Starting 1 July 2026, law firms in Victoria, along with other professionals such as accountants, conveyancers, and real estate agents, will be brought into the scope of Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime. This marks a significant shift as legal services become subject to obligations under AUSTRAC’s regulatory framework.
Key Obligations
Lawyers providing certain designated services will need to:
- Enrol with AUSTRAC: Firms must enrol within 28 days of providing a regulated service. This includes supplying details about business structure, services, and key personnel.
- Develop an AML/CTF Program: This includes a risk assessment for money laundering and terrorism financing (ML/TF), documented procedures, and a designated compliance officer. The program must be reviewed and updated regularly and evaluated independently at least once every three years.
- Conduct Customer Due Diligence (CDD): This requires collecting and verifying client identities, assessing risk profiles, identifying politically exposed persons (PEPs), and conducting ongoing monitoring for suspicious activities.
- Report Suspicious Activities: Lawyers must file Suspicious Matter Reports (SMRs) when there’s a reasonable suspicion of criminal activity, including when someone may not be who they claim to be or when transactions are unusually large or complex.
- Maintain Records: Documentation related to CDD, transactions, training, and AML/CTF compliance must be retained for at least seven years.
What to Look Out For
Legal practices should start preparing now by:
- Assessing current client onboarding processes to align with CDD requirements.
- Training staff to identify and escalate red flags, such as large cash payments, reluctance to provide ID, or requests for overly complex transactions.
- Appointing an AML/CTF Compliance Officer to oversee the implementation and ongoing operation of your compliance program.
Importantly, the new laws respect legal professional privilege, with protections ensuring that privileged communications are not required to be disclosed under AML/CTF obligations.
Firms should monitor AUSTRAC updates for further guidance and be ready to adapt their systems and workflows well before the 2026 deadline. Proactive compliance will be crucial to mitigating regulatory risks and ensuring your firm remains both ethical and legally compliant.
https://www.austrac.gov.au/about-us/amlctf-reform/summary-amlctf-obligations-tranche-2-entities#Key%20obligations%20summary
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Under the new AML/CTF regime effective from 1 July 2026, lawyers will be required to file Suspicious Matter Reports (SMRs) in situations where they reasonably suspect that a matter may be related to criminal activity, money laundering, or terrorism financing. Here are some practical examples where an SMR might be appropriate:
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Unusual Payment Methods or Amounts: A client insists on making a large payment in cash for legal services or property transactions, especially when it’s inconsistent with their known financial profile or the nature of the transaction.
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Complex or Opaque Ownership Structures: A client uses multiple layers of companies, trusts, or offshore entities without a clear commercial rationale, making it difficult to determine the ultimate beneficial owner.
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Reluctance to Provide Identification: A client is evasive or refuses to provide standard identification documents, or the documents provided appear false or inconsistent.
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Third-Party Payments: Legal fees or other payments are made by third parties not related to the transaction or legal matter, particularly if they are from high-risk jurisdictions.
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Overseas Clients with No Clear Local Ties: An overseas client engages a lawyer for a property purchase or to set up a company in Australia with no clear business or personal connection to the country.
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High-Risk Jurisdictions: Transactions involve clients or funds from countries known for high levels of corruption, terrorism financing, or with limited AML/CTF controls.
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Pressure to Expedite: The client applies unusual pressure to complete a transaction quickly without clear reason, especially when combined with complex financial arrangements.
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Suspicious Legal Instructions: Instructions that appear to have no clear legal purpose, such as creating legal structures or agreements that don’t reflect genuine transactions or relationships.
Each of these scenarios could indicate an attempt to launder money, obscure beneficial ownership, or facilitate another criminal act. In such cases, lawyers are expected to assess the situation and, if suspicion is reasonable, file an SMR with AUSTRAC without tipping off the client.