Privileged Communications and SAR

Legal Professional Privilege and SAR Reporting: New Guidance for Lawyers

Since November 2025, law firms that are reporting entities under the AML/CFT Act have been given five working days (instead of the usual three) to file a suspicious activity report (SAR) where the information involved may be legally privileged.

To support this change, the Department of Internal Affairs (DIA) has issued new guidance to help lawyers navigate the intersection between legal professional privilege and SAR obligations.

What is legal professional privilege?

Legal professional privilege protects confidential communications (oral or written) made for the purpose of obtaining or providing legal advice or assistance. This includes communications between a lawyer and their client.

Importantly, the privilege belongs to the client, and only the client can waive it. This creates practical challenges in the AML/CFT context, particularly because you cannot inform a client that you are filing an SAR (due to tipping-off restrictions) and therefore cannot ask the client to waive their privilege.

In other words, privilege does not remove the obligation to file an SAR if there is information that can be shared, and you must still submit a report to the fullest extent possible, while withholding any legally privileged information.

When is information not privileged?

Even where a communication appears to meet the definition of privilege, it will not be protected if there is a prima facie case that it was made for a dishonest purpose, or intended to enable or assist the commission of an offence. A prima facie case means there is credible evidence suggesting wrongdoing, even if it is not yet proven.

This creates an important distinction:

• Suspicion only (no prima facie case):
  You still need to file an SAR, but you must not disclose privileged information.

• Prima facie case of wrongdoing:
  You must file an SAR, and the information is no longer considered privileged, meaning it does not need to be withheld.

In addition, certain financial records are never privileged, including information relating to:

• receipts, payments, income, or expenditure; and

• financial transactions recorded in trust account records (e.g. books, accounts, or statements kept by the lawyer).

 Record-keeping obligations

Where you decide to withhold information on the basis of privilege, you must keep a written record of your reasoning. In addition, you must retain both the SAR and your privilege assessment for at least five years after the date on which the SAR was filed.

What should law firms do now?

Law firms should review and update their policies, procedures, and controls to ensure they can operationalise this guidance. In particular, firms should:

• Establish a clear process for assessing legal professional privilege in the context of SAR reporting

• Ensure consistent documentation and record keeping of privilege decisions and reasoning

Get in touch if you have any questions.