In a recent development impacting the real estate sector, the Australian government is considering reforms to the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act that would significantly involve real estate agents, lawyers, and accountants in identifying and reporting potential money laundering activities. This move comes as part of a broader initiative to enhance the nation’s defences against financial crimes.
The proposed reforms, driven by Attorney-General Mark Dreyfus, are set against the backdrop of increasing international pressure, particularly from the Financial Action Task Force (FATF). The FATF has identified Australia as one of the few countries yet to regulate entities under the second tranche of its AML/CTF regulations. This gap has reportedly made Australia a favourable destination for illicit funds, with the real estate market being a particularly attractive channel for money laundering.
Under the new regulations, professionals in the real estate industry would be required to take on more rigorous duties in verifying the identities of their clients, ensuring the legitimacy of their funds, and reporting any suspicious transactions. Such measures are seen as essential to close loopholes that currently leave Australia’s financial system vulnerable to criminal exploitation.
One of the key components of the reform is the introduction of a beneficial ownership register. This register is intended to increase transparency around the ultimate ownership of properties, particularly in the high-end real estate market. The expectation is that this register will aid professionals in better understanding their clientele and in ensuring that they are not inadvertently facilitating financial crimes.
The real estate industry has expressed concerns about the potential cost implications of these reforms. Industry leaders like Ken Jacobs of Forbes Global Properties have acknowledged the necessity of knowing client backgrounds but also highlighted that such responsibilities typically fall under government purview.
The first tranche of the Anti-Money Laundering and Counter-Terrorism Financing Act, introduced in 2006, primarily covered financial institutions, some lawyers, and gambling authorities. The expansion to include real estate agents and other professionals marks a significant broadening of the law’s scope, increasing the number of businesses regulated by AUSTRAC from approximately 17,000 to 100,000.
This move has been met with some trepidation within the industry. Tim McKibbin, CEO of the Real Estate Institute of NSW, pointed out that similar reforms in New Zealand required real estate agencies to hire additional staff to meet compliance obligations, adding substantial costs to the business. While acknowledging the benefits of a safer financial environment, he emphasised the need for dialogue with the government on the implementation of these reforms.
The Real Estate Institute of Australia echoed these concerns, noting the significant financial impact experienced by New Zealand agencies in implementing these measures, with costs ranging between $30,000 to $100,000 per agency.
The Australian Federal Police, in a submission to a Senate hearing, highlighted the scale of the issue, revealing that a considerable portion of the assets seized in the 2021 financial year were real estate properties. This underscores the urgency of addressing money laundering risks in the sector.
The government’s consultation process for these proposed reforms is currently underway, with submissions open until mid-June. As the industry grapples with these potential changes, the role of real estate agents, lawyers, and accountants in safeguarding Australia’s financial system against money laundering and terrorism financing is being redefined, marking a significant shift in the responsibilities and operational landscape for these professionals.