AML/CTF Law Amendments: New Obligations for Australian Real Estate Agents

The Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (Cth) (Bill) was introduced into Parliament in September 2024. When enacted, it will amend the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act). Those amendments cover several things, including new federal regulatory requirements to be satisfied by real estate agents under the AML/CTF Act.  These requirements are detailed and demanding. Real estate agents face a real risk of penalties if they fail to comply with those requirements when enacted.

Why are AML/CTF obligations being extended to real estate agents?

The Australian Federal Attorney-General’s Department Consultation Paper ‘Reforming Australia’s anti-money laundering and counter-terrorism financing regime – Paper 1: Further information for real estate professionals – May 2024’ notes that:

‘Real estate professionals are the front door to buying and selling property. Real estate professionals have a different relationship with purchasers and sellers to other parties involved in a property transaction and can provide unique insights. For example, real estate professionals are well-placed to know if the client:

• is located inexplicably far away from the property being purchased
• purchases property without viewing it
• shows little interest in price
• appears to be acting under the instruction of a controlling third party
• pays a large deposit in cash and the balance is financed by an unusual source, or
• alters a transaction after being asked for further information.’

In other words, besides providing a “high risk” service capable of being used for money laundering and terrorism finance purposes, real estate agents are often well placed to detect suspicious real estate transactions.

What are the proposed changes affecting real estate agents?

Under the Bill, it is proposed that any person or company engaged in “brokering the sale, purchase or transfer of real estate on behalf of a buyer, seller, transferee or transferor in the course of carrying on a business” will be a ‘reporting entity’ under the AML/CTF Act. The definition is not limited to licensed real estate agents. Instead, it would cover any person or entity engaged in these activities.

Broadly, a real estate agent (who, by definition, will be engaged in these activities) must:

• enrol as a ‘reporting entity’ with AUSTRAC, the regulator under the AML/CTF Act;
• lodge annual returns with AUSTRAC;
• have and comply with an AML/CTF program, comprised of an AML/CTF risk assessment and AML/CTF policies (this will require the real estate agent to assess, understand, manage and mitigate money laundering, terrorism financing and proliferation financing risks associated with providing its services to a customer);
• undertake customer due diligence, including the initial verification of the identity of a prospective customer (there is a due diligence component too, involving identifying the ultimate beneficial owner of customers which are not individuals, as well as checking whether individual customers are ‘politically exposed persons’ and undertaking additional due diligence if they are);
• comply with suspicious matter reporting and ongoing customer due diligence requirements;
• comply with record-keeping requirements; and
• comply with various other obligations under the AML/CTF Act.

What’s next?

The Bill has been referred to the Senate Standing Committee on Constitutional and Legal Affairs which is accepting submissions until 14 October 2024.

In the meantime, the Senate Standing Committee for the Scrutiny of Bills has expressed some specific concerns about aspects of the Bill (see Scrutiny Digest 12 of 2024).  Additionally, the Federal Opposition has expressed more general concerns about the Bill.

Nonetheless, it appears to us that there is a realistic prospect that changes affecting real estate agents will be implemented in the first half of 2026.

Real estate agents who are franchisees under a franchise arrangement may be able to obtain AML/CTF compliance assistance from their franchisors. This is because the amended AML/CTF Act will allow for a ‘lead entity’ to develop and maintain an AML/CTF program which is established for the entire reporting group, rather than have each member within the reporting group create their own AML/CTF program. The way in which the ‘lead entity’ mechanism will work in the real estate agency context will most likely be subject to more detailed rules to be contained in revised AML/CTF rules. Those revised rules have yet to be released.

If you have questions or require our assistance, please contact our project team, comprised of AML/CTF subject matter specialists as well as practitioners with several years’ experience in real estate agency law and practice.

Queries

If you have any questions about this article, please get in touch with an author or any member of our AML/CTF real estate agency project team.

Disclaimer

This information is general in nature. It is intended to express the state of affairs as of the date of publication. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.