aligning Australia with international standards established by the Financial Action Task Force. These reforms aim to enhance Australia’s AML/CTF framework, bolstering efforts to safeguard the community against serious and organised crime.
When will the obligations commence?
Most changes to the AML laws are set to take effect from March 31, 2026. There will be staged commencement for lawyers who provide designated services. Lawyers will be required to assess the services they provide and any associated money laundering and terrorism risks and enrol with the regulator (AUSTRAC). The obligations for lawyers providing a designated service will broadly commence 1 July 2026.
Legal services captured
“Designated services” include:
- assisting clients to buy, sell or transfer real estate;
- assisting clients to buy, sell or transfer legal entities;
- receiving, holding, controlling (including disbursing) or managing clients’ funds and/or property, for example, money, accounts, securities or assets associated with a transaction (exceptions include circumstances such as where the payment is for fees for the barrister or firm’s legal services);
- assisting clients in transactions for equity and debt financing relating to a body corporate or legal arrangement; and
- assisting clients to sell or transfer a shelf company;
- assisting clients to create or restructure a body corporate or legal arrangement.
- acting (or arranging for another person to act) in roles like company director, partner, trustee, or pursuant to a power of attorney, etc.;
- acting (or arranging for another person to act) as a nominee shareholder; and
- providing a registered office address or principal place of business.
- For the detail, see the Amending Act here. In particular, Schedules 3 (Table 6) and 4.
What will affected legal service providers need to do?
As it stands, compliance with the AML/CTF regime has six key obligations (also subject to potential AUSTRAC compliance audits). Legal service providers, accountants, real estate agents, and similar entities will need to:
- Enrol with AUSTRAC.
- Develop and maintain, as a newly recognised reporting entity, an ‘AML/CTF compliance program’ tailored to their practice.
- Develop processes to meet AML/CTF obligations, including risk-based assessments and client identification.
- Conduct due diligence (and ongoing due diligence and transactional monitoring) procedures.
- Develop reporting mechanisms for suspicious activities.
- Make and keep required records.
- Appoint an AML/CTF Compliance Office.
Compliance frameworks will need to be established, and training on AML/CTF obligations will become essential.
Although the AML/CTF Rules and Guidance are yet to be finalised, firms should begin preparing now.
Concerns: Balancing Compliance with Legal Professional Principles
The implementation of these reforms has raised significant concerns within the legal profession, particularly regarding the interplay between legal professional privilege (LPP), confidentiality, and the new compliance obligations.
While LPP is protected within the AML/CTF framework, questions remain about other in-practice concerns. For instance:
- Confidentiality vs. LPP: Confidentiality, which is broader than LPP, may not always be safeguarded under the new regime. Not all information that falls within a lawyer’s duty of confidentiality is considered privileged. To qualify as privileged, the communication between the client and lawyer must also relate to legal advice. Information not covered by LPP but still attracting the duty of confidentiality could potentially be required by AUSTRAC, raising ethical dilemmas for lawyers.
- Suspicious Matter Reporting: The Act requires lawyers to report suspicious matters, with a low and broad reporting threshold that appears to extend beyond money laundering.
- Legal Professional Privilege Forms: Under the Act, lawyers claiming LPP over certain client information must submit an LPP form alongside any report to AUSTRAC. Failure to do so, or incorrect reporting, could result in civil penalties. While this ensures LPP is formally recognised, it also adds administrative complexity and increases the risk of inadvertent disclosure.
The profession has called for clearer guidelines, tailored rules for lawyers, and adequate time to implement these requirements.
The Law Council of Australia and other stakeholders continue to advocate for a balanced approach that respects the unique role of lawyers while meeting AML/CTF objectives. As other Commonwealth countries such as Canada and New Zealand have historically experienced, finding this balance is both critical and challenging.
Privacy Act Considerations
In addition to AML reforms, legal service providers must also prepare for potential changes to privacy practices and procedures.
Note that small legal service providers that become reporting entities under the AML/CTF Act will need to comply with the Privacy Act (1988) when handling personal information collected for AML/CTF compliance purposes, even if they were previously exempt from the Privacy Act or are otherwise exempt in terms of other business activities they undertake.
Here we will see an overlap of data collection and management obligations, where stricter privacy protections must be balanced with AML compliance. AML reporting entities will need to adapt their processes to uphold both regulatory duties for anti-money laundering and the new privacy expectations, particularly around data security, client rights, and the scope of information collected.
Such considerations should be monitored by the legal profession as / where appropriate.
What’s Next? Steps to Prepare:
- Identify if your practice provides “designated services” and qualifies as a reporting entity.
- Monitor updates on AML reforms, including industry consultations and detailed guidance.
- Prepare systems, including updating compliance processes, client data management, and staff training on AML/CTF and related obligations (e.g., Privacy Act).
- Reach out to the Law Society for legal compliance contacts in preparing for these changes.
Early preparation will position legal service providers to meet these evolving compliance standards successfully. Ensure this is firmly on your radar now.
Francesca Beattie
Deputy Executive Director
The Law Society of Tasmania
