Published
Australia’s anti-money laundering regime is expanding, and real estate is one of the sectors being brought inside it. The Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth) amends the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) to extend obligations to professions that have sat outside the regime since it began, including real estate agents, buyer’s agents and property developers who sell their own stock. These newly regulated businesses are commonly described as tranche 2 entities.
The new obligations commence progressively. Some steps, such as enrolment with AUSTRAC, arrive ahead of the substantive compliance obligations, and AUSTRAC continues to release rules and guidance that shape the detail. A real estate business that waits for a single start date will find that parts of the timetable have already passed.
What the tranche 2 reforms do
The AML/CTF regime requires regulated businesses, called reporting entities, to identify their customers, assess and manage the risk that their services are used to launder money or finance terrorism, and report certain matters to AUSTRAC. Banks, casinos and remittance providers have carried these obligations for many years. The 2024 amendments extend the regime to lawyers, accountants, trust and company service providers, dealers in precious metals and stones, and real estate professionals.
Real estate was a priority for the expansion because property is a well recognised channel for laundering criminal proceeds. High values, stable assets and the ability to hold property through companies and trusts make Australian real estate attractive to people who need to move large sums into the legitimate economy. International bodies have pressed Australia for years to close this gap, and the amendments respond to that pressure.
Who is captured in the real estate sector
The amendments capture businesses that provide designated services connected with the sale, purchase or transfer of real estate. In practical terms, the sector should expect the following to be within scope:
- Real estate agents who broker the sale of real property on behalf of sellers.
- Buyer’s agents who act for purchasers in acquiring real property.
- Property developers who sell land or dwellings they have developed, including sales made off the plan.
Whether a particular business is captured turns on the designated services it actually provides, and the definitions have technical edges. Businesses that only provide residential property management or leasing services are in a different position from businesses that broker sales, and a single agency may provide a mix of both. Lawyers and conveyancers who assist with property transactions are also being brought into the regime, under a separate category for professional service providers. Each business should map its services against the legislation and current AUSTRAC guidance before assuming it sits outside the net.
Enrolment with AUSTRAC
A business that provides a designated service must enrol with AUSTRAC as a reporting entity. Enrolment is the administrative entry point to the regime. It identifies the business to the regulator, and the reporting and compliance obligations flow from it.
Enrolment for the newly regulated sectors is being staged ahead of the substantive obligations, and AUSTRAC has published guidance for tranche 2 businesses on when and how to enrol. The enrolment process itself is manageable. It involves providing details about the business, its structure and the designated services it provides. The risk lies in timing. Providing designated services without being enrolled when required can attract enforcement action, so every captured business should confirm the enrolment window that applies to it and diarise the date.
The AML/CTF program
The central ongoing obligation is to develop, adopt and maintain an AML/CTF program. Under the amended regime a program has two core elements. The first is a money laundering and terrorism financing risk assessment. The business must consider the risks arising from its customer types, the services it provides, the channels through which it delivers them, and any foreign jurisdictions it deals with. The second element is a set of policies, procedures, systems and controls that respond to the risks identified.
The program also has a governance layer. The business must appoint an AML/CTF compliance officer, and senior management and boards are expected to approve and oversee the program. For agencies and developers operating through companies, this sits alongside the broader trend of regulators holding directors personally accountable for risk oversight, a trend we have written about in the context of director duties and cyber security. A program bought off the shelf and left in a drawer will not satisfy the regulator. AUSTRAC expects the risk assessment to reflect the actual business and the controls to be used in practice.
Customer due diligence through to settlement
Customer due diligence, usually shortened to CDD, is the obligation that will change day to day practice the most. Before providing a designated service, a reporting entity must establish who its customer is and verify that identity using reliable and independent information. Where the customer is a company or a trust, the entity must look through the structure to identify the beneficial owners, the individuals who ultimately own or control it. Trust structures are common in Queensland property transactions, and buyers and sellers using them should expect more questions than they are used to.
