Introduction

With the 1 July 2026 commencement of Tranche 2 obligations now just two months away, Australian law firms find themselves working against a settled but dense regulatory backdrop. The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), as amended by the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024, commenced for current reporting entities on 31 March 2026. The same date saw a suite of Rules go live, and, in early April, the Government tabled a further amendment Bill that signals where AUSTRAC's enforcement focus is moving next.

What Commenced on 31 March 2026

A package of subordinate legislation came into force alongside the amended Act, all pointed squarely at the new operating environment for existing and incoming reporting entities. The Anti-Money Laundering and Counter-Terrorism Financing Rules 2025, which were already amended once by the Anti-Money Laundering and Counter-Terrorism Financing (2025 Rules) Amendment Rules 2026, now operate together with the Anti-Money Laundering and Counter-Terrorism Financing (Class Exemptions and Other Matters) Amendment Rules 2026 and the Anti-Money Laundering and Counter-Terrorism Financing Transitional Rules 2026. The Anti-Money Laundering and Counter-Terrorism Financing (Proliferation Financing) Regulations 2026 also took effect on 31 March.

The Class Exemptions Rules carry several items that will be of direct interest to the legal profession. Barristers providing services to Australian government bodies are exempt from the regime, as are community legal centres, legal aid providers, duty lawyers and advocates representing clients under court referral schemes for incidental legal assistance.

The Transitional Rules grant existing reporting entities a three-year initial customer due diligence runway, from 31 March 2026 to 30 March 2029, in which to bring their existing customer base up to the new CDD standard. Tranche 2 entities will not benefit from this particular transition period and will need to start clean from 1 July.

A New Bill Targets High-Risk Channels

On a separate but related track, the Government has introduced the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2026 into the House of Representatives. The Bill would empower the AUSTRAC CEO to restrict or prohibit, by legislative instrument, a reporting entity's use of a "high-risk mechanism" to deliver a designated service. The example given in the explanatory material is exchanging cash for virtual assets through a cryptocurrency ATM, a channel AUSTRAC has flagged repeatedly as a money-laundering vulnerability.

The Bill also revises the definition of "financing of terrorism" to capture new offences for financing a state sponsor of terrorism, and makes a series of technical amendments. While most law firms will not be operating crypto ATMs, the broader signal is that AUSTRAC intends to use the new regime not just to gather data but to actively close down channels assessed as unmanageable. Compliance officers should anticipate a more interventionist regulator from day one.

SMR Reference Guide Refreshed

In parallel, AUSTRAC has updated its Suspicious Matter Reporting (SMR) reference guide to set out best-practice expectations for drafting "grounds for suspicion" text. For law firms that will be filing SMRs for the first time, this is a useful anchor: from 1 July 2026, suspicious matters must be reported within three business days (24 hours where terrorism financing is suspected), and threshold transaction reports for cash transactions of $10,000 or more must be lodged within 10 business days. Vague or templated suspicion narratives have historically attracted regulatory follow-up; the updated guide makes clear that AUSTRAC expects specific, evidenced reasoning.

Tools such as Legl can help firms operationalise these obligations, from running client risk assessments, capturing source-of-funds evidence and producing audit-ready records, but the underlying judgement calls on suspicion remain with the firm.

Key Takeaways

• The amended AML/CTF Act commenced on 31 March 2026 for current reporting entities; the regime extends to law firms and conveyancers providing designated services from 1 July 2026.
• A three-year initial CDD transition (to 30 March 2029) applies only to existing reporting entities, not to Tranche 2 entrants.
• The Class Exemptions Rules carve out barristers acting for government bodies and community legal assistance providers, but mainstream private practice remains squarely in scope.
• A new Bill before Parliament would let AUSTRAC ban specific high-risk channels by legislative instrument, a sign that enforcement posture, not just rule-making, is sharpening.
• Use AUSTRAC's updated SMR reference guide to calibrate internal templates before 1 July; "grounds for suspicion" drafting will be an early reviewer focus.

Looking Ahead

The next milestones to watch are the 29 July 2026 deadline for Tranche 2 entities to register a compliance officer, and the progress of the AML/CTF Amendment Bill 2026 through Parliament. With AUSTRAC publishing sector-specific guidance for lawyers in early 2026 and the Law Council of Australia and state law societies running compliance roundtables through April and May, firms still finalising their AML/CTF programmes have a narrow but well-supported window to get the foundations right.