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New changes to the conduct and practice rules will assist you to navigate both your anti-money laundering/counter-terrorism financing (AML/CTF) obligations and your ethical duties. Here’s what’s changed.

Have you ever updated your glasses’ prescription but stayed with the same frames? Amendments to the Australian Solicitors’ Conduct Rules and the Solicitors’ Practice Rules, prompted by new AML/CTF obligations, have a similar effect. The rules have not changed in substance – it has always been the case that your legal services can’t be used for an improper purpose – but your obligations have been made clearer.

These changes are good news for practitioners.

The amendments came into effect on 1 July 2026, and were deliberately timed to commence with the Tranche 2 AML/CTF reforms. This way, you can navigate both your AML obligations, and the ethical obligations of your profession, with confidence.

Three changes are worth noting.

Clarified: Your duty around client instructions

Rule 8.1 of the Conduct Rules now provides that a solicitor must only accept and follow a client’s lawful, proper and competent instructions. What’s changed? The amendment adds three words – “only accept and” – and each of them matters.

While your duty is to advocate for and defend your client’s interests, your paramount duty is as an officer of the court and to the administration of justice. If a client asks you to do something untoward, or to use your legal services for an improper purpose, you can’t act on those instructions. The amendment to Rule 8.1 makes this limit explicit, and it clarifies that it applies from the moment a prospective client walks through your door. It also aligns with your customer due diligence obligations under the AML/CTF Act.

Defined: “Just cause”

Under Rule 13 of the Conduct Rules, a law practice may terminate an engagement for just cause and on reasonable notice. From my conversations with law firm partners and AML compliance officers, many practitioners feel nervous about terminating a retainer, asking: does my situation amount to just cause? Could I be exposed under the Conduct Rules, or for professional negligence? Until now, “just cause” in this context has been a concept defined only in common law.

Amendments to Rule 13 will assist in answering these questions by adding a non-exhaustive definition. Rule 13.4 provides that just cause includes: instructions that require, or any circumstance where continuation of the engagement would cause, a solicitor to breach his or her ethical duties and professional responsibilities; any circumstance where a solicitor is no longer able to act in the client’s best interests; and any circumstance where a client has not provided all information requested of them that is required to fulfil a solicitor’s statutory obligations.

This list is a floor, not a ceiling. For example, if a client is unreasonably evasive about identification, or cannot satisfactorily explain or demonstrate their source of funds, you can terminate the retainer, confident you are acting in accordance with the Conduct Rules. 

Introduced: A new practice rule for your retainers

A new rule has been added to the Practice Rules around retainers. Rule 12 provides that a retainer agreement should, in addition to any other provisions relating to termination of a retainer, inform the client to the effect that: the solicitor is subject to statutory obligations, including reporting obligations that might include confidential information; the solicitor may terminate the retainer, and notify the client, where continuing to act would require the solicitor to breach their ethical duties or professional responsibilities; and the law may prohibit the solicitor from providing reasons for terminating the retainer on the above grounds.

Because of the AML/CTF tipping-off prohibitions, you must be careful how you terminate a retainer, if required to do so. You cannot, for example, tell a client that the reason is that you have formed a reasonable suspicion that they are breaching the AML/CTF Act. The new Rule 12 means your client is informed of these possibilities from the start of the engagement, putting you on a clear contractual footing.

A word about suspicious matter reports

One of the most common anxieties we hear from members is around suspicious matter reports (SMRs). Rest assured: while the threshold for suspicion is broad, the definition in the legislation is specific. Your suspicion must relate to matters listed in the Act (Is the client who they say they are? Is this information that could further the investigation of a crime?). Moreover, the threshold sits below certainty.

An SMR is not a step to take lightly. If an SMR obligation arises in relation to your client, we cannot see how you can continue to act for that client. You cannot act in a client’s best interests while reporting on them, and you cannot seek their informed consent without tipping them off. In short, an SMR will generally mean terminating the retainer. However, it is likely prudent to seek independent legal advice if such a situation arises.

It is manageable

These amendments ask you to tread carefully, but they were made carefully, too. Ethical rigour is the pride of our profession, and it is why you can meet these new obligations with confidence. It is all manageable, and the Law Society is here to support you through these changes.

Solicitors with questions in relation to the new Conduct or Practice Rules are encouraged to contact the Professional Support Unit’s AML/CTF team at amlctf@lawsociety.com.au (02) 9926 0249 or Ethics team at ethics@lawsociety.com.au (02) 9926 0114.

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