The real estate industry is increasingly being placed in the spotlight for its potential involvement in illicit financial activities such as money laundering and terrorism financing (albeit inadvertently). In response to these growing concerns, the Australian government has significantly reformed its Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regime. These changes are designed to make it harder for criminals to exploit the property market for illegal purposes, and as a result, real estate professionals now face new obligations under the law.
The inclusion of the real estate sector within the scope of the AML/CTF regime from 1 July 2026 means that real estate agents, property developers, conveyancers, and other professionals involved in property transactions must comply with a range of legal obligations aimed at preventing financial crime.
You will need to be prepared prior to 1 July 2026, so this article is aimed at outlining the key reforms to Australia’s AML/CTF regime and the implications these changes have for you and your business in the real estate industry. It explores the legal obligations introduced, the challenges you may face in ensuring compliance, and the opportunities that could arise for your business by implementing effective AML/CTF measures.
Australia’s Anti-Money Laundering and Counter-Terrorism Financing Regime
Australia’s AML/CTF regime is primarily governed by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the Act), which aims to detect and prevent money laundering and terrorism financing activities. The regime is overseen by the Australian Transaction Reports and Analysis Centre (AUSTRAC), which monitors businesses for compliance and investigates suspicious transactions.
Initially, the Act applied mostly to financial institutions like banks. However, over the years, the government has expanded the scope of the regime to include other sectors, including the real estate industry. The expansion was prompted by concerns about the real estate market being used to launder money, especially in high-value transactions and those involving international investors.
The key change directly impacting your industry is the inclusion of real estate professionals – such as agents, property developers, and conveyancers – under the scope of the Act. This means that if you’re involved in property transactions, you now have legal obligations to ensure you’re not facilitating illegal financial activities.
Key reforms to Australia’s AML/CTF Regime
The Australian government’s reforms to the AML/CTF regime introduced several new obligations for real estate professionals. Understanding these changes is essential to ensure that your business complies with the law and avoids potential penalties. Below are the key reforms that you need to be aware of:
Inclusion of real estate professionals in the AML/CTF Regime: The most significant reform is the inclusion of real estate businesses within the scope of the AML/CTF regime. This change means that you are now required to conduct due diligence on your clients and report certain transactions to AUSTRAC. These obligations are outlined in more detail below.
Customer Due Diligence (CDD) Obligations: You now must implement robust customer due diligence (CDD) procedures. These procedures require you to verify the identity of your clients, as well as understand the nature and purpose of the transaction. In some cases, you may also need to verify the source of funds for a transaction, especially when dealing with high-value properties or clients from overseas or high-risk jurisdictions.
You will need to gather and retain information such as the client’s name, address, and date of birth. For businesses or companies, you will need to verify their registration details and ownership structures. If you are unable to confirm the identity or the source of funds for a client, you are prohibited from proceeding with the transaction.
Ongoing Monitoring of Transactions: In addition to performing CDD at the start of a transaction, you are required to continuously monitor the transaction throughout its course. This means you must remain alert to any signs of suspicious behaviour or activity that may suggest money laundering or terrorism financing.
For example, if a client’s behaviour or a transaction appears inconsistent with their known business dealings, you must investigate and, if necessary, report the activity to AUSTRAC. Monitoring also extends to keeping records of the transactions, including any due diligence documentation and reports made to AUSTRAC. This ongoing monitoring helps detect and prevent illicit activities that may emerge later in the transaction process.
Risk-Based Approach to Compliance: The reforms introduce a risk-based approach to compliance. This means you are expected to assess the level of risk associated with each client and transaction and tailor your compliance efforts accordingly. The more complex or high-risk a transaction is, the more thorough your due diligence and monitoring processes should be.
For instance, if you are dealing with a politically exposed person, or if the transaction involves a foreign investor from a high-risk jurisdiction, you will need to apply a higher level of due diligence. This may include more in-depth checks into the client’s background, the source of their funds, and the legitimacy of their financial activities.
Reporting Suspicious Transactions: Real estate professionals are now legally obligated to report suspicious transactions to AUSTRAC. If you become aware of any transactions that appear unusual or inconsistent with your client’s known business activities, you must submit a Suspicious Matter Report (SMR) to AUSTRAC.
For example, if a client offers to pay for a property entirely in cash or refuses to disclose the source of their funds, this could be a red flag. By submitting an SMR, you help prevent the illegal use of the property market for money laundering or terrorism financing.
