Tranche 2 for real estate agents

Tranche 2 is the shorthand for the long delayed second stage of Australia's anti-money laundering and counter-terrorism financing (AML/CTF) regime. The first tranche covered banks, casinos and remitters. The second extends the same framework to professions that handle large value transactions without being financial institutions, and real estate agencies are the largest group in it.

The reforms are set out in the AML/CTF Amendment Act, and the new reporting regime is now in force.

What actually changed

Before the reforms a real estate agency had no obligations under the AML/CTF Act. After it, an agency that provides a designated service is a reporting entity, with the same core duties as any other reporting entity: know who your customer is, keep records that prove it, and tell AUSTRAC when something looks wrong.

The practical effect is that compliance stops being a policy document and starts being something an agency does on every deal, for every party to it.

Which agencies are captured

Capture turns on the designated service, not on the size of the agency. If your business brokers the sale, purchase or transfer of real estate, you are providing a designated service. A one person agency and a multi office network are both in scope, and being small does not exempt you.

The boundaries matter, because not everything an agency does is captured. AUSTRAC's list of real estate designated services excludes some activity, including leases of 30 years or less. Property management, on its own, is generally not the captured service.

The obligations an agency now carries

Enrol with AUSTRAC

AUSTRAC opened enrolment for the new professions ahead of commencement and set a deadline for newly regulated businesses. Enrolment is a short form covering the business, the designated services it provides and its compliance officer. It is separate from the AML/CTF program, and an agency needs both.

Have an AML/CTF program

The program is the document that says how your agency identifies and manages its money laundering risk: who you check, how you check them, what raises the level of scrutiny, who is responsible, and how staff are trained. AUSTRAC publishes starter kits by sector to give agencies a base to work from rather than a blank page.

Do customer due diligence

Before providing a designated service you have to know who you are dealing with. Real estate has its own timing rule, because a sale does not wait for paperwork. Initial customer due diligence (CDD) on a buyer can be completed after the exchange of contracts within a defined window rather than up front.

Keep the records

Verification is only worth what you can later prove. Records of customer due diligence have to be kept for seven years from the end of the business relationship, which means the evidence has to outlive the deal, the staff member and often the software it was collected in.

Report

Reporting entities submit suspicious matter reports when they form a suspicion, and threshold transaction reports for cash at or above the reporting threshold. Reporting is an obligation in its own right and sits alongside, not instead of, the due diligence work.

Why real estate was included

Property is a stable, high value, appreciating asset in a market with a lot of legitimate volume to hide in, which is exactly what makes it useful to someone moving illicit funds. AUSTRAC assesses the sector accordingly and publishes indicators of suspicious activity written for real estate specifically.

What to do if you have not started

The obligations are already live, so the useful question is not whether you are behind but what to do first. Enrol, because it is quick and the deadline has passed. Then get a program in place using the starter kit as a base. Then make the verification itself routine, because it is the part that happens on every deal and it is where an agency either builds an audit trail or does not.

If it helps to see what that looks like in practice, our guide to the AUSTRAC real estate starter kit walks through what the kit contains and what it leaves for you to decide.

Common questions

General information about the obligations, not legal advice about your agency.