Table of Contents
Key Highlights
- Australia’s real estate sector will soon fall under Tranche 2 of the AML/CTF regime, making real estate agents reporting entities.
- New compliance obligations include developing an AML/CTF program, conducting customer due diligence (CDD), and assessing risks.
- The primary goal is to prevent financial crime, such as money laundering and terrorism financing, through property transactions.
- Key dates are approaching, with enrolment opening in March 2026 and obligations commencing in July 2026.
- Robust record keeping and ongoing staff training are core obligations for all real estate professionals.
- Adopting effective AML solutions is essential for navigating the new CTF framework and protecting your business.
Introduction
The Australian real estate sector is approaching a major regulatory overhaul. With the introduction of Tranche 2 reforms, the federal government is extending anti-money laundering and counter-terrorism financing (AML/CTF) laws to cover real estate professionals. This change acknowledges the high risk of property transactions being used for financial crime. For real estate agents and property developers, this means new compliance obligations are on the horizon. Understanding these changes is crucial for protecting your business and the integrity of the financial system in the coming months.
Essential Steps for Navigating Tranche 2 Compliance in Real Estate
Preparing for the upcoming Tranche 2 reforms is vital for every real estate agent and agency. These new obligations are designed to close regulatory gaps and align Australia with the standards set by the Financial Action Task Force. Navigating this new landscape requires a clear understanding of your responsibilities as a new reporting entity.
To ensure you are ready, you must follow a series of steps to build a compliant framework. This includes understanding your specific CTF obligations, registering your business, developing a risk-based compliance program, and training your staff. The following sections will guide you through these core obligations.
1. Understanding the Expanded AML/CTF Obligations for Real Estate Professionals
The extension of AML/CTF laws to the real estate sector is a direct response to the high risk of financial crime. Property transactions can involve large sums of money, making them an attractive channel for laundering illicit funds. It is important to note that this is not an implication that real estate professionals are facilitating crime, but rather a measure to protect the industry from exploitation.
As a real estate professional, you will soon be considered a provider of a “designated service.” This new status comes with legally binding compliance obligations designed to help you identify, mitigate, and report potential financial crime. Your role will become a crucial line of defence in the national effort against money laundering and terrorism financing. Understanding AML compliance for real estate will be essential to ensure you’re meeting these responsibilities and safeguarding both your business and the broader industry.
Your core CTF obligations will include:
- Verifying the identities of your clients.
- Assessing the risks associated with each transaction.
- Reporting suspicious activities to the relevant authorities.
- Establishing and maintaining an internal AML/CTF program.
2. Registering Your Business as a Reporting Entity
Under the Tranche 2 reforms, your real estate agency will be designated as a “reporting entity.” This means you have a legal requirement to enrol with the Australian Transaction Reports and Analysis Centre (AUSTRAC), the country’s financial intelligence agency. Enrolment is a critical first step in meeting your new compliance obligations.
The timeline for this is firm. Enrolment for the real estate sector opens on 31 March 2026, and the new AML/CTF obligations will officially commence on 1 July 2026. As a reporting entity, your agency will be subject to a set of core obligations that fundamentally change how you manage transactions and client relationships.
3. Developing and Maintaining an Internal AML/CTF Program
A central requirement of the new CTF regime is the development and implementation of an internal AML/CTF program. This program is not a generic document; it must be a tailored framework that identifies and manages the specific financial crime risks your real estate agency faces. It serves as your roadmap for compliance.
Your AML/CTF program must be a living document, regularly reviewed and updated to reflect changes in your business or the regulatory environment. It needs to be approved by your governing body and championed by senior management to ensure it is embedded in your agency’s culture.
Key components of a robust AML program include:
- A detailed risk assessment of your business operations.
- Clear policies and procedures for customer due diligence.
- A governance structure, including the appointment of an AML/CTF compliance officer.
- A plan for ongoing staff training.
4. Conducting Comprehensive Customer Due Diligence (CDD)
Customer Due Diligence (CDD), often called “Know Your Customer” (KYC), is a cornerstone of your new AML compliance obligations. Before providing any designated service, you must take steps to be reasonably satisfied that your clients are who they claim to be. This is a crucial step in preventing illicit funds from entering the property market.
The process involves collecting and verifying key information, such as a client’s full name, residential address, and date of birth, using reliable and independent sources. A significant advocacy win for the industry means that for buyers, this initial CDD can be deferred until settlement, which is a more pragmatic point in the transaction.
Your CDD process must be documented and should include:
- Verifying the identity of all parties to a transaction.
- Understanding and, in high-risk situations, verifying the client’s source of funds and source of wealth.
- Implementing ongoing CDD to monitor transactions throughout your business relationship.
5. Identifying and Verifying Beneficial Ownership in Property Transactions
Criminals often use complex legal structures like companies and trusts to obscure their identities when conducting real estate transactions. Your due diligence obligations extend beyond the client in front of you to uncover the “beneficial owner”—the individual who ultimately owns or controls the entity. A beneficial owner is typically defined as someone who owns 25% or more of an entity or exercises significant control.
