Summary of AML/CTF reform coming in 2026 – what it means for you

Two-minute summary

Australia has strengthened its anti-money laundering and counter-terrorism financing (AML/CTF) laws to meet international standards set by the Financial Action Task Force. The changes to the AML/CTF Act 2006 will start on 31 March 2026 for businesses already regulated and on 1 July 2026 for newly covered industries.

Background. The Act protects Australia's financial system from money laundering and terrorism financing. It requires regulated businesses to check who their customers are, monitor transactions and report to AUSTRAC, the national financial intelligence agency and AML/CTF regulator. Since 2007 these rules have applied to "tranche 1" businesses such as banks, casinos, lenders, financial service providers, digital currency exchanges and gold dealers.

What changed. The AML/CTF Amendment Act 2024, passed in November 2024, extends the rules to "tranche 2" sectors the government considers high risk. These include real estate professionals, most lawyers, accountants, trust and company service providers, dealers in precious metals and stones, and a wider range of crypto and virtual asset businesses.

What businesses that are now covered must do:

• enrol with AUSTRAC between 31 March and 1 July 2026, with possible criminal penalties for missing the deadline

• build and maintain an AML/CTF program tailored to the business

• train staff on it

• carry out customer checks at the start and on an ongoing basis

• report certain transactions and suspicious activity

• keep full records for at least seven years

Legal professional privilege. The Act isn't meant to override a client's right to legal professional privilege. Still, because lawyers are now covered, it isn't yet clear how the two will interact. Deciding whether information is privileged or must be reported to AUSTRAC will need case-by-case analysis. AUSTRAC's guidance on this is still developing, and getting it wrong carries serious penalties.

Farahs Legal's position. The firm is a tranche 2 business itself. It is enrolling with AUSTRAC, expanding its own AML/CTF program and tracking regulatory updates. It offers tailored advice on whether the rules apply to a business, on building a compliance program, and on privilege concerns.

Full article

New rules under the Anti‑Money Laundering and Counter‑Terrorism Financing Act 2006 (Cth) (the Act) are set to take effect on March 31, 2026 (for current entities) and July 1, 2026 (for new ‘tranche 2’ industries). 

What are these reforms for? 

The Australian Government is strengthening its anti-money laundering (AML) and counter-terrorism financing (CTF) measures, and reforms have been implemented to reflect increasing international AML/CTF standards set by the global Financial Action Task Force. 

What is the purpose of the Act and when did it first start operating?

The Act itself is designed to protect the integrity of Australia’s financial system and prevent serious financial crime including, as its name suggests, money-laundering and terrorism financing. These goals are achieved by requiring certain designated service providers that are subject to the Act to implement certain prescribed preventative measures. 

These preventative measures include (but are not limited to): 

• customer due diligence and verification of identity; 

• monitoring of transactions and behaviours of clients; and 

• requiring the reporting to the ‘Australian Transaction Reports and Analysis Centre’ (AUSTRAC) – the Australian Government’s financial intelligence unit and AML/CTF regulator whose authority was extended and modernised under the Act. 

  
  

The Act commenced operation back in December 2006, having passed through both Houses of Parliament in early Dec 2006 and receiving Royal Assent on 12 December 2006.  

Once in operation, key operational obligations, such as customer identification procedures, AML/CTF programs, and reporting requirements for ‘tranche 1’ entities (for example, financial institutions, casinos, remittance services) were phased in from 12 December 2007. 

Why all the noise now?

As mentioned above, certain ‘tranche 1’ entities have been subject to the requirements under the Act now for close to two decades. These entities are listed in section 6 of the Act (mainly in tables 1–4) and focus on financial, gambling, remittance, bullion, and certain virtual asset services.  

Typically, ‘tranche 1’ entities would include: 

• banks; 

• casinos; 

• digital currency exchange providers; 

• lenders; 

• financial service providers; and 

• gold dealers, 

to name a few. 

The Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth) (Amendment Act) passed through Parliament on 29 November 2024 and received Royal Assent on 10 December 2024. The reason we are hearing so much about AML/CTF now is that the Amendment Act seeks to expand the reach of the Act to cover additional (previously unregulated) sectors that the Australian government deems to be high-risk. These sectors are described as ‘tranche 2’ entities and include those who provide ‘designated services’ defined in the Act, generally being: 

• real estate professionals (agents, conveyancers and developers in certain cases); 

• most lawyers (there are some exceptions); 

• accountants; 

• trust and company service providers;  

• dealers in precious metals, stones and products; and 

• broader virtual asset service providers (think crypto firms, for example). 

So what does this actually mean? If my business is now caught by the Act, what do I have to do?

AUSTRAC have provided a helpful summary setting out the upcoming anti-money laundering and counter-terrorism financing obligations. For a more detailed dive, we encourage you to visit AUSTRAC’s summary of obligations here. For any lawyers reading (or any others looking for some bedtime reading) you can read the full Act (as amended by the Amendment Act) here. 

By way of summary, key obligations if you are a ‘tranche 2’ entity (or a ‘tranche 1’ entity that has not yet done so), you will need to: 

1. enrol and register with AUSTRAC between 31 March 2026 and 1 July 2026 – this window is critical, and there are potential criminal penalties if you miss the 1 July 2026 deadline; 

2. develop and maintain an AML/CTF program tailored to your particular business; 

3. prepare and train your staff on your AML/CTF program and the obligations generally; 

4. conduct initial and ongoing customer due diligence; 

5. report certain transactions and suspicious activities; and 

6. make and keep accurate and complete records for at least 7 years. 

Legal professional privilege – how it interacts with these obligations

Importantly, it is not intended that the Act will erode a client’s right to legal professional privilege (LPP). Despite this, given that certain ‘tranche 2’ entities would traditionally be the exact type of industries to which LPP often applies, such as lawyers, whether the Act causes conflict with LPP rights is yet to be seen. 

Whether or not certain information is to be treated as the type that attracts LPP or alternatively, a type that should be shared with AUSTRAC, will require careful analysis and tailored legal advice. It will require careful assessment on a case by case basis. 

AUSTRAC has released some guidance on the LPP point here. We expect that this will evolve over the course of this year. 

It is important that the right balance is struck, and the correct principles are applied so that any information withheld on grounds of LPP is withheld on the correct and lawful basis. There could be serious penalties if an entity governed by the Act got it wrong.  

How Farahs Legal can help

As a tranche 2 entity ourselves, we become bound by these new obligations on and from 1 July 2026. We will be enrolling when enrolment for ‘tranche 2’ entities opens on 31 March 2026. We are also actively expanding our AML/CTF program, and paying close attention to any Australian Government and/or AUSTRAC press releases. 

We are also attending CPD seminars where we can, to stay ahead of the curve. We strongly recommend that all businesses, whether or not you are captured in the list of entities above, do the same. This is especially so if you are a ‘tranche 2’ entity. 

If you have any doubt as to whether or not these new obligations apply to you or your business, we encourage you to reach out to us at Farahs Legal. We would be happy to provide tailored advice to your circumstances, to assist you with the necessary AML/CTF program, and to advise you as to whether your business has strong governance and oversight in place to meet the requirements under the Act. 

We encourage you to reach out to us directly if you are a service provider with legal professional privilege, (or any other) concerns, and we would be happy to provide you with tailored advice. 

At Farahs Legal, we would be glad to assist you and your business, and we welcome any and all enquiries.