Preparing Australian Law Firms for New AML Compliance

Australian lawyers are on the cusp of a significant regulatory shift as Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) obligations extend to the legal sector. With reforms set to bring lawyers, accountants, and real estate agents firmly into scope, now is the time to get ahead of the curve.

During PracticeEvolve’s recent INTEL session, Amy Bell - an AML expert with decades of experience in the UK and international markets - outlined what to expect, why it matters, and how to prepare.

Why These Changes Matter

Australia’s reforms are driven by global expectations set by the Financial Action Task Force (FATF), the international standard-setter for AML and CTF measures. While the financial sector is already well regulated, FATF previously identified a gap: lawyers, accountants, and other “non-financial” professionals had not been fully brought into the AML framework.

The reforms aim to close gaps in Australia’s AML framework. Beyond meeting global expectations, stronger AML measures protect Australian communities and economies. The new rules are designed to ensure compliance and curb criminal exploitation of the legal system.

Key Timelines and Scope

• Compliance Deadline: Law firms must demonstrate AML/CTF compliance by 1 July 2026.
• What’s in Scope? Transactional work like property purchases, company formations, and trust creations—areas prone to exploitation by money launderers.
• What’s Out of Scope? Contentious work, such as litigation, is expected to remain outside the scope of the regulations. Final guidance will confirm the details.

What the New Obligations Mean for Your Firm

1. Appoint a Compliance Officer: Designate someone at a senior level to oversee the firm’s AML program. This person should have appropriate training, access to all necessary client information, and the authority to make judgment calls on reporting suspicious matters.
2. Conduct a Firm-Wide Risk Assessment: A robust AML program starts with understanding your firm’s unique risk profile. Consider your client base, the nature of your services, where clients are located, and the complexity and value of their transactions. This assessment will guide the policies, procedures, and checks you put in place.
3. Implement Policies and Procedures: Once you’ve identified the risks, create clear policies to mitigate them. This might include standardised processes for client due diligence (CDD), verifying identities, and understanding clients’ sources of funds. Don’t forget about ongoing monitoring—AML compliance isn’t a “set and forget” exercise.
4. Train Your Team: Everyone on your staff, from partners to support staff, needs to understand their role in preventing money laundering. Training should cover spotting red flags, conducting proper due diligence, and handling suspicious activity reporting.
5. Reporting Suspicious Matters: The most sensitive part of AML compliance often involves reporting suspicions without breaching legal privilege or tipping off clients. Anticipate this by establishing secure internal reporting channels and seeking guidance on privilege issues early.

Practical Tips to Get Started Now

• Gather Data: Start collecting basic information on your firm’s work. Consider client types, transaction values, jurisdictions involved, and funding methods. Having reliable data will make your risk assessment more accurate—and your policies more targeted.
• Nominate a Leader: Appointing a compliance lead now ensures that someone is watching AML developments and preparing the firm. This person can track legislative progress, consult emerging guidance, and coordinate training.
• Stay Informed: Keep abreast of new rules and guidance from AUSTRAC and the Law Council of Australia. As more details emerge, adapt your approach. Consider joining webinars, reading industry updates, or seeking external advice from AML specialists.
• Use Existing Tools and Processes: Your firm may already be doing elements of due diligence for property matters or trust work. Review what you do now, identify gaps, and consider electronic verification tools or other technology solutions that can streamline compliance.

Access our on-demand session for a comprehensive breakdown of the AML reforms and their practical implications for Australian law firms.

Looking Ahead

While these changes bring new responsibilities, they’re also an opportunity to reinforce your firm’s commitment to ethical and professional standards. Adapting to the AML reforms helps you stay ahead of regulatory scrutiny and, protects your clients, strengthens your reputation, and builds trust in the broader legal ecosystem.

Amy Bell will return for another INTEL session in March to provide further insights and practical tips once the legislative details and guidance are more precise. Until then, start your preparations early and ensure your firm is well-positioned to meet Australia’s evolving AML landscape head-on.