Aml Ctf Obligations Law Firms

According to AUSTRAC guidance, aml ctf obligations law firms are critical requirements for lawyers and legal professionals. From 1 July 2026, AML/CTF obligations will apply to certain legal services provided by lawyers and conveyancers under the Tranche 2 reforms. The Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 provides clear protections for information and documents that are subject to legal professional privilege.

A reporting entity can refuse to give a suspicious matter report where they reasonably believe that the entire grounds for a suspicion is composed of information that is subject to legal professional privilege. In such cases, the reporting entity is not required to provide an LPP form to AUSTRAC. Where only part of the grounds for suspicion is subject to LPP, the reporting entity must still submit the suspicious matter report but can exclude the privileged information, and must provide details about the assertion of LPP via an approved form.

A reporting entity will not be required to disclose information or a document as part of any reporting and information disclosure obligation where they believe that the information or document is subject to LPP. This protection applies to customer due diligence requirements, reporting obligations, and other information disclosure requirements under the AML/CTF Act. Lawyers must carefully assess whether information is subject to LPP on a case-by-case basis and maintain appropriate documentation of these assessments.

Law firms must enroll with AUSTRAC between 31 March 2026 and 29 July 2026. Your AML/CTF program must include a documented money laundering and terrorism financing risk assessment that identifies risks specific to your legal practice, including the types of clients you serve, the legal services you provide, and your geographical areas of operation. The risk assessment must be approved by senior management and kept up to date as your practice evolves.

Your AML/CTF policies must set out how you will conduct customer due diligence while respecting client confidentiality and legal professional privilege. This includes procedures for identifying and verifying clients, understanding the nature and purpose of the legal engagement, identifying beneficial owners, and determining whether clients are politically exposed persons or subject to targeted financial sanctions. You must implement transaction monitoring systems appropriate to your practice to detect suspicious activity.

Law firms must appoint an AML/CTF compliance officer at management level who is fit and proper and has the authority, independence and access to resources necessary to perform their role effectively. The compliance officer must report to the governing body at least annually about how the firm is meeting its AML/CTF obligations. Employee due diligence and regular AML/CTF risk awareness training programs are mandatory to ensure all staff understand their obligations and can identify potential money laundering or terrorism financing risks.

Reporting obligations include submitting suspicious matter reports within three business days of forming a reasonable suspicion that a client or transaction is connected to money laundering, terrorism financing, or other serious crimes. Threshold transaction reports must be lodged for physical cash transactions of $10,000 or more. Law firms face significant penalties for non-compliance including civil penalties up to $31.3 million for corporations and $6.26 million for individuals, criminal penalties including imprisonment, and daily fines of $18,780 for firms failing to enrol with AUSTRAC. Beyond financial consequences, breaches can result in reputational damage, loss of client trust, and disciplinary measures from law societies.