AML for legal practices

Start with the service

AUSTRAC has dedicated guidance for legal professionals and professional designated services. The professional-services guidance covers specified transaction activities, including certain work that directly advances a real-estate transaction. The scope question therefore concerns the service and facts, rather than a blanket rule for every legal matter. This guide is an entry point for a practice to organise that review. It does not decide whether a particular retainer is captured or resolve legal professional privilege. Read the current designated-service text and applicable law for those decisions.

Specific exemptions and exclusions can apply. The shared service guide explains the scope questions that a practice must examine.

Sources: AUSTRAC: Industry guidance index; AUSTRAC: Professional transaction services; Federal Register of Legislation: Section 6, including table 6 and subsections 6(6), 6(6A) and 6(6B).

Map the matter stages

An illustrative practice review follows enquiry, engagement, transaction planning, execution and completion. At each stage, describe what the practice does for the client and what information it receives. This can reveal a scope decision earlier than the movement of money. Keep the service analysis separate from a general client identity check. The suggested worksheet records the relevant activity, source and reviewer. It should not substitute a broad label such as commercial work for an explanation of the actual service being considered.

Sources: AUSTRAC: Industry guidance index; AUSTRAC: Professional transaction services; Federal Register of Legislation: Section 6, including table 6 and subsections 6(6), 6(6A) and 6(6B).

Identify the action that advances the matter

AUSTRAC’s professional-services guidance explains that planning and organising can include preparatory steps that directly advance the relevant outcome. Waiting for settlement or a transfer of money can therefore miss the start of the service. A connection to a transaction is not sufficient by itself. General advice and ancillary work can differ from action that directly advances it.

For intake, describe the requested deliverable and what staff will do with it. Explaining possible structures, preparing documents to create a chosen structure, and acting on transaction instructions are different tasks to assess. Apply the relevant table 6 item and its conditions to each task. A single engagement can contain more than one kind of work.

Source: AUSTRAC: Key terms and principles; Assisting or otherwise acting for or on behalf of a person when providing the professional services covered by items 1–4 and 6; Starting to provide a designated service; Receiving, holding, controlling or managing a person’s property; Creating or restructuring a body corporate or legal arrangement; Act section 6(5B).

• Professional advice and transaction assistance

Invented example: from advice to implementation

In this fictional matter, a client first asks for an explanation of possible business structures. Later, the client selects a structure and asks the practice to prepare and arrange execution of its constituting documents. The file should show the revised instructions and the point at which staff begin acting on them. The original description general advice no longer describes all the work.

A proposed handover records the service item, action, customer and relevant connected people. It includes customer due diligence (CDD) status and the reviewer’s decision about starting work. Where another adviser is involved, record who performs which action. An introduction by a trusted professional does not establish that this practice’s own obligations have been met.

If staff identify a privilege question, they send the specific information and proposed disclosure to the appropriate reviewer. They do not treat an entire transactional file as privileged merely because a lawyer holds it. Scope, CDD and privilege are related questions, but one answer cannot replace the others.

Sources: AUSTRAC: Industry guidance index; AUSTRAC: Professional transaction services; Federal Register of Legislation: Section 6, including table 6 and subsections 6(6), 6(6A) and 6(6B); AUSTRAC: Key terms and principles; Assisting or otherwise acting for or on behalf of a person when providing the professional services covered by items 1–4 and 6; Starting to provide a designated service; Receiving, holding, controlling or managing a person’s property; Creating or restructuring a body corporate or legal arrangement; Act section 6(5B); AUSTRAC: Legal professional privilege and the Act; Suspicious matter reporting obligations.

Privilege is narrower than confidentiality

Legal professional privilege and the duty of confidentiality are not the same. AUSTRAC explains that legal professional privilege (LPP) protects only communications within the common-law doctrine. It does not cover everything a lawyer must keep confidential.

Section 242(1) preserves the right to withhold privileged information. The reporting guidance also describes LPP forms in relevant circumstances. The practice needs to identify the information and the basis of the privilege claim. A legal matter does not make the entire file privileged.

SMR deadlines are unchanged by confidentiality: three business days after forming the suspicion, 24 hours for a terrorism financing suspicion, and a qualified five business day period under section 41(2)(aa) only where some but not all of the required information may be privileged and the privilege belongs to another person. The suspicious matter reports and legal professional privilege guides explain the conditions.

Sources: AUSTRAC: Legal professional privilege and the Act; introductory discussion; Federal Register of Legislation: Sections 41(1), 41(2)(a), (aa), (b), 41(2A), 41(3) and 42.

Build a practical handover

A useful internal handover identifies the service assessment, customer information, unresolved questions and responsible reviewer. It also states what change in the matter should trigger another review. This helps fee earners and support staff work from the same facts. Test the process with a fictional matter that changes scope midway through the engagement. The output should be a clear decision trail, not a claim that a template confirms compliance. The related program, CDD and reporting guides explain those requirements separately.

Sources: AUSTRAC: Industry guidance index; AUSTRAC: Professional transaction services; Federal Register of Legislation: Section 6, including table 6 and subsections 6(6), 6(6A) and 6(6B).

Make the fee-earner and support-staff boundary clear

A practical instruction tells support staff which changes require a fresh review. Examples include a new entity, representative, transaction role or request to control assets. Staff should know where to record the change and who can decide its effect. They should not be expected to resolve a difficult statutory scope question from a checklist alone.

Test the process with a fictional file that changes between consultation and execution. Examine whether the new instruction reaches the reviewer before the relevant work starts. Also make sure that customer-facing notes do not expose restricted reporting information. The process should support the practice’s legal assessment and record it clearly. It does not turn this guide into a legal opinion on a retainer.

Sources: AUSTRAC: Key terms and principles; Assisting or otherwise acting for or on behalf of a person when providing the professional services covered by items 1–4 and 6; Starting to provide a designated service; Receiving, holding, controlling or managing a person’s property; Creating or restructuring a body corporate or legal arrangement; Act section 6(5B); AUSTRAC: Legal professional privilege and the Act; Suspicious matter reporting obligations.