AML/CTF TOOLKIT FOR REAL ESTATE AGENTS
COMPLYING WITH TRANCHE II
The Financial Action Task Force (FATF) is the global Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) body, of which Australia is a member. Their recommendations 10, 11, 12, 15 and 17 suggest that financial institutions conduct customer due diligence, maintain transaction records and report any suspicious transactions to the relevant regulator, have been extended to cover designated non-financial businesses and professions (DNFBPs) in their recommendations 22 and 23.
Due to intense lobbying by the domestic legal and real estate sectors, the Australian political parties have dragged their heels for more than fifteen years in adopting the DNFBP FATF recommendations. Now, however, the Tranche II legislation is expected to be introduced in 2024/25.
The main legislation that gives AUSTRAC its powers and covers Australian reporting entities is the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) and the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (Cth) (AML/CTF Rules).
Businesses that fail to deliver their designated services within the requirements of the Act and the rules may face hefty fines and criminal proceedings.
Here is a step-by-step process that Real estate Agents need to follow in order to comply with their new AML/CTF obligations.
1. Check to see if you need to enrol or register with AUSTRAC as a reporting entity by clicking this link to AUSTRAC’s website https://www.austrac.gov.au/business/new-to-austrac/check-if-you-need-enrol-or-register
2. If you do need to enrol or register your business then follow this link to the AUSTRAC website https://www.austrac.gov.au/business/new-to-austrac/enrol-or-register . If you need help completing this form you can contact AUSTRAC or get in touch with us at G2 Company – jgale@g2company.com.au or phone 0422953972
3. Appoint someone in the company as the AML/CTF compliance officer who is either involved in the management of the business or has direct access to senior management – AML/CTF Rules Part 8.5. This person will have the responsibility of ensuring the company is complying with its AML/CTF obligations.
4. Once you have enrolled with AUSTRAC and they process your AUSTRAC business profile form (ABPF), an AUSTRAC Online business account is created for your company. If you requested AUSTRAC Online access when you submitted your ABPF, you will be emailed a login name and password to access the AUSTRAC Online business account as an ‘administrator’. Follow this link to the AUSTRAC website to find out more information on how to manage your online account. https://www.austrac.gov.au/business/austrac-online
5. Before providing any designated services, under rules 8.1.4 and 8.1.5, all reporting entities must conduct a money laundering and terrorism financing (ML/TF) risk assessment of their business activities and keep a record of this policy. The risk assessment should follow this process:
· Identify ML/TF risks
· Assess and measure risks
· Apply controls
· Monitor and review effectiveness
6. AML/CTF Program. After completing your the ML/TF risk assessment, a reporting entity is required to adopt and maintain an AML/CTF Program under Part 7 of the AML/CTF Act. https://www.austrac.gov.au/business/core-guidance/amlctf-programs . Depending on the type of services you provide the program will be one of the following:
standard
joint
special
The document considers the ML/TF risk of your business activities and outlines policies and procedures to mitigate these risks based on the size, scale, nature and complexity of your business.
7. Risk awareness program. Under Rule 8.2. reporting entities are required to develop a risk awareness program for employees involved in the services covered by the AML/CTF Act. This program will be used to train staff on how to identify ML/TF risks while providing these services.
8. Employee due diligence program. Under Rule 8.3 a company must have an employee due diligence program which will outline how to screen new and existing employees to minimise ML/TF risks. https://www.austrac.gov.au/business/core-guidance/amlctf-programs/employee-due-diligence
9. Collect and verify know-your-customer (KYC) information. Under ss 32 and 35 reporting entities must collect identification information about their customers and then verify that this information is correct. The procedure that you follow to do this will be included in your AML/CTF Program.
10. Ongoing customer due diligence, Enhanced Customer Due Diligence and transaction monitoring. In accordance with Parts 15.2 to 15.11 of the Rules, involves updating, verifying and re-verifying customer information as well as monitor customer transactions to identify, mitigate and manage the ML/TF risks.
11. Record keeping. Chapter 20 of the Rules provides details of which records must be kept by the reporting entity. The main records to be kept relate to the following:
· Customer identification
· Transactions
· AML/CTF Programs
12. Reporting to AUSTRAC. Under Rule 8.9 your AML/CTF Program must include policies and procedures about your reporting obligations. For real estate agents, your reporting will most likely limited to suspicious matters reports https://www.austrac.gov.au/business/core-guidance/reporting/suspicious-matter-reports-smrs
13. Independent Reviews. Under Rule 8.6 reporting entities are required to conduct independent reviews with varying frequency depending on the size, scale, nature and complexity of their business. https://www.austrac.gov.au/business/core-guidance/amlctf-programs/independent-reviews
14. AUSTRAC Feedback. Under Rule 8.7 reporting entities must take into account AUSTRAC feedback or industry specific or general information. Sometimes companies are required to respond to AUSTRAC and are therefore obliged to have policies and procedures in place to manage this.
Red Flags for real estate agents
Sector risks
● Use of complex loans or finance
● Manipulation of a property’s valuation or appraisal
● Use of monetary instruments
● Use of investment schemes
● Properties being bought and sold in quick succession
● Customers selling for less than the market value
● Unusual involvement of third parties
● Lack of transparency regarding a company’s structure in the public domain
● Unnecessarily complex transactions
Clients/Customers
● Significant and unexplained geographical distance between your premises and the location of the client
● Customer purchases properties at significantly higher or lower prices than the market
● Unusual or complex business structures
● Difficulties in identifying the beneficial owners
● Customer is reluctant to provide all CDD information
● Client’s access to funds does not match their profile
● Client shows little interest in price
● Sudden activity from a previously dormant client
● Client alters a transaction after being asked for further information
● Client appears nervous or defensive, especially when questioned
● Client refuses to identify the source of funds
● Client wishes to purchase property in someone else’s name
● Client purchases property without viewing it
Country/Geographic
● Countries with poor AML/CTF measures
● Countries with a history of bribery, corruption or tax evasion
● Countries with organised crime
● Countries that are, or border, conflict zones
● Countries associated with drug production or people trafficking