Disclaimer: Please note this article only provides a summary of, and the authors comments relating to, parts of the new AML laws and is intended to be for discussion purposes only. It does not constitute any form of legal advice relating to the legislation or its effect.
As most lawyers in WA will likely know by now, as of 1 July 2026 there have been some significant changes to anti-money laundering and counter-terrorism financing laws, requiring the legal profession (amongst others) to become gatekeepers for policing these offences.
- Those changes have been implemented by amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), given effect by the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth).
- Those new obligations have been complemented by amendments to the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015, by the Legal Profession Uniform Law Australian Solicitors’ Conduct Amendment Rules 2026.
The Law Society has, of course, been leading the charge in both educating the profession and lobbying for clarity around how certain obligations will operate (see, for example, articles in Brief here and here, and on the Law Society’s AML Hub).
Whilst there is a lot that can be written about all the obligations these amendments will impose on the profession, in this article I do not propose to discuss:
- what kinds of work are covered by the AML laws (e.g. what is meant by, and the scope of, “designated services” in the AML CTF Act). Discussion around that can be found here and in the very helpful Law Council of Australia Guidance Note;
- the requirements for enrolling with AUSTRAC. Discussion around that can be found here; or
- the requirements for adopting AML programs and procedures and conducting due diligence.
Rather, I intend to focus solely on the consequences of suspicious matter reporting under the Act for ongoing client relationships.
As you will see from my observations below, there appears to be real ambiguity as to how both the AML laws themselves, and the amendments to the Conduct Rules are intended to apply. The Law Council has attempted to clear up some of this confusion by publishing its own commentary on how the Conduct Rules are intended to operate. On my reading of that commentary, the Law Council takes the rather strict view that, as soon as a suspicious matter report has been made, an irreconcilable conflict will arise between a solicitor’s various professional duties, and the engagement with the client will need to be terminated.
I am not so persuaded that the line needs to be so stark and have concerns that such rigidity may lead to reduced (or non) reporting under the Act, undermining the intent and purpose of AML legislation.
Below, I set out my thoughts on how these laws and rules might be applied, but it is not my intention to express any concluded opinion or advice on the issue. Rather, I am hopeful that raising some of these issues will encourage others, more capable and more directly involved with these issues than myself, to also consider the possible implications.
As to the last point – my direct involvement with the new AML laws – I should note that being at the independent Bar, the new AML laws will largely not affect me (with limited exceptions). This allows me to exercise some independence in expressing the views I do, but it also means I don’t have as much skin in the game, so feel free to take or leave my views as you wish.
The new AML laws
Reporting obligations
First, I wanted to start by outlining (at a high level) the nature of the new obligations that will be imposed on solicitors as a consequence of the new AML laws.
Pursuant to section 4 of the AML CTF Act, a “reporting entity” is a person who provides “designated services”. As mentioned above, I do not intend to go into chapter and verse about the scope of what is meant by “designated services”. For present purposes, I will assume that solicitors reading this article will be performing designated services and therefore they (or, more likely, their firms) will be reporting entities under the Act. Accordingly, for convenience, from here onwards, I refer to a “reporting entity” and a “solicitor” interchangeably.
As reporting entities, solicitors will be subject to a number of reporting obligations in circumstances where a client or potential client (for convenience, I will refer to both current and prospective clients collectively as “clients”) engages them (or makes enquiries with a view to engaging them) to undertake a designated service.
The first major imposition on solicitors is that they will now be responsible for undertaking significant due diligence on their clients (see generally, Part 2 of the AML CTF Act).
Reporting obligations are then triggered where a solicitor suspects, on reasonable grounds, that:
- the client (or an agent of the client) is not the person they claim to be (ss 41(1)(d) and (e));
- information they have obtained from the client regarding the provision of the designated service:
- may be relevant to the investigation of a person for tax evasion;
- may be relevant to the investigation of a person for an offence against a law of the Commonwealth or of a State or Territory (s 41(1)(f)(iv);
- may assist with enforcement under proceeds of crime legislation;
- (s 41(1)(f))
- the provision of the designated service or information received relating to the designated service may be relevant to a financing of terrorism or money laundering offence (ss 41(1)(g)-(j)).
I wish to pause there for a moment, for a brief aside to consider subsection 41(1)(f)(iv) of the Act. That provision seems to be an outlier in an Act intended to assist in the detection and prevention of money laundering and terrorism financing. On its face, that subsection suggests that it will capture information related to any offence. Whilst such information ostensibly needs to be linked to the specific designated service, arguably, as long as it is information a solicitor “has concerning the provision, or prospective provision, of the [designated] service”, it will be captured by subsection 41(1)(f)(iv), so it will be interesting to see how that provision is approached.
