Real estate designated services
Whether your agency is captured by the AML/CTF Act turns on one question: are you providing a designated service? Here is what counts, what does not, and what needs checking.
Almost every question an agency has about Tranche 2 comes back to this one. Obligations do not attach to being a real estate business, they attach to providing a designated service, and the difference decides whether a particular part of your operation is in scope at all.
Quick check
Select an activity to see where it sits. Marginal cases are marked rather than guessed at, because a tool that answers confidently and wrongly is worse than one that tells you to check.
- Brokering the sale, purchase or transfer of real estate is the designated service at the centre of the real estate reforms.
- The service is captured whichever side of the transaction you act for. Buyer's agents are in scope on the same basis.
- An auction is a sale. The timing of the customer due diligence differs, because the buyer is not known until the hammer falls, but the service itself is captured.
- Still a sale of real estate being brokered by the agency, so the designated service applies.
- AUSTRAC's list of real estate designated services excludes leases of 30 years or less, so ordinary residential leasing sits outside the captured service.
- Managing a property is not brokering its sale, purchase or transfer. Property management on its own is generally not the captured service.
- An appraisal alone does not broker a transaction. If it leads to a listing and a sale, the sale is what brings the obligations.
- The exclusion AUSTRAC publishes is for leases of 30 years or less, so a longer term sits outside that exclusion. Check the designated services list and take advice on the specific arrangement.
- The designated service is defined by the activity rather than the property class, so a brokered sale is the thing to look at. Confirm against AUSTRAC's list for the specific transaction type.
- Whether the real estate component is being brokered as a sale of real estate is the question, and that turns on the structure of the deal. This is one to check rather than assume.
Each verdict restates AUSTRAC's published position on a clear cut activity, from Real estate designated services. Marginal cases are marked “check this one” on purpose rather than guessed at. This is general information, not advice about your agency.
The service at the centre of it
For real estate, the designated service is brokering the sale, purchase or transfer of real estate. That phrasing is doing real work. It is the brokering of a transfer of ownership that matters, not the property, not the client, and not the size of the agency.
“Real estate designated services”
Because capture is per service rather than per business, an agency can be a reporting entity for one part of what it does and not another. The obligations then apply to the captured work.
What is clearly in scope
Listing and selling for a vendor. Acting for a buyer. Auction sales. Off the plan and new development stock. In each case the agency is brokering a transfer of ownership, which is the designated service, and it makes no difference which side of the transaction the agency sits on.
Auctions are captured, with different timing
An auction is a sale, so it is captured. What changes is when the customer due diligence has to be done, because the buyer is not known until the hammer falls. The Act allows initial customer due diligence (CDD) on a buyer to be completed after the exchange of contracts within a defined window.
“You must complete initial CDD 28 days after the exchange of contracts, or at least 3 days before the initially agreed day for settlement (whichever is earliest).”
What sits outside
Ordinary residential leasing is excluded, because AUSTRAC's list carves out leases of 30 years or less. Property management on its own is not brokering a sale. A market appraisal that never leads to a listing has not brokered anything.
What to do with the grey ones
Long leases, commercial transactions with unusual structures, and business sales that carry real property with them are the cases worth checking properly rather than reasoning about from first principles. AUSTRAC publishes the list, and where a transaction does not map cleanly onto it, that is a question for AUSTRAC or your own adviser.
Once you know which work is captured, the next questions are what the program has to contain and how the checks actually get done. Those are covered in the starter kit guide and the Tranche 2 overview.
Common questions
What is a designated service?
A designated service is an activity listed in the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act that brings the business providing it under the Act. Providing one makes you a reporting entity. For real estate the central designated service is brokering the sale, purchase or transfer of real estate.
Is residential property management a designated service?
Managing a property for a landlord is not brokering its sale, purchase or transfer, so property management on its own is generally not the captured service. An agency that does both will be captured through its sales work rather than its management work.
Are residential leases captured?
AUSTRAC's list of real estate designated services excludes leases of 30 years or less, so ordinary residential and commercial leasing sits outside the captured service. A lease longer than 30 years falls outside that exclusion and should be checked against the published list. Note that an agency doing both leasing and sales will still be captured through its sales work, so the exclusion affects which files need due diligence rather than whether the agency needs a program.
Does it matter whether we act for the buyer or the seller?
No. The designated service is brokering the sale, purchase or transfer of real estate, and it is captured whichever side of the transaction you act for. Buyer's agents are in scope on exactly the same basis as selling agents, and an agency acting for a purchaser carries the same customer due diligence, record keeping and reporting obligations as one acting for a vendor.
Our agency only sells commercial property. Are we captured?
The designated service is defined by the activity rather than the class of property, so brokering a sale is the thing to look at rather than whether the property is residential or commercial. Confirm the specific transaction type against AUSTRAC's published list.
General information about the obligations, not legal advice about your agency.
Sources
- AUSTRAC, Real estate designated services.
- AUSTRAC, New reporting regime now in force.
- AUSTRAC, Delayed initial customer due diligence.
- AUSTRAC, Real estate program starter kit: Getting started.