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The Australian Government is introducing major reforms that will, for the first time, bring parts of the legal profession into the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth). These reforms—known as Tranche 2—mean that many lawyers and legal practices will soon become reporting entities with new and ongoing compliance obligations.
This blog explains the changes in simple terms, who is captured, what services trigger the regime, and the practical steps your practice must take before 1 July 2026.
Who will be captured?
Only law practices that provide certain services—called “designated services”—will be regulated under the new AML/CTF Act.
This includes:
- Law firms (large, mid-tier, boutique and small practices)
- Sole practitioners
- Legal practices that occasionally assist in transactions (even if only a few times per year)
The obligations apply to the law practice as a whole, not to each lawyer individually. However, everyone within the practice must comply with the firm’s AML/CTF Program.
Barristers
Barristers are generally excluded where they are briefed by a solicitor, but may be captured if they provide a designated service directly to a client.
When do the obligations start?
There are two key dates:
31 March 2026
AUSTRAC enrolment for newly regulated (Tranche 2) entities opens.
1 July 2026
Your mandatory AML/CTF obligations begin—but only if you provide a designated service.
Importantly, there is significant preparatory work required ahead of 1 July 2026. Firms that do not start preparing early will struggle to meet the deadline.
Do all Legal Services Trigger AML/CTF Obligations?
No.
The regime only applies to services listed as designated services under the Act.
Traditional legal work—litigation, family law (except transactional property transfers), wills and estates, immigration, criminal defence, employment law, and general advisory services—will typically not trigger AML/CTF obligations.
Your firm must identify, document and regularly review which of your service lines fall within the designated services list.
What are “Designated Services” for Lawyers?
Below is a plain-English summary of the designated legal activities that trigger AML/CTF obligations.
You are captured if you assist a client to:
1. Buy, sell or transfer real estate
This includes drafting, preparing or acting in connection with property transactions.
2. Buy, sell or transfer legal entities
Such as:
• companies
• unit trusts
• partnerships
• joint ventures
3. Receive, hold, control or manage client money or property
Examples include:
• managing funds for a settlement
• disbursing client money as part of a transaction
• controlling securities or assets
Exception:
Funds held solely for your professional fees or disbursements in your trust account are generally excluded.
4. Provide equity or debt financing transaction support
This includes assisting with:
• capital raisings
• equity subscriptions
• loan arrangements
• private financing transactions
5. Sell or transfer a shelf company
6. Create or restructure companies, trusts or legal arrangements
Examples include:
• drafting trust deeds
• forming partnerships or companies
• undertaking corporate restructures
• preparing governance documents linked to structural changes
7. Act as (or arrange for another to act as):
• company director
• company secretary
• partner
• trustee
• attorney of a company or trust
8. Act as a nominee shareholder
9. Provide a registered office or principal place of business address
These activities are detailed in Table 6, section 6 of the Act.
Borderline Scenarios: When you need to investigate further
Some matters will require careful analysis. For example:
- Where a transaction ultimately changes the beneficial owner of property
- Where a series of steps leads to a new legal arrangement
- Where corporate structuring work indirectly facilitates the acquisition of an asset
Examples and guidance will be provided in the final AUSTRAC Rules.
Should your Firm continue offering high-risk Designated Services?
Some firms may only undertake a handful of these transactions each year.
In such cases, the compliance cost, administration and training burden may outweigh the commercial benefit.
Firms should consider:
- Whether it is viable to continue offering certain services
- Whether the firm should restructure or limit specific practice areas
- Whether those services should be centralised within a specialist team
- Whether alternative providers should be engaged for parts of the transaction
Click Legal can assist in conducting this assessment.
Are there any exemptions?
Yes—limited ones.
You do not need to enrol with AUSTRAC if:
- you do not provide any designated services.
If you do provide designated services:
Some simplified customer due diligence (CDD) options may apply in low-risk scenarios, but these exceptions are narrow and must be justified through your risk assessment.
Examples include:
- certain low-risk client types
- matters with limited ML/TF exposure
- specific activities outlined in the AML/CTF Rules
Your firm must always apply a risk-based approach unless a clear exemption applies.
What will lawyers need to do to comply?
There are six core obligations for legal service providers:
1. Enrol with AUSTRAC
This is mandatory if your practice provides a designated service.
2. Build and maintain an AML/CTF Program
Your program must be tailored, written, and implemented in practice. It must include:
- governance arrangements
- risk assessments
- procedures for customer identification
- control measures for high-risk matters
- oversight of staff and agents
- ongoing monitoring
3. Conduct customer due diligence (CDD)
This includes:
- verifying clients
- identifying beneficial owners
- understanding the purpose of the matter
- ongoing monitoring
- enhanced due diligence for higher-risk matters
4. Report certain matters to AUSTRAC
This may include:
- Suspicious Matter Reports (SMRs)
- Threshold Transaction Reports (if relevant)
5. Keep mandatory records
Such as:
- risk assessments
- customer identification documents
- transaction documentation
- training and audit logs
6. Appoint an AML/CTF Compliance Officer
The role must be assigned to a suitably senior and capable person.
Key concerns for the Legal Profession
The reforms have raised legitimate questions around legal professional privilege (LPP) and confidentiality.
Legal Professional Privilege
LPP remains protected under the Act. However:
- Lawyers must submit an LPP claim form if withholding privileged information in a report to AUSTRAC.
- Errors in LPP claims may lead to civil penalties.
Confidentiality
Confidentiality is broader than privilege and is not automatically protected.
This creates practical and ethical challenges where information:
- is confidential, but
- does not meet the strict requirements of LPP.
Suspicious Matter Reporting
The threshold for SMRs is low and broad.
Lawyers may need to report matters that appear unusual or inconsistent with the client’s instructions—even outside strict money laundering contexts.
What about the Privacy Act?
The reforms intersect with anticipated changes to privacy law.
Law practices will need to review:
- data handling practices
- client information storage
- security and access controls
- privacy policies
What should Law Practices be doing now?
Firms should begin preparing immediately. Key steps include:
1. Map your services
Identify whether your firm provides designated services.
2. Conduct a ML/TF risk assessment
This will set the foundation for your AML/CTF Program.
3. Decide whether you will continue certain services
Some may no longer be commercially viable under the new regime.
4. Prepare governance and training processes
Partners, lawyers, and support staff must understand their obligations.
5. Start developing your AML/CTF Program
Do not wait until after 31 March 2026—AUSTRAC will expect early preparation.
How Click Legal can help
Click Legal specialises in AML/CTF compliance for professional service providers, including the legal profession.
We assist law practices with:
- Assessing whether you provide designated services
- Conducting AML/CTF risk assessments
- Building tailored AML/CTF Programs
- Designing CDD workflows that work in practice
- Staff and partner training
- Governance frameworks and compliance roadmaps
- Ongoing AML/CTF advisory services
Our expertise is built around the new reforms and the unique ethical obligations of Australian lawyers.
If your legal practice needs guidance or a full compliance package, Click Legal can help you prepare well ahead of 1 July 2026.
Contact Click Legal for tailored AML/CTF guidance.
E: hello@clicklegal.com.au
P: 0450 502 672
Important: The information below is general, educational and based on publicly available materials from AUSTRAC, the Law Council of Australia and state/territory law societies. It is not legal advice.