Publications

AML/CTF Reforms to the Legal Profession

Published on June 20, 2025 by Hayley Aldrich and Dwaraka Ratnasiva

On 4 June 2025, AUSTRAC CEO, Brendan Thomas, addressed the increasing use of Australian professional service sectors in financial crime at the Integrity Insight Financial Crime Summit. Given the growing complexity of financial crime, the recent changes to the anti-money laundering and counter-terrorism financing (AML/CTF) framework, marks a pivotal move in Australia’s financial regulatory regime. As part of this reform, lawyers, accountants, real estate agents and other professional services have now been included under AML/CTF obligations to ensure a consistent and widespread approach in preventing financial crime.

On 29 November 2024, the Australian Parliament passed the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (‘the Bill’) to introduce significant reforms surrounding Australia’s financial crime mitigation structure.

In summary, the reform involves the following primary objectives:

1. Simplifying the AML/CTF regime to improve compliance and subsequently its effectiveness.
2. Modernising the regime to address new risks derived from the emerging digital and technological nature of business structures and the white-collar industry. The AML/CTF regime has expanded to regulate ‘virtual assets’ to ensure the inclusion of all digital services in preventative measures.
3. Extending the regime to “Tranche 2 Entities”, to include certain higher-risk services (designated services), such as lawyers, accountants, real estate agents and other professional services. This ensures consistent AML/CTF compliance is not limited to the financial sector and expanded to other service providers.

Why extend the regime to Tranche 2 Entities?

At present, Australia is one of five jurisdictions that does not regulate Tranche II entities under its AML/CTF regime. This regulatory gap enables criminal groups to exploit the designated services provided by these entities to facilitate large-scale financial crime.

Where lawyers are concerned, the transactional, advisory and confidential nature of the legal profession fosters opportunities for criminal exploitation and consequently poses a high-risk to financial crime. Common ML/TF routes identified in the legal sector are established through legal services including real property purchases, client accounts and creating and managing trusts, companies and charity organisations.

There are apprehensions surrounding legal professional privilege in contention with AML/CTF reporting obligations, undermining client confidentiality and a lawyer’s ethical duties. However, the reform encompasses the enforcement of the doctrine of legal professional privilege and ensures there are clear protections outlined for the disclosure of privileged information.

Incorporating the property industry within the AML/CTF regime includes two designated services. This involves brokering the sale, purchase or transfer of real estate as agents and businesses that represent sellers and buyers as well as selling or transferring real estate while carrying on a business selling real estate. This ensures financial crime concealed through protected investments in residential and commercial real estate are mitigated.

The regime also extends to further professional service providers, including accountants, consultants, conveyancers, financial planners, trustee and company service providers and others. This captures designated services connected with controlling and receiving transit moneys such as virtual assets or property and providers who assist with transactions and set or restructure corporate bodies. The regulation of these designated services aims to address transnational organised financial crime within the financial, property and corporate sector.

As a result, the inclusion of Tranche II entities in Australia’s regulatory regime strengthens the prevention of financial crime in the legal sector and further contributes to jurisdictional consistency in addressing AML/CTF measures on a global scale.

What are the Key Obligations as a Reporting Entity

• Enrol with AUSTRAC: A reporting entity must enrol and register their business with AUSTRAC within 28 days of providing a designated service.
• Developing AML/CTF Programs: A reporting entity must develop and maintain an AML/CTF program which establishes that entity’s ML/TF risk assessment and compliance policies. This program must ascertain the entity’s process in identifying, mitigating and managing the risks of its services.
• Customer Identification and Verification: A reporting entity must conduct customer identification and ongoing due diligence processes of their clients.
• Reporting Obligations: A reporting entity must report certain transactions and suspicious matters and submit compliance reports to AUSTRAC.
• Record-Keeping: A reporting entity must make and keep full and accurate records of transactions, customer identification procedures, the AML/CTF program, staff training and audit results.
• Risk-Based Approach: A reporting entity must adopt a risk-based approach to establish a system which mitigates and manages ML/TF risks specific to the business.

The Bill seeks to expand and improve Australia’s anticipated compliance with international AML/CTF standards and will take effect on 1 July 2026. As lawyers, while ensuring compliance to this regime may be complex, tailoring legal practice to manage AML/CTF obligations is crucial.

Please note that this article does not constitute legal advice. If you are seeking professional advice on any legal matters, you can contact Carroll & O’Dea Lawyers on 1800 059 278 or via our Contact Page and one of our lawyers will be able to assist you.