Failure to report suspicious transactions can result in significant penalties, including hefty fines and reputational damage to your business. Therefore, it is essential that you are vigilant and proactive in identifying suspicious behaviour and reporting it to the authorities.
Record-Keeping Requirements: You are also required to keep detailed records of all customer due diligence activities and any suspicious transactions. These records must be retained for a minimum of seven years and made available to AUSTRAC upon request. This includes documentation of the verification of clients’ identities, as well as any reports submitted to AUSTRAC.
Maintaining comprehensive and accurate records ensures that you can demonstrate compliance with the AML/CTF regime if required by regulatory authorities. Additionally, it can help your business manage any potential audit or review processes that may arise.
Implications for real estate professionals
The reforms to the AML/CTF regime have significant implications for real estate professionals. While the primary aim of these changes is to combat money laundering and terrorism financing, they also introduce a range of new challenges and responsibilities. We outline some of the key implications for you and your business below:
Increased Compliance Burden: The new obligations will increase the compliance burden on your business. You must now allocate time, resources, and budget to ensure that you have the necessary systems and processes in place to meet the requirements. This includes establishing or upgrading your customer due diligence processes, implementing transaction monitoring systems, and training your staff to recognise suspicious activity.
For smaller firms, these new responsibilities may seem daunting. However, larger firms and agencies may also face challenges in integrating these processes across their various locations and departments.
Operational Challenges: As part of the reforms, you must conduct more detailed checks and monitor transactions throughout the process. This will require a more thorough understanding of your clients and may slow down the transaction process, especially if you encounter high-risk clients or complex transactions.
You may face challenges in ensuring that all transactions are fully compliant with the new regulations. Balancing regulatory obligations with the fast-paced nature of the real estate industry may require you to adopt new technologies or workflows to ensure smooth operations.
Reputational Risks: Failure to comply with the new AML/CTF obligations can result in reputational damage to your business. If your business is found to have facilitated money laundering or terrorism financing, even unintentionally, you could face serious consequences. On top of a damaged reputation, this could also lead to a loss of clients and/or legal penalties.
It is therefore essential that you implement a strong compliance culture within your business, ensuring that all staff members understand their obligations and are diligent in identifying and reporting suspicious activity.
Opportunities for Competitive Advantage: While the reforms introduce new challenges, they also create opportunities for real estate professionals who are proactive in meeting their AML/CTF obligations. By adopting a strong compliance culture and ensuring that your business is fully aligned with the new regulations, you can position yourself as a trustworthy and secure option for clients.
Clients, particularly international investors, high-net-worth individuals, and institutions, are increasingly seeking businesses with strong compliance credentials. Demonstrating that your agency adheres to AML/CTF requirements can differentiate you from competitors and enhance your reputation as a reliable, law-abiding partner in property transactions.
Collaboration with Regulators: The reforms also encourage closer collaboration between real estate professionals and regulatory authorities, such as AUSTRAC. By maintaining an open dialogue with regulators and staying informed about emerging trends in money laundering and terrorism financing, you can ensure that your business is always one step ahead of potential risks.
What should you do?
Real estate professionals will commence being regulated by AUSTRAC from 1 July 2026. Changes to your business take time to implement, therefore you need to start now so that your business is compliant once the new laws take effect.
While these changes create new compliance obligations and operational challenges, they also present opportunities to differentiate your business in an increasingly regulated market. By implementing robust AML/CTF measures and ensuring that your staff are properly trained and informed, you can not only meet your legal obligations but also enhance your reputation and secure a competitive advantage.
As the real estate industry continues to evolve under the pressure of greater regulatory scrutiny, it is essential that you stay ahead of the curve. By adopting a proactive approach to AML/CTF compliance, you will help combat financial crime while maintaining your integrity and the trust of your clients.
How can we help you?
Paradise Charnock Hing can help ensure your business is compliant with the new legislation. Do not wait until it is too late, prepare your business to be compliant now so that you are ahead of your competitors and your business is compliant long before regulation by AUSTRAC commences.
We offer a range of services including reviewing your current procedures and advising on any changes required, assisting with implementation of new procedures or amending your current practices, presentations or training for your staff, and general advice on the new legislation.
Contact Eric Cabrera at eric.cabrera@pch.law to arrange an obligation free call to discuss how we can assist.