To identify beneficial owners, you must take reasonable measures to peel back the layers of ownership. This involves asking your client for their ownership structure and then independently verifying this information. This can be done by reviewing documents such as an ASIC company search or a certified copy of a trust deed.
This process is critical for:
- Preventing illicit funds from being hidden in property.
- Ensuring you meet your CTF obligations and protect your agency from being exploited for financial crime.
- If no individual owns 25% or more, you must identify the senior managing official, such as the CEO.
6. Monitoring and Reporting Suspicious Transactions
As a reporting entity, you will have a legal duty to monitor for and report suspicious activities to AUSTRAC. A suspicious matter is one where you have reasonable grounds to suspect it may be related to a criminal offence, tax evasion, or terrorism financing. This obligation applies even if a transaction is only attempted and not completed.
Your staff training must equip your team to recognise the indicators of suspicious activity. The CTF rules are strict on reporting timelines; you must report suspicions of terrorism financing within 24 hours and other suspicious matters within three business days. This reporting provides law enforcement with vital intelligence.
Indicators of suspicious activity to watch for include:
- A client’s reluctance to provide identification or information.
- Transactions involving large amounts of physical cash.
- Use of complex or opaque ownership structures.
- A lack of concern about the property’s price or condition.
7. Implementing Ongoing Staff Training and Governance
AML compliance is a team effort that cannot be handled by one person alone. Effective governance and ongoing staff training are essential to embedding your CTF program into your agency’s daily operations. This starts with appointing a dedicated AML/CTF compliance officer who is responsible for overseeing the program.
All staff involved in property transactions must be trained to understand their roles and responsibilities under the new CTF rules. This training is not a one-off event; it should be conducted regularly to keep your team updated on your agency’s policies and evolving financial crime risks. AUSTRAC provides e-learning materials that can support your training efforts.
Your training program should cover:
- How to conduct customer due diligence.
- How to identify and escalate red flags or indicators of suspicious activity.
- Your agency’s internal reporting procedures and risk management framework.
8. Maintaining Accurate Records and Documentation
Accurate and thorough record keeping is a fundamental compliance obligation. You must maintain records of all AML/CTF-related activities for at least seven years after a business relationship has ended. This documentation is your proof of compliance and will be essential if your agency is ever audited by AUSTRAC.
Failing to keep adequate records is a serious breach of the CTF rules and can result in significant penalties. Your records must be sufficient to reconstruct property transactions and demonstrate the steps you took to verify client identities, assess risk, and monitor for suspicious behaviour.
You must securely retain records of:
- All customer identification and verification documents.
- All transactions, including information on the source of funds and the source of wealth, where applicable.
9. Adapting to Regulatory Changes Impacting Real Estate in 2025 and 2026
The AML/CTF regime is not static, and the real estate sector must be prepared to adapt as CTF reforms are finalised. The federal government is releasing guidance in stages, with core guidance expected in October 2025 and sector-specific guidance for real estate in December 2025. Staying informed on these developments is critical.
It is important to understand the difference between the two main types of regulatory documents. The AML/CTF Rules are legally binding obligations that you must follow. In contrast, Core Guidance is non-binding practical advice that helps you implement your obligations and can demonstrate a genuine attempt to comply with the law.
To prepare for the coming months, you should:
- Monitor announcements from AUSTRAC and the Attorney-General’s Department.
- Engage with industry bodies to stay updated on how the new CTF laws will be implemented.
Conclusion
Navigating Tranche 2 compliance in real estate is essential for maintaining the integrity of the industry and ensuring that all parties operate within legal frameworks. By understanding expanded AML/CTF obligations, developing internal programs, and implementing robust customer due diligence processes, real estate professionals can significantly mitigate risks associated with money laundering and terrorism financing. Staying ahead of regulatory changes will not only protect your business but also enhance your reputation as a trustworthy entity in the market. As we move forward, prioritising compliance and ethical practices will benefit both your organisation and the greater community. For tailored advice on how to enhance your compliance strategies, consider booking a free consultation with our experts today.
Frequently Asked Questions
What are the key penalties for real estate agencies that fail to comply with AML laws?
Failure to comply with AML/CTF laws can lead to severe penalties for real estate agencies. These can include substantial financial fines, with AUSTRAC able to impose penalties of up to $2.2 million or more for businesses, reputational damage, and, in serious cases, potential criminal liability for individuals.
How can property professionals best prepare for new AML/CTF obligations?
Property professionals can best prepare by starting now. Begin by understanding the new rules, planning for the development of a tailored AML/CTF program, and scheduling ongoing staff training. Seeking guidance from compliance experts can also help ensure your agency is ready for the July 2026 commencement date.
Which real estate transactions are considered high-risk under Tranche 2 regulations?
High-risk transactions include those involving large amounts of cash, complex or opaque ownership structures, or funds from high-risk jurisdictions. Transactions with Politically Exposed Persons (PEPs) or where the client is unusually secretive are also considered higher risk for money laundering and terrorism financing.