Returning then to the process, if a solicitor forms a suspicion of the kind contemplated by section 41(1), they must report that suspicion (in the approved form) to AUSTRAC within:
- 24 hours for suspicions relating to the financing of terrorism;
- 3 business days for any other s 41(1) suspicions; or
- 5 business days in circumstances where the information does not relate to a terrorism financing offence (in which case the deadline will remain 24 hours), but some (but not all) of the information contained in the report may be subject to the client’s legal professional privilege.
- (s 41(2))
In the case of partial privilege, the solicitor will also need to lodge an (approved) LPP form with AUSTRAC within the relevant time period (ss 5, 41(3)(aa)).
In circumstances where the solicitor considers, on reasonable grounds, that all of the information that would be contained in a report is subject to the client’s legal professional privilege, the solicitor may refuse (and, as I read it, this means make no disclosure at all) to provide AUSTRAC with any report (s 41(2A)).
Let me pause again there for a moment to make a couple of observations about legal professional privilege in this context:
- First, some of the amendments to the AML CTF Act appear to somewhat erode the protections afforded by legal professional privilege under the Act. The previous words of section 242 of the AML CTF Act stated, in absolute terms: “This Act does not affect the law relating to legal professional privilege”;
- The amendments to that section appear, in part, intended to reduce the risk of waiver of privilege to the world at large, but in my view, also serve to strengthen AUSTRAC’s ability to obtain privileged information; and
- Second, although the new section 242A of the Act contemplates that the Minister may issue guidance as to how legal professional privilege will be treated under the Act, as far as I am aware, as of today no guidance has yet been published.
I note the above matters only by way of observation, as I do not propose to go down the rabbit hole of how legal professional privilege will be dealt with or maintained under the Act, but suffice to say, there is considerable consternation in the legal community about this issue (see, for example, this opinion of Anthony Morris KC for the Queensland Bar Association).
Finally, I should note for completeness, that the AML CTF Act includes a number of other reporting requirements for reporting entities, such as:
- section 42 relating to threshold transactions;
- section 46 relating to international value transfer services; and
- section 46A relating to the transfer of virtual assets,
- however, for the purposes of this discussion, I have only focused on suspicious matter reporting.
Tipping off offence
A supporting provision to the new reporting laws is the so-called “tipping off offence”.
The existing tipping off offence contained in section 123 of the AML CTF Act, has now been repealed and replaced with a new version of the offence.
The new tipping off offence prohibits reporting entities from disclosing any information relating to its mandatory reporting (including the formation or existence of a suspicion), that could prejudice the investigation of an offence (s 123).
In other words, once a reporting entity has formed a suspicion, unless the information on which it is based is entirely subject to legal professional privilege, it is required to report that suspicion (and the basis for it) to AUSTRAC, and section 123(1) provides that it is an offence (punishable by imprisonment) to disclose the substance, content, or even fact of, such a report or the suspicion underlying it.
I pause again briefly here to note there is an exception to these tipping off provisions for legal practitioners who disclose the information to the relevant client in good faith for the purposes of dissuading them from engaging in conduct that does, or would constitute, an offence (s 123(4)). Although I do not propose to discuss this exception in any detail here, it appears to me that solicitors proposing to rely upon this exception will need to exercise significant caution so as not to fall afoul of the offence itself.
The new Conduct Rules
I now turn to the amendments to the Conduct Rules. All solicitors practising in Western Australia (not only those captured by the new AML laws) will be subject to the following amendments to the Conduct Rules.
Rule 8.1 formerly stated that: “A solicitor must follow a client’s lawful, proper and competent instructions.”
The amendment modifies that rule to now read: “A solicitor must only accept and follow a client’s lawful, proper and competent instructions”.
Although it is a subtle amendment, it does serve to shift the emphasis of the rule from following client instructions, to only following lawful instructions. That is appropriate and consistent with a legal practitioner’s primary duty to the court and the administration of justice, rather than to the client (see, for example, Giannarelli v Wraith (1988) 165 CLR 543).
The more substantive amendment is the insertion of (new) Rule 13.4. That Rule serves to supplement the existing Rule 13.1.3 which provides that a solicitor must ensure completion of legal services for a client’s matter unless (amongst other things) the law practice terminates the engagement for “just cause” and on reasonable notice.
The new Rule 13.4 states:
- “In subrule 13.1.3— just cause includes the following—
- 13.4.1 instructions that require, or any circumstance where continuation of the engagement would cause, a solicitor to breach his or her ethical duties and professional responsibilities;
- 13.4.2 any circumstance where a solicitor is no longer able to act in the client’s best interests,
- 13.4.3 any circumstance where a client has not provided all information requested of them that is required to fulfil a solicitor’s statutory obligations.”
There is also a corresponding amendment to the Legal Profession Uniform Legal Practice (Solicitors) Rules 2015 (by the Legal Profession Uniform Legal Practice (Solicitors) Amendment Rules 2026) (Legal Practice Rules), which inserts a new Rule 12 that provides:
“12 Retainer agreements
A retainer agreement should, in addition to any other provisions relating to termination of a retainer, inform the client to the effect that—
- 12.1 the solicitor is subject to statutory obligations, including reporting obligations that might include confidential information, and
- 12.2 the solicitor may terminate the retainer, and notify the client, where continuing to act would require the solicitor to breach their ethical duties or professional responsibilities; and
- 12.3 the law may prohibit the solicitor from providing reasons for terminating the retainer under the previous sub-rule.”
