How the AUSTRAC process applies to lawyers

From 1 July 2026, certain legal services will be regulated under Australia’s Anti‑Money Laundering and Counter‑Terrorism Financing (AML/CTF) regime. These reforms which introduce newly captured “reporting entities” — known as “Tranche 2 entities” — are administered by AUSTRAC and will introduce new compliance obligations for law firms that provide designated services.

This article explains when lawyers are captured as Tranche 2 entities and what the AML/CTF obligations look like in practice — in simple, practical terms

AML/CTF regulates designated services — not lawyers

A critical distinction under AUSTRAC’s framework is that lawyers are not regulated simply because they are lawyers.

AML/CTF obligations arise only where a legal practice provides designated services. For law firms, this typically includes services such as:

• Assisting with property transactions
• Assisting with the creation, restructuring, sale or transfer of companies or trusts
• Assisting with equity or debt financing
• Handling or controlling client money, accounts, securities, virtual assets or other property
• Appointing a person, or acting as a trustee of a trust, a director, secretary, power of attorney, partner in a partnership or nominee shareholder of a company or trust (or any equivalent position)
• Assisting with the sale or transfer of a shelf company
• Providing a registered office or business address for a company or trust

If your firm provides one or more of these services, you firm must enrol with AUSTRAC and comply with its AML/CTF obligations. Enrolment must occur by 29 July 2026.

Purely advisory legal work is not automatically captured. Whether a firm is regulated depends on the nature of the services it provides, not its professional label.

What a law practice must do as a reporting entity

If your practice provides one or more designated services in the course of business, as part of your obligations you must:

• Enrol with AUSTRAC
• Conduct a risk assessment and implement an AML/CTF program
• Conduct customer due diligence
• Provide AML/CTF training to staff
• Report suspicious matters as they arise
• Create and maintain records

Whether you are captured depends on what you do, not your firm size. If you are captured you  must address these obligations in a way that reflects the size, nature, and complexity of your practice.

Legal professional privilege (LPP): a key difference

The AML/CTF reforms do not take away a lawyer's right to refuse to provide information that is protected by legal professional privilege. AUSTRAC has explicitly acknowledged LPP for the purposes of the AML/CTF reforms.

What this means in practice:

• Obligations to report to AUSTRAC do not extend to information subject to LPP — but lawyers must still assess AML/CTF risk and fulfil reporting obligations to the extent possible without disclosing privileged information
• Where privileged and non-privileged information is disclosed that raises suspicion, only the non privileged information will be required to be disclosed and an LPP form submitted in lieu of any withheld information that is subject to LPP
• AML/CTF programs must be designed carefully to respect LPP obligations

This is a fundamental difference between lawyers and other Tranche 2 entities.

What AML/CTF obligations look like in legal practice

1. Identifying when designated services are being provided

Law firms will be required to apply AML/CTF controls at a matter level where they are providing a designated service, not across every client interaction.

Matters likely to constitute the provision of a designated service include:

• Property and conveyancing work
• Complex corporate or trust structures
• Client funds held in trust accounts
• Transactions

2. Customer due diligence (CDD)

Before providing a designated service, lawyers must conduct CDD:

• Verify client identity
• Identify beneficial owners or other parties to a matter (as required)
• Understand the purpose of the matter

3. Suspicious matter reporting

If a transaction or instruction raises red flags, the firm must submit a suspicious matter report to AUSTRAC — without tipping off the client.

How AML/CTF changes legal workflows

In order for a firm to meet its AML/CTF obligations it will:

• Add CDD checks at matter opening for matters where a designated service will be provided
• Require clearer documentation of instructions from clients
• Change how trust money and corporate work is handled
• Introduce general AML/CTF compliance obligations (such as tailored AML/CTF policies and processes)

AUSTRAC has stated that AML/CTF programs should be proportionate and aligned to the firm’s actual risk exposure.

Key takeaway for lawyers

• AML/CTF doesn’t regulate legal advice — it regulates legal services that present ML/TF risk.
• If your firm helps clients move money, buy property, or create structures, AML/CTF compliance will become part of everyday practice from 1 July 2026.

• Lawyers will more commonly engage with their AML/CTF obligations on a  matter‑by‑matter basis, focused on specific transactions (such as property transfers or entity structuring), with the added complexity of legal professional privilege.
• In practice, accountants will likely face more extensive ongoing AML/CTF monitoring obligations due to the long‑term nature of their client relationships and the designated services that they provide. 

Same law, same obligations — different day‑to‑day impact.