CDD is not a single event at the start of the file. The obligation continues through the transaction, and higher risk situations call for enhanced due diligence. Unusual sources of funds, customers based in higher risk jurisdictions, politically exposed persons and structures with no clear commercial rationale all require closer scrutiny. In a sale campaign this due diligence has to coexist with contract deadlines and settlement pressure, which is exactly the environment in which criminals also attempt payment fraud. Agencies tightening their identity and verification processes for AML/CTF purposes should extend the same discipline to payment instructions, where payment redirection fraud at property settlement is the live risk.
Reporting, tipping off and records
Enrolled reporting entities carry reporting obligations to AUSTRAC. The most important for real estate professionals is the suspicious matter report. Where a business forms a suspicion on reasonable grounds that a customer or transaction may be connected with criminal proceeds, money laundering or terrorism financing, it must report the matter to AUSTRAC within the statutory timeframe, which is short. Suspicion can arise from many things, including a customer’s reluctance to provide identity documents, funds arriving from unexplained third parties, or a purchase price that makes no commercial sense.
Two related rules deserve attention. The first is the tipping off restriction, which limits what a business can tell its customer or others about a suspicious matter report. Staff need training on this, because a well meaning explanation to a client can itself be a contravention. The second is record keeping. Reporting entities must keep records of customer identification, transactions and their AML/CTF program for the statutory retention period. Businesses that handle physical currency should also be aware that transactions involving large amounts of cash at or above the reporting threshold must be reported to AUSTRAC.
Practical first steps
Queensland real estate businesses can build in stages, and the first stage starts now. The reforms arrive at the same time as other significant changes to conveyancing practice, including the Queensland seller disclosure scheme, so onboarding and transaction workflows are worth redesigning once rather than patching repeatedly. A sensible sequence looks like this:
- Map the services the business actually provides against the designated services in the legislation, and record the conclusion for each service line.
- Confirm the enrolment timing that applies to the business and diarise it with a margin.
- Begin the risk assessment now, using real data about customers, transaction types and geographies.
- Appoint the AML/CTF compliance officer and settle the governance and approval pathway for the program.
- Redesign client onboarding so identity and beneficial ownership information is collected early, when the client relationship starts.
- Train front line staff on suspicious matter indicators and the tipping off restriction.
- Review systems for identity verification, record keeping and reporting, and close the gaps before the obligations commence.
Frequently asked questions
Are property developers captured by the tranche 2 reforms?
Developers who sell real estate in the course of their business, including off the plan sales, should expect to be captured as reporting entities in their own right. A developer cannot assume that using an external selling agent removes its own obligations. Each entity in the sale chain needs to assess its position separately.
When do the new obligations start?
Commencement is progressive rather than a single date. Enrolment obligations arrive ahead of the substantive compliance obligations, and AUSTRAC continues to publish rules and guidance that refine the detail. Because the timetable is staged and has been subject to change, businesses should verify the current dates directly with AUSTRAC or take advice rather than rely on secondhand summaries.
Does customer due diligence apply to buyers or sellers?
The obligation attaches to the reporting entity’s customer, which depends on the service being provided. A selling agent’s customer is ordinarily the vendor, while a buyer’s agent’s customer is the purchaser. The AML/CTF Rules deal with how due diligence operates across the parties to a real estate transaction, and the detail matters, so businesses should confirm how the rules apply to their specific service model.
What happens if a real estate business does not comply?
AUSTRAC has a broad enforcement toolkit, including civil penalty proceedings, enforceable undertakings, remedial directions and infringement notices. Penalties under the AML/CTF Act can be substantial, and AUSTRAC has shown through its enforcement history in other sectors that it will use them. Early, documented compliance effort is the best protection.
If your agency, development business or fund is working out how the AML/CTF reforms apply to it, contact GRM LAW to scope your obligations and build a program that fits your business.
Disclaimer: This is general information only and is not legal advice. For advice on your circumstances, contact GRM LAW.
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