So, what does this all mean in practice?
It appears clear that the new Conduct Rules are intended to create a framework to allow solicitors to terminate retainer agreements in circumstances where a suspicious matter reporting obligation has arisen and the solicitor no longer considers they can continue to act for the client whilst discharging their professional obligations.
However, what neither the new Conduct Rules nor the new AML laws do is identify when or in what circumstances it would be incumbent upon a solicitor to terminate their engagement with the client once they have formed a suspicion and/or made a report to AUSTRAC pursuant to the AML CTF Act.
The Law Council of Australia has given this issue considerable thought and has published its own guidelines on how it believes the new AML laws and Conduct Rules should operate.
As can be seen in its updated Commentary to the Conduct Rules (in this case the commentary to Rule 9.2.2 on page 39) and the Law Council’s updated Guidance Note (at pages 14-16), the Law Council has formed the view that: “A solicitor who is statutorily compelled to disclose client confidential information [under the AML CTF Act] without the client’s knowledge or consent must cease acting for the client in the matter”.
As I read the Law Council’s commentary, it appears to accept that rule 9.2.2 of the Conduct Rules allows solicitors to disclose confidential information where they are compelled to do so by law (such as pursuant to the AML CTF Act), but concludes that such disclosure is likely to result in an irremediable conflict with continuing to act for that client.
It bases that view on the ethical obligations solicitors owe to their clients, including:
- the duty to act in their best interests;
- the duty to maintain confidentiality; and
- the duty of loyalty.
Those duties (and their breaches) were brought into stark relief in AB v CD and EF v CD (2018) 362 ALR 1; [2018] HCA 58 (AB v CD) – the so-called Lawyer X case involving counsel Nicola Gobbo acting as an informant for Victorian Police in breach of numerous professional and ethical obligations owed to her clients.
Whilst there were very compelling reasons in that case to conclude that a lawyer should not disclose confidential client information to third parties without their client’s knowledge or consent, as the High Court itself said in its decision contrasting the position of Ms Gobbo with a police informant, “Here, the situation is very different, if not unique, and it is greatly to be hoped that it will never be repeated”: AB v CD, [10].
In my respectful opinion, the position of a solicitor making mandatory disclosures to regulators is qualitatively different to that of a legal practitioner voluntarily disclosing confidential client information to the very people involved in the prosecution for which she was supposed to be defending them.
It is therefore no surprise in the Lawyer X case that the members of the High Court had no doubt in their minds that Ms Gobbo’s conduct resulted in “fundamental and appalling” breaches of her ethical obligations: AB v CD, [10].
Where a solicitor is compelled by law to disclose “suspicions” of offending to a regulator and that disclosure is limited by the protection afforded by legal professional privilege, in my view the playing field is very different.
Additionally, solicitors’ new due diligence obligations, coupled with the amendments to their retainer agreement obligations in the Legal Practice Rules, must go some way to putting clients on notice that such a disclosure is a possibility, without further notice to them. In some ways, it is not dissimilar from the type of informed consent solicitors can obtain from clients when establishing information barriers.
In this regard, I query whether the amendments to the retainer rules do not, in fact, go far enough? For example, it might be a clearer indication that informed consent is being sought, if rule 12.1 of the Legal Practice Rules went on to say something to the effect of, “Certain statutory reporting obligations, including those involving the disclosure of confidential information, may be made without notice to the client.”
This is not to say that in many, perhaps even most, cases solicitors will form their own view that once a report has been made to AUSTRAC, they cannot continue to act for that client whilst continuing to discharge their ethical obligations.
This circumstance-dependent approach appears to be the one adopted in New Zealand. Alternatively, the UK appears to take a slightly different tack, essentially allowing solicitors to obtain “consent” from the National Crime Agency (rather than the client) to continue acting for a client upon making a suspicious activity report (see their Law Society’s commentary here).
In my view, if too rigid an approach is taken to termination of engagements once a report has been provided to AUSTRAC, this may have a chilling effect on solicitors’ willingness to provide AUSTRAC with reports relating to their clients. It is possible they will only do so if they have formed a fairly robust suspicion that the designated service is in aid of an offence.
Where there is mere suspicion (a low bar), solicitors may be unwilling to provide AUSTRAC with reports relating to their clients if the consequence is that they will be required to terminate the engagement with that client. To do otherwise might risk not only losing a valued client for what may amount to nothing, but also the risk that abandoning the client may result in claims against the solicitor by that client.
Whilst it is difficult to say how this will all play out, if the above predictions come to pass, it may have the effect of undermining the very purpose for which the legislation was created.
