Reforms to Australia’s anti-money laundering and counter-terrorism financing regime: impact on the real estate, legal and accounting professions

After years of review and consultation, the Australian Parliament passed, and Royal Assent was given, to the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 (Cth) (AML/CTF Amendment Act) on 10 December 2024.

Although these reforms are scheduled to take effect from March 2026, rather than March 2025 (as initially proposed), they introduce significant obligations for both current reporting entities and those not previously captured by the regime, including the real estate, legal and accounting professions, which require significant action ahead of the commencement of the regime. Significant penalties apply for non-compliance, so it is critical for businesses in these sectors to be prepared.

Snapshot - what will change for you?

Following our previous article in September 2024, amendments were proposed by the Senate. In summary, the AML/CTF Amendment Act, as passed, seeks to:

• expand regulation to professions such as real estate professionals, lawyers, accountants, precious metal and stone brokers, conveyancers and other trust and corporate service providers, deemed to be high risk for money laundering and terrorism financing; 
• subject the high-risk professions to supervision by the Australian Transaction Reports and Analysis Centre (AUSTRAC), which enforces Australia’s anti-money laundering compliance laws;
• require reporting entities to produce and maintain policies with reference to a risk assessment of the respective industry in order to reduce money laundering and terrorism financing. These policies are to be implemented and adjusted by an AML/CTF Compliance Officer within the entity (AMLCO), rather than seeking regulatory approval, in order to remain dynamic and responsive to changing risks;
• modernise the existing regulatory regime to account for modern assets and business practice;
• necessitate due diligence from reporting entities in identifying and verifying their customers. This requires a holistic consideration of key factors such as the service being provided, the nature of the customer, the country where the transaction is occurring, and any other risk-based considerations that these professions must now follow. Where risk of money laundering or terrorism financing is deemed to be high, enhanced customer due diligence will be required; and
• empower AUSTRAC to obtain information and enforce civil penalties on entities that fail to meet their obligations, which includes changes to the ‘tipping off’ offence where reporting entities are obligated to not interfere or act when their actions would, or could, prejudice an investigation into suspicious conduct. The Senate amendments have moved the commencement of the ‘tipping-off’ offence to 31 March 2025. 

Summary of the AML/CTF Amendment Act as passed – what reporting entities will be required to implement

AMLCO

Reporting entities will need to designate an AMLCO whose appointment will be notified to AUSTRAC within 14 days. This individual must be appropriately independent and have sufficient authority and resources to design and implement policies in response to the risk of money laundering and financing terrorism. Further, this person must be a fit and proper person and an Australian resident in instances where the reporting entity provides designated services within Australia. 

Customer due diligence

The AML/CTF Amendment Act requires reporting entities to conduct initial and ongoing customer due diligence and identification. The extent of this assessment, as previously stated, will require a multi-factorial analysis of considerations such as the service being provided, the nature of the customer, the country where the transaction is occurring, and any other risk-based considerations that are industry specific. 

Enhanced customer due diligence will be required if any of the following triggers are met: 

• the customer's ML/TF risk is high;
• a designated service is provided to a customer or beneficial owner who is a politically exposed person (or PEP);
• a suspicious matter report has been lodged about the customer;
• a reporting entity proposes to enter into a transaction with a party physically present in a prescribed foreign country (currently Iran and North Korea);
• a customer, beneficial owner or any person on whose behalf the customer is receiving the designated service is an individual, body corporate or legal arrangement physically present or formed in a high-risk jurisdiction which the Financial Action Task Force has advised enhanced due diligence;
• customers who are provided designated services are part of a “nested services relationship”; or
• the customer is of a kind specified in the AML/CTF Rules. 

'Tipping off'

Commencing on 31 March 2026, it will be an offence for reporting entities to intentionally or inadvertently inform any party under suspicion that there is an ongoing AUSTRAC investigation. This civil penalty will only be applicable where the ‘tipping-off’ would, or could, reasonably be expected to, prejudice an investigation by a governmental authority. This is subject to the exception of good faith by which a reporting entity is expected to inform, in order to dissuade, a customer of any illegal conduct that could constitute an offence. Further exemptions include sharing information with a reporting group or in the context of a merger or acquisition. 

Reporting group

As discussed in our previous article, the AML/CTF Amendment Act replaces the existing concept of “designated business group” with a “reporting group”. The Senate has amended the definition so that, to be considered a reporting group, an organisation must align with the respective conditions specified by the AML/CTF Rules in relation to changes in membership dissolution, administration or general operation.

