Navigating AMLCTF reforms

31 March 2026

1 July 2026

Lawyers and accountants are key players in the fight against money laundering and terrorism financing. They offer services that can be exploited for illegal activities, such as managing client funds and assets. Their role is crucial in:

• Conducting due diligence
• Managing client money, securities, or other assets
• Ensuring compliance with AMLCTF regulations

By adopting a risk-based approach and maintaining high standards, they help protect their professions and prevent criminals from misusing their services. Vigilance in client interactions is essential to identify and combat potential threats.

1. Buying and selling real estate.
2. Managing client money, securities, or other assets (including operating a trust account).
3. Managing bank, savings, or securities accounts.
4. Organising contributions for the creation, operation, or management of companies.
5. Creating, operating, or managing companies, trusts, or other types of legal persons or arrangements.
6. Buying and selling businesses.
7. Acting as a formation agent of companies, trusts or similar entities.
8. Acting as (or arranging for another person to act as) a director or secretary of a company, a partner of a partnership, or a similar position in relation to other legal persons.
9. Providing a registered office, business address, or accommodation, correspondence, or administrative address for a company, a partnership, or any other legal person or arrangement.
10. Acting as (or arranging for another person to act as) a trustee of an express trust or performing the equivalent function for another form of legal arrangement.
11. Acting as (or arranging for another person to act as) a nominee shareholder for another person.

Under the amended regime, reporting entities are required to maintain comprehensive and accurate records, with the retention period being 7 years, with any client identification procedure records needing to be maintained for the duration of your relationship with the customer, and for an additional seven years after you stop providing any designated services to them. These records include:

• Customer Due Diligence (CDD):
  Maintain records of Know Your Client (KYC) procedures, including the steps taken to identify clients and any documentation provided. While copying documents is not mandatory, if copies are made, they must be retained. Records should also include information on clients identified as Politically Exposed Persons (PEPs) or sanctioned individuals, along with any ongoing monitoring requirements.
• International Funds Transfer Instructions (EFTI):
  Keep records of any instructions to transfer funds electronically between financial institutions, whether the transfer is between different accounts of the same person or from one person to another.
• Transaction records:
  Document all transaction details, including parties involved, dates, and descriptions. Any documents provided by customers (or their agents) related to designated services must be retained.
• Reporting records:
  Maintain records necessary for lodging annual reports with AUSTRAC. This includes records of suspicious transaction reports, especially if further investigations are required.
• AMLCTF program documentation:
  Keep records of the adoption date of the AMLCTF program (e.g., board minutes), details of program approval, the program itself, and any subsequent changes.
• Staff training sessions:
  Document details of training sessions conducted for staff.
• Audit results:
  Maintain records of audit results related to compliance with the AMLCTF program

When conducting Know Your Client (KYC) or Client Due Diligence (CDD), it is crucial to be vigilant for potential “red flags’ that may indicate suspicious activity. These red flags can sometimes be subtle, such as a general feeling of unease or inconsistencies in the information provided by the client. Key indicators to watch for include:

1. Client identity issues:

• Association with high-risk countries or unusual sources of funds.
• Political exposure or connections to politically exposed persons (PEPs).
• Provision of identification documents that are misleading, vague, or difficult to verify.
• Attempts to disguise identity.
• Criminal convictions or ongoing investigations for serious crimes.

2. Client behaviour concerns:

• Reluctance to provide identity documents or submission of false documents.
• Difficulty in contacting the client after funds are deposited.
• Unusual secrecy about identity or transactions.
• Involvement in cash-intensive businesses or high-risk activities.
• Offering unusually high fees for expedited transactions.

3. Relationship with the practice:

• Seeking services outside the practice's expertise.
• Frequent changes of solicitors without valid reasons.
• Requests to use the practice's trust account as a banking facility.

4. Funds or assets concerns:

• Small payments that suggest “structuring” to avoid detection.
• Real estate purchases lacking a logical connection to the buyer.
• Large private funding from offshore accounts without explanation.
• Requests for payments to third parties without logical explanations.   

5. Jurisdictional risks:

• Transactions involving high-risk countries without logical connections.

6. Commercial activity or use of companies/trusts:

• Use of complex legal structures without business necessity.
• Frequent changes in management or legal structures without reason.
• Involvement in frequent transactions with similar elements without explanation.