Family law practices in New South Wales are increasingly at risk of AML/CTF regulation in property settlement and spousal support orders, especially if the practice receives or makes payments, facilitates real property transactions, or restructures family trusts. Starting 31 March 2026, practices offering a designated service must register with AUSTRAC, with full requirements beginning 1 July 2026. The following 12-point plan combines family law relief with risk-based AML regulation.
1) Establish Scope and Implement Immediate Risk Measures
Assess if the matter involves a designated service (such as trust account settlements, property transactions, trust/company restructurings). If suspicious circumstances emerge, suspend transactions (without alerting the party), refer to the AMLCO/risk partner, segregate communications, and document a contemporaneous risk memo.
2) Risk-Based Customer Due Diligence
Check identity (VOI) and obtain complete identifying information. Identify and verify beneficial parties and controllers of companies, trusts (including appointers and beneficiaries), SMSFs, and third-party funders. Screen for PEPs, exposure to sanctions, and adverse media. Obtain written beneficial ownership and third-party payment statements.
3) Determine and Confirm Source of Funds and Source of Wealth
Seek reasonable risk-based evidence of the source of funds used in the transaction (bank statements, settlement statements, loan agreements, payroll records) and the source of wealth (tax returns, financial statements, trust deeds, inheritance records). Use enhanced CDD in high-risk situations.
4) Create Funds Flow Maps and Strengthen Settlement Arrangements
Develop a funds flow map from source to destination. Demand remittance from confirmed accounts in the name of (or third party to) the relevant party. Ban cash and anonymous remitters. Make payments only to confirmed payees, with dual confirmation for changes to accounts.
5) Use Red Flags Relevant to Family Issues
Review for suspicious lack of explanation for large deposits, unexplained “loans,” round-trip transactions, unconnected offshore receipts, under/overvaluation of assets, payments structured around $10,000, refunds to strangers, or suspicious explanations for source of funds.
6) Use Family Law Tools to Trace and Preserve Property
Deploy disclosure and subpoenas to banks, accountants, trustees, and exchanges. Seek freezing or injunction orders where dissipation risk exists. Consider applications under s 106B of the Family Law Act 1975 to set aside defeating transactions, and third-party orders under s 90AE. Engage forensic accountants for complex or cross-border structures.
7) Crypto, Remittance and Cross-Border Payments (Heightened Controls)
Require liquidation of crypto via regulated exchanges linked to verified accounts. Collect exchange statements, wallet addresses, and transaction hashes. Prohibit mixers and off-exchange trades. For offshore transfers, obtain SWIFT/MT103 records and credible purpose-of-payment evidence; apply ECDD for high-risk jurisdictions.
8) Decisioning and AUSTRAC Reporting (from 1 July 2026)
If suspicion forms on reasonable grounds while providing a designated service, submit a Suspicious Matter Report within three business days (24 hours for terrorism financing). Do not tip off. Conduct a legal professional privilege analysis and document decision-making.
9) Trust Account Governance and Reporting Baselines
Do not operate as a “bank.” Handle funds only with a clear legal nexus to the retainer. Enforce strict authority protocols, segregate duties, monitor reporting triggers (e.g. threshold cash transactions where applicable), and retain records for at least seven years.
10) Interface with Proceeds of Crime and Civil Confiscation
Check early for restraint or forfeiture proceedings under Commonwealth or NSW confiscation regimes that may affect the asset pool. Court orders do not “cleanse” tainted funds.
11) Documentation, Training and Independent Review
Maintain a matter-level ML/TF risk assessment, CDD/ECDD notes, funds-flow map, and decision logs. Provide targeted AML training to fee earners and trust staff. Subject procedures to periodic independent review and monitor updates from The Law Society of NSW and Law Council of Australia.
12) Condensed Due Diligence Checklist
Identity and beneficial ownership (VOI, corporate/trust/SMSF documents); source of funds (6–12 months’ bank statements, contracts, loan documents, payslips, tax returns); crypto/offshore (exchange KYC, wallet records, SWIFT data); risk screening (PEP/sanctions/adverse media); governance (funds-flow map, exception approvals, SMR/LPP documentation).