What is AMF/CTF, and what does it mean for solicitors and their clients?

Client information brief — Australia’s AML/CTF changes (Tranche 2) and what they mean for the solicitor–client relationship (as at July 2026)

1. What has changed (in plain terms)

Australia has passed major reforms to the AML/CTF regime via the Anti‑Money Laundering and Counter‑Terrorism Financing Amendment Act 2024 (Cth), which (among other things) expands the regime to additional “high‑risk services” and includes specific provisions dealing with legal professional privilege and tipping‑off.

A key practical change is that from 1 July 2026, law practices that provide certain “designated services” (commonly described as Tranche 2 services) will be treated as “reporting entities” and must comply with AML/CTF obligations.

The reforms are intended to bring Australia closer to international standards and reduce the use of professional “gatekeepers” (including lawyers) to launder funds. Our partnership with Arch.Law means this isn't really new to us, because law firms have been AML/CTF reporting entities in the UK for many years. Support from Arch.Law in developing and maintaining our AML/CFT systems means you're unlikely to see a significant increase in costs compared to firms who are developing systems from scratch.

2. When a law firm is affected (high level)

A law firm is not automatically captured just because it provides legal services; it is captured if it provides one or more “designated services” under the AML/CTF framework.

Professional bodies such as the Queensland Law Society have summarised the practical effect as: lawyers, conveyancers and related professional service providers become subject to AML/CTF obligations when they provide the newly regulated services (often corporate structuring / trust and company services / certain transactional services).

3. What obligations this introduces, and what you may (or may not) notice

Where a firm is a reporting entity, the AML/CTF Act framework imposes obligations including:

• Customer due diligence / ongoing monitoring: the Act includes an “ongoing customer due diligence” obligation aimed at identifying and managing AML/CTF risk. You can expect us to ask more questions about you and in particular source of funds as part of our onboarding process and when our process and policy requires that we re-assess the risk level of your matter.

• Having an AML/CTF program: the Act requires reporting entities to maintain an AML/CTF program. This is in the background, you won't notice it but it's important because it dictates whether we take you on as a client, how we manage our ongoing relationship with our clients, and what information we need from you and when.

• Suspicious matter reporting: the Rules set out detailed content requirements for suspicious matter reports made under the AML/CTF Act. You won't notice this because reporting entities cannot notify their customer or client if they have made a report.

Clients will experience this as more identity checks, more questions about source of funds / source of wealth, and potentially delays while checks are completed—particularly for matters involving entities, trusts, property transactions, or handling client money (depending on the designated service).

4. The key solicitor–client relationship impacts

(a) Confidentiality and legal professional privilege (LPP)

The 2024 amending Act expressly includes a schedule dealing with legal professional privilege, signalling that privilege is a central design feature of the reforms.

Professional guidance summarises AUSTRAC’s position as: “The common law doctrine of legal professional privilege will remain unchanged under the reformed laws”, and the AML/CTF regime is not intended to compel disclosure of information reasonably believed to be privileged.

Practical effect for clients: privilege remains, but you should expect that some information requested for AML/CTF compliance may be administrative/transactional and not privileged in the same way as advice communications.

(b) We may have to report (suspicious matter reporting) and we may not be able to tell you

The AML/CTF framework includes suspicious matter reporting obligations, and the Rules prescribe what must be included in such reports.

The 2024 reforms also include amendments concerning the tipping‑off offence (i.e., restrictions on disclosing that a report has been made or will be made, or related information).

Practical effect for clients: in limited circumstances, a law firm may be required to make a report to AUSTRAC and may be constrained in what it can say to the client about that step (even where the client is acting in good faith). That's why it's really important to be honest about your affairs with us when we are conducing due diligence so there are no nasty surprises later.

(c) More “front-end” friction: onboarding, verification, and delays

Because the AML/CTF Act is enforced through significant civil penalties and a compliance program model, reporting entities (including K&W Lawyers) will implement robust onboarding and monitoring processes. Courts have noted the seriousness of the scheme and the scale of penalties imposed for contraventions in the AML/CTF context.

Practical effect for clients: more up-front information requests, and sometimes a “no documents, no progress” approach on existing matters. AML/CTF is new to applicable law firms in 2026 but it's not new in Australia. Google "Star Casino money laundering" if you want an idea of the trouble a reporting entity can get into when it fails to comply with AML/CTF obligations.

(d) Retainer terms and scope: the firm may need to define what it can/can’t do

Firms will increasingly:

• carve out that they must comply with AML/CTF laws (including verification and reporting);

• reserve rights to pause/cease work if AML/CTF requirements aren’t met; and

• explain that some communications may be constrained by tipping‑off rules.

5. What clients should take away

• Not every legal matter is captured, but where a firm provides a regulated “designated service”, it may become a reporting entity with mandatory AML/CTF compliance steps.

• Expect more ID and source-of-funds questions and potentially slightly longer onboarding for some matters.

• Legal professional privilege is preserved, but it won’t cover everything a client provides in a transactional context.

• In some cases, firms may have reporting obligations and may be legally constrained from discussing those steps due to tipping‑off restrictions.

Summary: Tranche 2 brings many law firms into the AML/CTF regulatory perimeter from 1 July 2026, meaning more verification, risk screening and (in rare cases) reporting—while preserving legal professional privilege but changing the “feel” of onboarding and confidentiality expectations in certain transactional matters.