Anti-Money Laundering and Counter-Terrorism Financing (AML / CTF) Regime set to apply to the real estate sector
4 mins reading time
Real estate professionals play a critical role in the financial ecosystem, often dealing with high-value transactions that can be attractive targets for illicit activities. The Australian Government is proposing significant changes to the Anti-Money Laundering and Counter-Terrorism Financing (AML / CTF), which will likely soon include Real Estate Agents and Conveyancers under its regulatory umbrella.
What is the AML / CTF regime?
Each year, billions of dirty dollars are generated from corrupt practices. Australia’s AML / CTF regime establishes a specific regulatory framework for businesses offering specific types of designated products and services, to help prevent money laundering, terrorism financing and other serious financial crimes.
While AML and CTF laws have been in place since 2006, their application and scope are currently undergoing significant proposed changes. These anticipated changes are set to directly impact Real Estate Agents, expanding the obligations and responsibilities within the industry.
What changes are proposed?
The Government has been consulting on two main aspects of the AML / CTF regime, including how to:
- Simplify and modernise the current AML/CTF Rules – to make it easier for all businesses to meet their obligations; and
- Address money laundering and terrorism financing risks in certain professions – proposing that the AML/CTF Rules should be expanded apply to particular industry groups including Real Estate Agents and Conveyancers (being, “tranche 2 entities” along with Accountants and Lawyers).
While these proposals have not yet been finalised and the amending legislation is still pending, the Government is currently seeking feedback on the practical impact on these “tranche 2 entities”.
Why include Real Estate Agents in the AML / CTF regime?
Criminals often buy high-value goods, such as real estate, to launder or conceal illicit funds. Australia has become a prime target for the investment of foreign proceeds of crime in the real estate market due to its perceived ease. Money laundering through real estate can be relatively simple and requires little planning or expertise compared to other methods. Real estate can also be used to conduct illegal activities such as the growing or producing of illicit drugs.
The proposed AML/CTF reforms aim to address these vulnerabilities by introducing a list of “designated services” that Real Estate Agents and Conveyancers perform, which have been identified as posing a significant risk for money laundering and terrorism financing.
What might be the “designated services”?
The proposed “designated services” pertain to “real property” transactions. Under the AML/CTF amendments, “real property” is likely to be broadly defined to include:
- any interest in or right over land;
- a personal right to call for or be granted any interest in or right over land; and/or
- a licence to occupy land or any other contractual right exercisable over or in relation to land.
This expansive definition will cover all types of properties, including residential, commercial, industrial, vacant land, and agricultural properties.
In particular, the proposed designated services to be introduced relevant to Real Estate Agents and Conveyancers include:
- Brokering the sale or transfer of real property on behalf of one or more sellers, in the course of carrying on a business;
- Brokering the purchase, or transfer of real property on behalf of one or more buyers, in the course of carrying on a business; and
- Selling real property in the course of carrying on a real property selling business without the involvement of a Real Estate Agent.
How can my Real Estate or Conveyancing business prepare for these proposed changes?
Australia is on a compressed timeline for the introduction of its expanded AML/CTF commitments, with an expected ‘hard deadline’ around mid-2025.
As time to prepare for proper compliance may be tight, Real Estate Agents and Conveyancers should start to think about the key issues now: Does your business undertake one – or any – of the likely new “designated services”?
- Does your business want to continue to undertake any of the likely new “designated services”? Are there any “designated services” that you could cease, so as to fall outside of the AML/CTF regime?
- What customer / client services do you offer? Are any of these services high risk? Should any of these services been altered or removed from your business?
- What identification and verification information is already collected about your customers and clients? How is it stored? How often is it reviewed?
- What new client on-boarding processes will you need to implement, prior to providing your Real Estate Agency or Conveyancing services?
- How much do you “know” about your customers and clients, and their sources of wealth?
- What screening tools may be available for purchase to help your business comply?
- What processes do you already have in place to identify potentially suspicious activity and transactions?
- What record keeping practices are already in place in your business?
- Who in the business will take the lead to ensure AML/CTF compliance is properly and fully achieved?
How can MK help my business prepare?
Whilst the introduction of the simplified (yet expanded) regime is still being refined, it is likely that the changes will come into effect in early 2025.
The AML/CTF regime is complex and has a lot of policies, procedures and training that will need to be introduced. It is likely that if businesses wait for the certainty of the introduction, the time to prepare relevant documentation and the significant costs involved to comply with the regime may be too significant and the company will be non-compliant by the due date.
As it stands, compliance with the AML/CTF regime has six key obligations:
- Enrol with AUSTRAC
- Develop and maintain an AML/CTF program tailored to your business
- Conduct customer due diligence
- Conduct ongoing customer due diligence
- Report certain transactions and suspicious activity
- Make and keep records.
Contact Macpherson Kelley for assistance with all or any of the following:
- Advice on the steps you can be taking now to prepare for the anticipated changes;
- Foundational AML/CTF training seminars for your business and staff, outlining how the regime is anticipated to apply to Real Estate Agents and Conveyancers;
- Auditing your current products, services, practice and procedures, to ascertain the scope of “designated services”;
- Undertaking a risk assessment of your current business;
- Preparing the drafts of your required AML/CTF policies and Program documents; and
- Providing updates on the AML/CTF changes as they become known.
