As of 1 July, AML/CTF obligations have become an operational reality for thousands of legal practices across Australia. I was pleased to have presented at The Industry Collective Speaks, which brought together four corporate Tranche 2 professions, and discussed AML/CTF issues that require careful navigation by solicitors.

The Law Society of NSW has been thinking intensely about how solicitors are to exercise their longstanding ethical and professional duties, while ensuring they appropriately discharge their AML/CTF obligations. My message to practitioners is this: the friction points are real, and while they are manageable, they do need to be understood and addressed with care.

Two frameworks, two sets of objectives

The AML/CTF framework and the regulatory framework governing the legal profession were each designed with distinct objectives. Understanding where those objectives differ is what allows practitioners to meet both with confidence.

The objective of the AML/CTF legislation is to disrupt, deter, and detect money laundering, through the facilitation of intelligence sharing. The objective of the legal profession is to uphold and maintain the rule of law, and protect the administration of justice. Much of how the legal profession does this is by fiercely advocating in the best interests of our clients.

Those objectives can, in certain situations, pull in different directions. That does not mean we cannot meet both. But it does mean we need to be precise about where the friction points lie and how to handle them.

Suspicious matter reports and how to handle them

One of the most important considerations for lawyers’ centres on suspicious matter reports. Under the AML/CTF regime, a reporting entity may continue to act for a client after filing an SMR and, for most professions, that makes sense. It preserves the intelligence-gathering relationship and avoids tipping off the subject.

For solicitors, however, this model does not sit comfortably. Consider what it means in practice: if you have formed a suspicion sufficient to trigger an SMR obligation, you cannot act in that client’s best interests. You are also in a conflict of interest, you cannot seek instructions from the client about whether to continue acting without breaching the tipping-off prohibition. The client cannot waive that conflict because they cannot know it exists.

The Law Society’s position is clear: where an SMR obligation arises in relation to your client, you should terminate the retainer with that client. We have published guidance on how to do this without tipping off the client, including suggested wording for correspondence and for retainer agreements, in our AML/CTF Implementation Guide: for sole practitioners and small practices. I encourage every practitioner to review it.

Legal professional privilege, the unresolved question

The AML/CTF regime appropriately protects information subject to client legal privilege. That is fundamental to the rule of law, and we were pleased to see it clearly provided for.

What is less clear is what happens when the material subject to privilege is disputed. Remember: privilege belongs to the client, not the solicitor. Only the client can waive it. But how do you seek instructions from your client about a privilege claim when you are also subject to the tipping-off prohibition? This remains an area of genuine ambiguity, and practitioners should proceed with caution.

AUSTRAC’s own advice here is instructive: err on the side of caution, and do not allow legally privileged information into the system. If you are uncertain, you may need to seek independent legal advice.

What the AML framework gets right and what it asks of us

Despite these complexities, I want to be clear: there is much in the AML/CTF framework that the legal profession should get behind. Some of its core concepts are not foreign to good legal practice they are an articulation of it.

Knowing your client. Understanding who you are acting for, not just as an administrative function, but as a matter of professional judgment, is something solicitors have always been expected to do.

Spotting red flags. Developing the practical intelligence to identify when something about a client, a matter, or a transaction does not sit right, is a professional skill. The AML/CTF framework is asking you to formalise and act on that instinct. Being committed to continuous improvement of managing your practice.

The obligation to review and refine your AML/CTF program over time reflects a commitment to professional excellence that good firms already demonstrate. These are not alien concepts. They are part of what it means to deliver legal services competently and diligently.

Practical steps for legal practices right now

Update your retainer agreements. Include provisions that allow you to cease acting without disclosing the reason, this may protect you against inadvertently tipping off a client.
Document every decision. You are not expected to get everything right immediately. You are expected to show that you have applied your mind to the issues, consulted available guidance, and made a considered judgment.
Enrol with AUSTRAC if you have not already done so. Appoint an AML/CTF Compliance Officer, this can be the principal in a small practice. Ensure your AML/CTF program has been implemented, not just printed.
Review the guidance provided by your state law society, such as the Law Society of NSW’s AML/CTF Implementation Guide: for sole practitioners and small practices. It addresses the profession’s unique tensions, including retainer wording and how to terminate safely.

If you are uncertain about whether a matter involves a designated service, check AUSTRAC’s website, call their contact centre, have a look at our guidance and document your reasoning, whatever conclusion you reach.

What success looks like in 12 months

In a year’s time, I hope to see AML/CTF obligations folded into standard practice management processes. Not as a separate compliance project, not as a shelf document, but as part of the way law is practised.

The legal profession has always upheld the rule of law and the administration of justice. These reforms ask us to extend that commitment into our interactions with the financial system. That is not a contradiction. Done well, it is an expression of the same values.

My advice to practitioners heading into this first phase is simple: don’t let perfection get in the way of progress. Have a go. The support is there, from AUSTRAC, from the Law Society of NSW, and from the broader industry. Show your workings, keep your records, and do the next right thing.

Bobbie Wan, Head of Regulatory Policy & Strategy, The Law Society of NSW
Bobbie Wan leads regulatory policy and strategy at the Law Society of NSW, where she has been working closely with AUSTRAC and legal practitioners to support the profession’s transition to AML/CTF compliance.

This article was first published in connection with The Industry Collective Speaks, an event convened and hosted by InfoTrack on 18 June 2026. An on-demand recording of the full forum is available here.

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