Amendments to the Australian Solicitors’ Conduct Rules and the Solicitors’ Practice Rules have been introduced to help practitioners understand their anti-money laundering/counter-terrorism financing (AML/CTF) obligations and ethical duties. The changes, which came into effect on 1 July 2026, aim to provide clearer guidance on existing obligations.
The amendments were deliberately timed to commence with the Tranche 2 AML/CTF reforms, allowing practitioners to confidently understand both their AML obligations and ethical obligations. Three key changes are worth noting, including clarifications on a solicitor’s duty around client instructions, the introduction of a non-exhaustive definition of “just cause” for terminating an engagement, and a new practice rule for retainers.
Key Changes to the Conduct Rules
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. This amendment adds three words – “only accept and” – which make it clear that a solicitor’s duty is to advocate for and defend their client’s interests while also upholding their duty as an officer of the court and to the administration of justice.
The amendment to Rule 8.1 also aligns with customer due diligence obligations under the AML/CTF Act. If a client asks you to do something untoward, or to use your legal services for an improper purpose, you cannot 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 the door.
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Under Rule 13 of the Conduct Rules, a law practice may terminate an engagement for just cause and on reasonable notice. However, many practitioners have felt nervous about terminating a retainer, unsure of what constitutes “just cause.” The amendments to Rule 13 provide a non-exhaustive definition of just cause, which includes instructions that require a solicitor to breach their ethical duties and professional responsibilities, circumstances where a solicitor is no longer able to act in the client’s best interests, and circumstances where a client has not provided all requested information.
This list is not exhaustive, and solicitors can terminate a retainer if a client is unreasonably evasive about identification or cannot satisfactorily explain their source of funds. The introduction of this definition aims to provide clarity and confidence for practitioners when dealing with complex situations.
New Practice Rule for 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 rule also states that the solicitor may terminate the retainer and notify the client if continuing to act would require the solicitor to breach their ethical duties or professional responsibilities.
Because of the AML/CTF tipping-off prohibitions, you must be careful how you terminate a retainer, if required to do so. The new rule means that clients are informed of these possibilities from the start of the engagement, putting solicitors on a clear contractual footing. This change is intended to provide transparency and clarity for both solicitors and clients.
The amendments to the Conduct Rules and Practice Rules are designed to provide clearer guidance on existing obligations, and solicitors are encouraged to familiarize themselves with the changes. As the profession continues to evolve, it is essential to prioritize ethical rigour and transparency, and the Law Society is committed to supporting practitioners in this effort. The Law Society website provides additional resources and information on the amended rules.
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One of the most common anxieties among practitioners is around suspicious matter reports (SMRs). The threshold for suspicion is broad, but the definition in the legislation is specific, and solicitors must be cautious when dealing with these situations. If an SMR obligation arises in relation to a client, it is likely that the solicitor will need to terminate the retainer, as they cannot act in the client’s best interests while reporting on them.
The introduction of a non-exhaustive definition of “just cause” in Rule 13.4 is expected to provide clarity for solicitors when terminating a retainer. This definition includes circumstances where a solicitor is no longer able to act in the client’s best interests or where a client has not provided all requested information.
Terminating a Retainer
When terminating a retainer due to a breach of ethical duties or professional responsibilities, solicitors must be mindful of the AML/CTF tipping-off prohibitions. The new Rule 12 in the Practice Rules requires retainer agreements to inform clients of these possibilities, ensuring solicitors are on a clear contractual footing.
For further assistance, solicitors can contact the Professional Support Unit’s AML/CTF team at [email protected] or (02) 9926 0249, or the Ethics team at [email protected] or (02) 9926 0114. The Law Society is committed to supporting practitioners in meeting their AML/CTF obligations and upholding ethical standards.