AML/CTF policy

Further, the AML/CTF Amendment Act continues to require that reporting entities maintain policies in reducing the risk of money laundering, financing terrorism or proliferation financing. Any attempt to provide a designated service without such policy maintenance may result in a contravention of the AML/CTF laws and give rise to significant civil penalties. These policies should be reasonably adjusted to the practice of the entity and reflect the services that are conducted in the scope of their regular business.

Persons

The Senate also clarified the definitions of persons subject to the AML/CTF laws, being:

• officers, employees or agents of reporting entities; 
• members of a reporting group;
• officers, employees, or agents of a member of a reporting group; or 
• required by a notice from AUSTRAC to provide information and relevant documents.

Designated service

The definition of “designated service” has been amended to exclude barristers operating under the instructions of solicitors even if the work is in connection to a designated service performed by a solicitor or law firm. 

The AML/CTF Amendment Act continues to exempt from disclosure, communications that are properly subject to legal professional privilege (LPP). Any party claiming LPP will need to complete an AUSTRAC LPP form which outlines the facts said to justify the claim, without disclosing the substance of the legal advice. Where any dispute arises on a claim of LPP, it is likely to be resolved by the courts. How this will operate in practice, however, remains to be seen.

Real estate sector

Transactions in the real estate sector have been, for some years, regarded by AUSTRAC and international organisations as high risk and, in the absence of compliance and reporting obligations, seen as a conduit for the illicit flow of funds.

The AML/CTF Amendment Act extends application of the regime to certain services provided by real estate professionals who conduct the buying and selling of real estate.

Relevantly for those in this sector, the following designated services will be captured under the new regime:

In relation to these new designated services, they are designed to capture not only those who act on behalf of a buyer or seller of real estate as a “broker”, but a transaction where an independent real estate agent is not used and to include property developers. While they are not perfectly expressed, we expect AUSTRAC may provide some further guidance when it publishes its updated Rules.

'Real estate' will be defined as:

1. any of the following interests in land (including a subdivision arrangement, such as strata) in Australia:
   1.  a fee simple interest;
   2. a leasehold interest;
   3. a land use entitlement (i.e. rights to occupy land through ownership of shares or units in a trust, or a combination of either with a lease or licence)
2. an interest, estate, right or entitlement in land in a foreign country that:
   1. is equivalent to an interest mentioned in paragraph (a); or 
   2. otherwise confers ownership rights on the holder of that interest, estate; right or entitlement; or  
3. an interest prescribed by the regulations;  

but does not include the following:

1. incorporeal hereditaments
2. the interest of a mortgagee (but not a charge); and
3. a leasehold interest under a lease for a term (excluding options for further terms) of 30 years or less. 

Given the above definition of real estate, ordinary commercial leasing and residential tenancy agreements are excluded from regulation under the new regime (provided that the lease term is less than 30 years).

The amendments have been the product, in part, of extensive consultation by AUSTRAC with the Property Council of Australia. The practicalities of implementing such a prescriptive regime in the real estate sector where, for instance, the identity of a beneficial owner (for example, a special purpose vehicle) may not be established at the commencement of the matter will be subject to AUSTRAC guidance prior to the commencement of the provisions. In our experience, once the identity of a beneficial owner is known, then the AML/CTF obligations will be triggered, and the appropriate identification and verification steps will need to be completed before the transaction (or designated service) is consummated.

Next steps

Fundamentally, businesses who are now and who are newly designated as reporting entities such as those in the legal, real estate and accounting professions, should first determine whether their operations fulfil the criteria as a reporting entity. If the answer is yes, each entity will need to consider:

• enrolling with AUSTRAC;
• developing a policy and program consistent with the AML/CTF laws;
• appointing an AML compliance officer; 
• developing a due diligence policy for initial and ongoing transactions with customers;
• developing due diligence policy for initial and ongoing transactions with new and existing employees;
• undertaking training of all employees;
• establishing internal controls to monitor all ongoing transactions and to report unusual or suspicious transactions; and
• being vigilant about producing and maintaining records. 

The majority of the implications of this legislation will not come into effect until March 2026. AUSTRAC is expected to produce amended Rules and guidance regarding how these reforms will affect entities, both already reporting to AUSTRAC and those who will now be subject to the regime under the AML/CTF Amendment Act.