The Australian real estate sector is undergoing its most significant regulatory shift in decades. The Tranche Two AML/CTF reforms expand compliance obligations to include real estate agents, agencies, and head offices, requiring them to implement Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) controls.

From 1 July 2026, businesses in the sector will need to comply with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) laws, requiring:

  • Customer Due Diligence (CDD) – Verifying client identities and assessing risk.
  • Transaction Monitoring – Detecting unusual financial activity.
  • Suspicious Activity Reporting – Submitting reports to AUSTRAC for any suspicious transactions.

This guide provides practical steps for compliance, differentiating responsibilities between head offices and individual agents, and outlining what businesses should do now to prepare for a seamless transition.

The Growing Threat of Money Laundering in Australia

Money laundering and terrorism financing present escalating threats to Australia’s economy and national security. Criminal networks use real estate to launder illicit funds, often through offshore transactions, anonymous ownership structures, and cash purchases.

Why Real Estate Is a Key Focus for AML Regulation

Real estate has long been a target for criminals looking to launder illicit funds due to:

  • High-value transactions – A convenient way to park large sums of illegal money.
  • Complex ownership structures – Offshore companies, trusts, and third-party purchases that obscure true ownership.
  • Cash-heavy transactions – Avoiding banking scrutiny by purchasing property in cash.
  • Lack of historical AML regulation – Unlike financial institutions, real estate professionals have not been subject to AML laws.

Globally, Governments are implementing stricter AML regulations for real estate to align with FATF (Financial Action Task Force) standards and combat organised crime.

How Criminals Exploit Real Estate for Money Laundering

Criminal networks launder money through real estate using various techniques that obscure the origin of illicit funds. These methods have been widely reported across multiple countries, highlighting the global scale of the issue.

Common Techniques & Global Cases

💰 Luxury Property Laundering

  • Criminals purchase high-end properties in major cities to store illicit funds.
  • Example: In Canada, an investigation into Vancouver’s luxury property market found that billions of dollars in illicit funds were laundered through real estate, inflating house prices. The phenomenon was dubbed the “Vancouver Model” of money laundering.

🏘 Layering Funds Across Multiple Properties

  • Money is moved between properties in different locations to obscure its origin.
  • Example: In London, the “Russian Laundromat” scandal revealed that over £1 billion of illicit funds were funnelled into the UK property market through complex layering schemes.

📜 Third-Party or Shell Company Ownership

  • Criminals use nominees, shell companies, or offshore trusts to purchase real estate, masking the real owner’s identity.
  • Example: In New York, the Panama Papers leak revealed that offshore companies owned luxury properties in Manhattan and Miami, allowing corrupt foreign officials to hide stolen funds.

📉 Overvaluation or Undervaluation of Properties

  • Property values are deliberately misrepresented to move illicit funds undetected.
  • Example: In Dubai, money launderers were found to be inflating and deflating real estate prices to facilitate illegal financial transfers, prompting the UAE to strengthen AML laws in its property sector.

🏠 Rental Properties as Laundering Vehicles

  • Criminals invest in rental properties to convert illicit funds into legitimate rental income.
  • Example: In Australia, AUSTRAC has identified cases where drug syndicates use residential and commercial rental properties as fronts to launder proceeds from illegal activity.

🌍 Cross-Border Transactions & Offshore Investment

  • Criminals purchase property outside their home country, making it harder to track illicit funds.
  • Example: Chinese investors were found using Australian real estate to bypass capital controls, with many transactions linked to underground banking networks.

💼 Use of Professional Intermediaries

  • Real estate agents, lawyers, and accountants are sometimes unknowingly involved in facilitating money laundering by failing to perform proper due diligence.
  • Example: In Switzerland, a lawyer-assisted scheme allowed criminals to buy Swiss properties without detection, leading to stricter AML measures for real estate professionals.

What Does it Actually Mean for Me?

Compliance Responsibilities for Real Estate Head Offices

🏢 Real estate head offices, including franchise networks and corporate agencies, must:

  • Develop and enforce AML/CTF policies across all affiliated agents.
  • Train franchisees and agents on compliance, risk detection, and AUSTRAC reporting.
  • Standardise customer due diligence (CDD) processes to ensure regulatory consistency.
  • Centralise transaction monitoring and reporting to AUSTRAC.
  • Compliance Responsibilities for Individual Real Estate Agents

Compliance Responsibilities for Real Estate Agents and Small Agencies

🏡 Real estate agents and small agencies must:

  • Conduct CDD to verify client identities and assess risk levels.
  • Identify and report suspicious transactions (e.g., high-risk buyers, cash purchases).
  • Maintain transaction records for at least seven years.
  • Work with head offices or compliance teams to escalate concerns.

Compliance Responsibilities for Real Estate Developers & Solicitors Handling Deposits

🏢 Developers often hold deposit funds in solicitor trust accounts, particularly for off-the-plan sales:

  • Solicitors & conveyancers may be required to report transactions to AUSTRAC.
  • Interest-bearing trust accounts may face additional scrutiny.
  • Developers must assess whether their solicitor’s AML obligations impact their own compliance.

Will PEXA Play a Role in Compliance?

  • PEXA (Property Exchange Australia) is widely used by conveyancers and solicitors for digital property settlements.
  • It may assist with KYC verification and transaction tracking, but PEXA’s exact compliance obligations under Tranche Two are still uncertain.
  • Real estate professionals should seek guidance on whether PEXA can streamline compliance obligations. SADE can help with understanding this.

Consequences of Non-Compliance: AUSTRAC’s Crackdown on AML Failures

Non-compliance with AML laws carries severe financial and reputational risks. AUSTRAC has increased enforcement actions against businesses failing to meet AML/CTF obligations.

Major AML Penalties in Australia

AUSTRAC can take enforcement action against reporting entities who do not comply with the AML/CTF legislative regime. Civil penalty orders imposed by the courts in recent years demonstrate AUSTRAC’s increasing compliance investigation capabilities. Additionally, companies may face reputational risk (damage public trust and corporate reputation) and regulatory scrutiny (AUSTRAC can restrict operations and enforce compliance remediation).

  • 2017 Tabcorp group companies fined $45 million.
  • 2018 Commonwealth Bank of Australia fined $700 million.
  • 2020 Westpac Banking Corporation fined $1.3 billion. The order represents the largest civil penalty in Australian history.
  • 2023 Crown Melbourne and Crown Perth fined $450 million.
  • 2024 SkyCity Adelaide fined $67 million.

How Real Estate Firms Can Prepare for AML Compliance

Immediate Steps for Compliance:

  • Conduct a readiness assessment to identify AML risks.
  • Implement a robust AML/CTF program (risk management, staff training, reporting structures).
  • Invest in KYC verification tools and transaction monitoring systems.
  • Partner with AML specialists like SADE to ensure full compliance.

Want a free readiness assessment? Contact SADE today!

📧 Email: [email protected]