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Anti-Money Laundering and Counter-Terrorism Financing (AML / CTF) Regime set to apply to the real estate sector
Real estate professionals play a critical role in the financial ecosystem, often dealing with high-value transactions that can be attractive targets for illicit activities. The Australian Government is proposing significant changes to the Anti-Money Laundering and Counter-Terrorism Financing (AML / CTF), which will likely soon include Real Estate Agents and Conveyancers under its regulatory umbrella.
What is the AML / CTF regime?
Each year, billions of dirty dollars are generated from corrupt practices. Australia’s AML / CTF regime establishes a specific regulatory framework for businesses offering specific types of designated products and services, to help prevent money laundering, terrorism financing and other serious financial crimes.
While AML and CTF laws have been in place since 2006, their application and scope are currently undergoing significant proposed changes. These anticipated changes are set to directly impact Real Estate Agents, expanding the obligations and responsibilities within the industry.
What changes are proposed?
The Government has been consulting on two main aspects of the AML / CTF regime, including how to:
- Simplify and modernise the current AML/CTF Rules – to make it easier for all businesses to meet their obligations; and
- Address money laundering and terrorism financing risks in certain professions – proposing that the AML/CTF Rules should be expanded apply to particular industry groups including Real Estate Agents and Conveyancers (being, “tranche 2 entities” along with Accountants and Lawyers).
While these proposals have not yet been finalised and the amending legislation is still pending, the Government is currently seeking feedback on the practical impact on these “tranche 2 entities”.
Why include Real Estate Agents in the AML / CTF regime?
Criminals often buy high-value goods, such as real estate, to launder or conceal illicit funds. Australia has become a prime target for the investment of foreign proceeds of crime in the real estate market due to its perceived ease. Money laundering through real estate can be relatively simple and requires little planning or expertise compared to other methods. Real estate can also be used to conduct illegal activities such as the growing or producing of illicit drugs.
The proposed AML/CTF reforms aim to address these vulnerabilities by introducing a list of “designated services” that Real Estate Agents and Conveyancers perform, which have been identified as posing a significant risk for money laundering and terrorism financing.
What might be the “designated services”?
The proposed “designated services” pertain to “real property” transactions. Under the AML/CTF amendments, “real property” is likely to be broadly defined to include:
- any interest in or right over land;
- a personal right to call for or be granted any interest in or right over land; and/or
- a licence to occupy land or any other contractual right exercisable over or in relation to land.
This expansive definition will cover all types of properties, including residential, commercial, industrial, vacant land, and agricultural properties.
In particular, the proposed designated services to be introduced relevant to Real Estate Agents and Conveyancers include:
- Brokering the sale or transfer of real property on behalf of one or more sellers, in the course of carrying on a business;
- Brokering the purchase, or transfer of real property on behalf of one or more buyers, in the course of carrying on a business; and
- Selling real property in the course of carrying on a real property selling business without the involvement of a Real Estate Agent.
How can my Real Estate or Conveyancing business prepare for these proposed changes?
Australia is on a compressed timeline for the introduction of its expanded AML/CTF commitments, with an expected ‘hard deadline’ around mid-2025.
As time to prepare for proper compliance may be tight, Real Estate Agents and Conveyancers should start to think about the key issues now: Does your business undertake one – or any – of the likely new “designated services”?
- Does your business want to continue to undertake any of the likely new “designated services”? Are there any “designated services” that you could cease, so as to fall outside of the AML/CTF regime?
- What customer / client services do you offer? Are any of these services high risk? Should any of these services been altered or removed from your business?
- What identification and verification information is already collected about your customers and clients? How is it stored? How often is it reviewed?
- What new client on-boarding processes will you need to implement, prior to providing your Real Estate Agency or Conveyancing services?
- How much do you “know” about your customers and clients, and their sources of wealth?
- What screening tools may be available for purchase to help your business comply?
- What processes do you already have in place to identify potentially suspicious activity and transactions?
- What record keeping practices are already in place in your business?
- Who in the business will take the lead to ensure AML/CTF compliance is properly and fully achieved?
How can MK help my business prepare?
Whilst the introduction of the simplified (yet expanded) regime is still being refined, it is likely that the changes will come into effect in early 2025.
The AML/CTF regime is complex and has a lot of policies, procedures and training that will need to be introduced. It is likely that if businesses wait for the certainty of the introduction, the time to prepare relevant documentation and the significant costs involved to comply with the regime may be too significant and the company will be non-compliant by the due date.
As it stands, compliance with the AML/CTF regime has six key obligations:
- Enrol with AUSTRAC
- Develop and maintain an AML/CTF program tailored to your business
- Conduct customer due diligence
- Conduct ongoing customer due diligence
- Report certain transactions and suspicious activity
- Make and keep records.
Contact Macpherson Kelley for assistance with all or any of the following:
- Advice on the steps you can be taking now to prepare for the anticipated changes;
- Foundational AML/CTF training seminars for your business and staff, outlining how the regime is anticipated to apply to Real Estate Agents and Conveyancers;
- Auditing your current products, services, practice and procedures, to ascertain the scope of “designated services”;
- Undertaking a risk assessment of your current business;
- Preparing the drafts of your required AML/CTF policies and Program documents; and
- Providing updates on the AML/CTF changes as they become known.