Which legal work is captured?
The boundary turns on what the work directly advances, not its label. General or hypothetical advice that merely influences a client's decision may sit outside the designated-service tables, while drafting or reviewing documents that actively advances a sale, company or trust formation, merger or restructure can itself be captured. Record the matter facts and test each service against AUSTRAC's current professional designated-services guidance.
- 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 or holding client money, securities or other property while also controlling or managing it as part of directly advancing a transaction, unless a statutory item 3 boundary applies
- Taking active steps that directly advance the sale or transfer of a body corporate or legal arrangement; an asset-only business sale is not automatically item 2
- 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
- Complete initial CDD ordinarily before providing the designated service, subject to the permitted delayed, transitional and deemed-compliance rules
- 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 CDD for high-risk customers and mandatory triggers, including foreign PEPs; domestic and international-organisation PEPs require those additional PEP measures when the customer is high ML/TF risk
- Refresh due diligence on a risk-based cycle and on trigger events
Trust money and suspicious matters
Item 3 applies where a practice receives or holds property and also controls or manages it as part of directly advancing a transaction, unless a subsection 6(5C) boundary applies. The reasonably-incidental boundary is tested across the same legal entity, not matter by matter; litigation settlement funds fall within it only when every condition is met. If activity lacks a credible commercial explanation, the practice must assess whether reasonable grounds for an SMR suspicion exist. SMRs generally go to AUSTRAC within three business days of the suspicion forming, or within 24 hours for terrorism-financing suspicions.
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 captured sale or purchase file requires CDD for the applicable customers: identity verification, screening and a recorded risk decision retained for the statutory period. Initial CDD ordinarily moves to the front of file opening, but practices must apply any specific delayed-counterparty, transitional or deemed-compliance rules that fit the facts rather than imposing an inaccurate universal deadline.
Official sources
Use these primary AUSTRAC pages to confirm the current rules and apply them to your circumstances.
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. Item 3 applies where the practice receives or holds property and also controls or manages it as part of directly advancing a transaction, unless a subsection 6(5C) boundary applies. The reasonably-incidental boundary is tested across the same legal entity, not matter by matter; litigation settlement funds fall within it only when every condition is met. Record the business-level and service-level analysis.
Do we need to verify clients we have acted for over many years?
A longstanding client receiving their first designated service after 1 July 2026 generally requires initial CDD. A qualifying pre-commencement customer can generally continue without initial CDD until an SMR obligation arises or a significant change in the relationship's nature or purpose causes medium or high risk; ongoing CDD still applies. Record the transition analysis and information relied on.
Who in the firm should handle suspicious matter reports?
The AML/CTF compliance officer, with a controlled need-to-know circle. Staff should be trained to escalate concerns privately and avoid disclosing protected SMR-related information where that would or could reasonably be expected to prejudice an investigation. SMR handling should be structurally separated from general matter-team access.
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. See our editorial and correction standards.