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 tensions are real, and while they are not insurmountable, they do need to be navigated carefully.
It is natural, and not unexpected, that tensions will arise when the AML/CTF framework meets the regulatory framework that governs the legal profession. They were crafted with different objectives in mind.
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.
The most significant tension for lawyers sits around suspicious matter reports (SMR). 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.
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.
Despite these tensions, 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.
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.
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.
