For lawyers
AML/CTF for lawyers and conveyancers: designated legal services, CDD and privilege
Law firms and conveyancing practices are central to Tranche 2 because they sit at the point where money, property and structures meet. From 1 July 2026, a legal practice that provides designated services is a reporting entity with the same core obligations as a bank's compliance function — scaled to a professional firm.
Which legal work is captured?
Advising clients, drafting documents and appearing in disputes are not designated services. Capture happens when the practice does the transaction: the AML/CTF Act targets legal professionals who move money, form structures or complete transfers for clients.
- Conveyancing and assisting with the sale, purchase or transfer of real estate
- Forming companies, trusts or other legal arrangements, or restructuring them
- Acting as or arranging nominee directors, secretaries or shareholders
- Receiving, holding or managing client money, securities or property in connection with a transaction (including trust account handling for captured matters)
- Assisting with the sale or purchase of a business or body corporate
- Providing a registered office or principal place of business
Legal professional privilege is preserved
The AML/CTF Act does not require a lawyer to disclose information that is subject to legal professional privilege, and AUSTRAC guidance confirms privilege is maintained. What the regime does require is the compliance scaffolding around captured work: the program, the CDD file, the screening evidence and the reporting discipline. Privileged advice stays privileged; the fact and mechanics of your compliance work must still be recorded.
Customer due diligence in a law firm
- Verify the identity of each client you provide a designated service to — before the service is provided
- Map and verify beneficial owners for company and trust clients, including layered structures
- Screen clients and beneficial owners for sanctions, PEP status and adverse media
- Record an ML/TF risk rating per matter and per client, with reasons
- Apply enhanced due diligence for higher-risk matters — PEPs, unusual structures, high-risk jurisdictions
- Refresh due diligence on a risk-based cycle and on trigger events
Trust money and suspicious matters
Trust accounts are a recognised laundering channel, which is why client-money handling is captured. If a matter smells wrong — a client routing funds with no commercial logic, a third party paying without explanation, pressure to move money quickly — the practice must consider a suspicious matter report. SMRs go to AUSTRAC, generally within three business days of the suspicion forming, and the client must never be told: tipping off is a criminal offence under section 123.
Practices need an internal SMR path that is firewalled from the matter team: only the compliance officer (and those they deliberately involve) should know a report exists. Cassandra AML restricts suspicious-matter records to authorised staff precisely for this reason.
Conveyancers: what changes on every file
Every sale or purchase file now carries CDD on the parties: identity verification, screening and a recorded risk decision, kept for seven years. Vendor and purchaser both need treatment. The practical change is timing — verification must happen before settlement work is provided, so it has to move to the front of the file opening process.
Frequently asked questions
Does Tranche 2 override legal professional privilege?
No. The AML/CTF Act preserves legal professional privilege. Lawyers are not required to disclose privileged communications to AUSTRAC. The compliance obligations — enrolment, program, CDD, record-keeping — operate around the advice, not through it.
Is all trust account activity a designated service?
No. Holding client money is captured where it is connected to a designated service — for example, holding purchase funds for a conveyance or transaction you are assisting with. Routine trust accounting for litigation costs or non-captured work is not, by itself, a designated service. The analysis is matter by matter, which is why scoping decisions should be recorded.
Do we need to verify clients we have acted for over many years?
Where you provide a designated service to an existing client from 1 July 2026, CDD obligations apply to that service. Long relationship history does not replace verification — though a risk-based program lets you schedule the work sensibly. The file must contain verified identity, screening outcomes and a risk decision.
Who in the firm should handle suspicious matter reports?
The AML/CTF compliance officer, with the smallest possible circle. Staff should be trained to escalate concerns to the compliance officer privately — never to discuss them with the client or broadcast them in the file. Tipping off is a criminal offence, so SMR handling should be structurally separated from matter teams.
Put it into practice
Cassandra AML turns these obligations into a working system: designated-service decisions, customer due diligence, screening, monitoring and reporting records — hosted in Sydney, free to start.
This guide is general information for Australian professionals. It is not legal advice and does not replace the AML/CTF Act, the AML/CTF Rules or AUSTRAC guidance. Confirm your specific obligations with AUSTRAC or a qualified legal adviser.