With just weeks to go before the commencement of Australia’s expanded anti‑money laundering and counter‑terrorism financing (AML CTF) regime, the Law Council of Australia has issued a warning that critical uncertainty remains, leaving legal practices unprepared for compliance.
Appearing before the Parliamentary Joint Committee on Intelligence and Security (PJCIS) this week on behalf of its constituent bodies – including the Law Society of Western Australia – the Law Council said small businesses, which make up more than 90 per cent of the legal profession, are facing significant challenges as they attempt to understand whether the new rules will apply to them.
Law Council of Australia President Tania Wolff said the lack of clarity surrounding the reforms is untenable so close to the proposed start date. “Until clarity is provided on who the regime actually applies to, commencement should be delayed. Three weeks is simply not enough time for small businesses to prepare for obligations they cannot yet identify,” Wolff said.
The Tranche 2 reforms are set to extend AML CTF obligations to a broader range of professional services, including lawyers, as part of Australia’s efforts to strengthen its financial crime framework and align with international standards. However, aspects of the legislation remain unclear, particularly around what constitutes a “designated service”, the threshold that determines whether a firm is subject to compliance obligations.
“Despite the best efforts of the profession and significant work by the regulator, a lack of clarity in the legislation means it is still not clear what legal services are caught up in the regime,” Wolff said. “Even now, practitioners and firms across the country cannot determine whether they provide a ‘designated service’ and therefore face prescribed obligations from 1 July.”
Further complicating matters are amendments to the regime currently before Parliament, which are being examined as part of the same PJCIS inquiry. Rather than resolving uncertainty, the Law Council has warned these changes could create additional confusion for practitioners already struggling to interpret their obligations.
On behalf of practitioners nationally, the Law Council is calling on the Federal Government to delay commencement of the reforms in full or part by 12 months, to allow affected entities sufficient time to prepare. If a delay is not feasible, it is urging AUSTRAC to adopt a transitional compliance approach. Such an approach would include a minimum 24‑month period focused on education and support rather than enforcement, giving firms time to develop systems, processes and risk frameworks without the immediate threat of penalties.
Despite its concerns, the Law Council reiterated its support for the broader goals of the AML CTF reforms, acknowledging the importance of addressing financial crime risks. “The Law Council remains committed to working with the Government on these reforms. Money laundering and terrorism financing cause real harm, and the legal profession takes that seriously,” Wolff said. “But regulated entities cannot comply with obligations they cannot identify.”
As the 1 July deadline approaches, the ability of regulators and government to provide clear, actionable guidance will prove critical in determining whether the rollout proceeds smoothly, or adds pressure to a profession already navigating significant regulatory change.
Help and support for WA firms can be found in the Law Society’s AML CTF hub.
