What real estate services may be covered by AML/CTF obligations?
Based on the International Standards and equivalent activity in other countries, the following services offered by the real estate industry will be included as designated services under the AML/CTF Act:
- Engaging in activity that involves the transfer of a beneficial interest in land or other real property;
- Managing client funds (other than sums paid as fees for professional services) or other assets; or
- Engaging in or giving instructions on behalf of a customer to another person for any conveyancing to affect the grant, sale, or purchase or any other disposal or acquisition of real estate or an interest in land.
If your business offers or provides one or more of the above services, your business will be subject to AML/CTF obligations.
Why will real estate have AML/CTF obligations?
- Real estate can be an attractive channel for criminals wishing to launder illicit funds.
- Criminals can purchase a property using illicit funds, live in the property purchased with illicit funds, renovate the property (using illicit funds) to improve its value and sell the property later for a capital gain.
- The ultimate beneficial ownership of real estate can also be easily concealed, making it an attractive asset class for criminals.
Risks faced by the real estate industry
Aspects of the services offered by the real estate industry have been identified as being attractive to criminals wanting to launder the proceeds of crime and to finance terrorism. The Money Laundering and Terrorist Financing (ML/TF) risks associated with the real estate sector include:
- The use of third parties to buy and sell properties;
- Manipulating property values (that is, criminals buy and sell real estate at a price above or below market value);
- Structuring cash deposits to buy real estate;
- The use of complex company structures and multiple accounts to disguise the real purpose of a property transaction and disguise the true ownership;
- Buying and leasing properties, but providing the tenant with illicit funds to pay the rents;
- Buying a property using illicit funds with the intention of conducting further criminal activity at the property; and
- Using illicit funds to renovate properties.
Businesses within the real estate industry that the AML/CTF Act will capture must ensure they conduct a comprehensive ML/TF risk assessment to identify, assess, mitigate, and manage ML/TF risk exposures. This is a critical first step in complying with the AML/CTF Act and AML/CTF Rules by 1 July 2026.
What are the types of activities AML/CTF compliance requires?
AML/CTF compliance in Australia involves several core activities that help businesses mitigate risks associated with money laundering and terrorism financing:
- Assessing exposure to potential AML/CTF risks, considering factors like customer types, transaction types, and geographical areas. This step is foundational to tailoring AML/CTF measures to the specific risks relevant to each business.
- Customer Due Diligence (CDD) to verify a customer's identity before establishing a business relationship. High-risk clients or transactions may require Enhanced Due Diligence (EDD).
- Regularly monitor customer transactions to identify potentially suspicious activities, including keeping track of customer profiles, understanding transaction patterns, and detecting unusual or high-risk activities that might indicate money laundering or terrorism financing.
- Submit reports on specific types of transactions to AUSTRAC, including Suspicious Matter Reports (SMRs), International Funds Transfer Instruction (IFTI) reports (where relevant), and Threshold Transaction Reports (TTRs) for cash transactions of AUD 10,000 or more
- Businesses must maintain records of all due diligence, transaction reports, and relevant correspondence for at least seven years. This supports transparency and allows authorities to review historical data if required.
- Businesses are required to develop, implement, and regularly update an AML/CTF program. This program outlines the specific controls and procedures the business will use to manage and mitigate money laundering and terrorism financing risks.
- Regular training on AML/CTF compliance for employees ensures they know their obligations and understand how to identify and report suspicious transactions.
