Why are lawyers now covered?
Australia's money laundering national risk assessment found that services provided by legal professionals pose a high money laundering risk. Lawyers' skills in creating legal structures — companies, trusts, and other arrangements — and transferring ownership of real estate and businesses make the profession a key target for criminal exploitation.
Australian authorities have found criminals using lawyers to legitimise their illegal proceeds. Legal professionals provide a range of services that can benefit criminals in the money laundering process, including managing money and property, operating trust accounts, facilitating real estate transactions, and establishing complex domestic and offshore legal structures.
The Tranche 2 reforms bring Australia in line with international standards — most other FATF member countries already regulate the legal profession for AML. This doesn't mean your clients are criminals. It means you need systems in place to identify and report suspicious activity, just as banks have done for years.
Which services are covered?
Not all legal work triggers AML obligations. You only need to comply when providing “designated services,” which include:
- Conveyancing and real estate transactions — acting for buyers or sellers in property transfers, including commercial and residential conveyancing
- Trust account management — operating trust and other accounts to deposit, hold, and disburse client funds
- Company and trust formation — establishing and administering companies, trusts, charities, and other legal entities for clients
- Financial arrangements — managing money, securities, and property on behalf of clients, or facilitating financial transactions
- Body corporate services — setting up and managing body corporate or strata arrangements
- Buying or selling businesses — acting on behalf of clients in acquiring or disposing of business interests
General legal advice, litigation, family law proceedings, criminal defence, and employment law are NOT designated services and do not trigger AML obligations on their own. However, if you also provide any of the services listed above — even occasionally — you are covered.
What you need to do
Step 1: Determine if you provide designated services
Review the list above carefully. Many solicitors who focus on litigation, criminal law, or family law may not be covered. But if you handle conveyancing, manage trust accounts, or form companies and trusts for clients, you are a reporting entity. Use our free compliance check to find out in 30 seconds.
Step 2: Register with AUSTRAC
If you provide designated services, you must register with AUSTRAC by 29 July 2026. Registration is free and done online through the AUSTRAC portal. Enrolment opens 31 March 2026.
Step 3: Appoint an AML/CTF compliance officer
You must designate an AML/CTF compliance officer — typically the principal lawyer or managing partner for small practices. This person is responsible for overseeing your AML/CTF program, ensuring staff are trained, and managing reporting obligations. You must notify AUSTRAC of your compliance officer.
Step 4: Create your AML/CTF program
Your program must include a risk assessment specific to your practice, customer identification procedures, ongoing monitoring processes, and an employee training plan. AUSTRAC provides a Starter Kit for the legal profession — designed for small practices with 15 or fewer personnel — that you can customise to your business.
For practices primarily dealing with individual Australian residents (not high-risk clients or complex international arrangements), the Starter Kit provides a streamlined approach. Larger or more complex firms should develop a more comprehensive program.
AML Mate automates this entire process. Answer questions about your practice and we generate a complete, tailored AML/CTF program using AUSTRAC's official templates.
Step 5: Implement Customer Due Diligence (CDD)
Before providing any designated service, you must verify your client's identity. For individual clients, this means collecting government-issued photo ID. For company or trust clients, you also need to identify beneficial owners — anyone who ultimately owns or controls 25% or more of the entity.
You must also screen clients against the DFAT consolidated sanctions list and check for Politically Exposed Persons (PEPs). Foreign PEPs must always be treated as high-risk clients.
Higher-risk clients — such as those with complex offshore structures, those from high-risk jurisdictions, or those seeking unusual legal arrangements — require Enhanced Due Diligence (EDD), including verifying source of funds and obtaining senior management approval.
Step 6: Know your reporting obligations
As a reporting entity, you must file:
- Suspicious Matter Reports (SMRs) — within 24 hours if terrorism financing related, or within 3 business days for other suspicions that a client is involved in money laundering or other serious crime
- Threshold Transaction Reports (TTRs) — within 10 business days for any cash transaction of $10,000 or more through your trust account
Critical: “Tipping off” is a criminal offence. You must not tell your client that you have filed or intend to file an SMR.
Common suspicious indicators for legal professionals
Based on AUSTRAC guidance, watch for these red flags when providing designated services:
Client behaviour
- Client avoids face-to-face meetings or is secretive in dealings
- Client appears to be following instructions of third parties
- Client is reluctant to prove their identity or provides vague information during KYC processes
- Client ends the relationship after you ask for more information
- Client has an unusual level of knowledge about AML/CTF requirements
Transaction red flags
- Client requests complex transfers through your trust account to obscure the funding source
- Client asks for complex business structures to hide beneficial ownership
- Client requests creation of trusts or companies with no clear commercial purpose
- Back-to-back property transactions with rapidly increasing values
- Client asks to buy aged shelf companies rather than setting up new ones
- Client wants to perform a series of complicated transfers through your trust account
Source of funds
- Client has high-value assets with no clear funding source
- Client won't identify their source of wealth or provides false or misleading information
- Client requests contracts for private loan agreements with unclear source of funds
- Client sets up companies with an unknown or hard-to-value equity source
On their own, one indicator may not suggest suspicious activity. But multiple indicators — or a single indicator with no reasonable explanation — should prompt further monitoring and, where appropriate, an SMR.
Timeline & deadlines
- 31 March 2026: AUSTRAC enrolment opens for Tranche 2 entities
- 1 July 2026: Full AML/CTF obligations start — your AML/CTF program must be in place
- 29 July 2026: Registration deadline
Transitional rules provide grace periods for initial CDD on existing clients, compliance officer notification, and independent evaluations. AUSTRAC has stated: “We don't expect perfection immediately, but we expect to see genuine effort to comply.”
How AML Mate helps
- AI-generated AML/CTF program — tailored to your practice using AUSTRAC's official Starter Kit templates
- Client KYC management — structured onboarding with automated risk scoring and ID verification tracking
- PEP & sanctions screening — automatic screening against DFAT sanctions and PEP databases on client creation
- SMR & TTR reporting — smart pre-fill from client data with step-by-step wizards
- Staff training — 5 built-in training modules with quizzes and certificates
- Compliance dashboard — track your score, deadlines, and alerts in one place
Frequently asked questions
“I only do litigation — do I need to comply?”
If you only do litigation, criminal defence, family law, or employment law, you are likely not covered. But review carefully — if you ever handle conveyancing, manage trust accounts, or form companies and trusts, you are.
“Does legal professional privilege protect me?”
Legal professional privilege does not exempt you from AML/CTF obligations when providing designated services. You are still required to verify client identity, conduct risk assessments, and file SMRs. The obligation to report does not require you to disclose privileged communications — it applies to the suspicion formed from the designated service itself.
“What if my practice is very small?”
AUSTRAC's Starter Kit is specifically designed for practices with 15 or fewer personnel. It provides a streamlined approach for smaller firms. AML Mate starts at $199 one-time for a Setup Pack or $49/month for the full platform — a fraction of the $3,000–$10,000 that compliance consultants typically charge.