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Real estate agents and AML/CFT

Real estate agents are at risk of being exploited by criminals to launder money. They’re among several professions whose members may be affected by proposed changes to the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act.

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If you’re a registered real estate agent, you may need to put AML/CFT measures in place once ‘Phase 2’ of the Act comes into effect.

This will help prevent money laundering, make it easier for authorities to find out where ‘dirty’ money came from, prosecute criminals, seize illegally earned money and assets, and stop crime.

Here’s a summary of the proposed changes.

Will I have to comply with the AML/CFT Act?

You’ll need to comply with the Act if you:

  • represent a client who’s selling or buying real estate
  • accept a deposit in cash of $10,000 or more from someone who’s buying real estate.

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Why will the Act apply to real estate agents?

Criminals often use real estate to convert the money they make from illegal activities into legitimate assets.

Introducing AML/CFT measures will deter criminals from using your services and help detect them if they do.

Importantly, it will also strengthen the overall AML/CFT system. For example, real estate agents may detect ‘red flags’ that banks and other financial service providers who interact with the same clients might not pick up, because you may have more information about the people and funds involved.

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How much work will be involved?

The greater the AML/CFT risks your business faces, the more you’ll have to do to manage these risks. A small firm with long-term local clients will likely have fewer obligations under the AML/CFT Act than a large firm with clients around the world.

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What will I have to do to comply with the AML/CFT Act?

Initially, you’ll have to:

  • designate someone in your business as an AML/CFT compliance officer
  • assess and document the money laundering and terrorist financing risks your business may face
  • establish an AML/CFT compliance programme setting out how you’ll detect and manage these risks.

On an ongoing basis, you’ll have to:

  • verify the identity of new clients and people who pay cash deposits of $10,000 or more (see question 1 above). In some circumstances (such as if they represent a company or trust), you may also need to ask for information about where money came from and the other people involved. For more information about verifying customers’ identities, see:
    Information for customers about AML/CFT laws
  • submit a Prescribed Transaction Report to the Police Financial Intelligence Unit (FIU) if a client wants to conduct a transaction in cash that is more than $10,000
  • monitor customers’ accounts to identify potential warning signs of money laundering and terrorist financing. You must report any suspicious transactions or activity to the FIU. For more information, see:
    Reporting suspicious activities
  • regularly review your risk assessment and compliance programme
  • have your risk assessment and compliance programme audited every 2 years
  • submit an annual report to the Department of Internal Affairs, which will supervise your sector.

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What could I do to reduce my compliance costs?

For information about ways to reduce compliance costs, see:

Working with others to reduce your AML/CFT compliance costs

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What help and oversight will be available?

It’s proposed that the Department of Internal Affairs (DIA) will supervise real estate agents, as well as other sectors that Phase 2 of the Act will apply to. It will help you comply with the law and enforce it when needed. Some of the things DIA will do include:

  • helping you understand how criminals could use your services to launder money or finance terrorism
  • providing support and guidance to help you identify money laundering ‘red flags’ and to comply with AML/CFT laws
  • investigating and taking action if you don’t meet your obligations.

For more information, see:

AML/CFT supervision and support for businesses

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When will I need to start complying with the AML/CFT Act?

The Government intends to pass the law around the middle of 2017.

After that, businesses will have a period of time to prepare for the changes. It’s proposed that real estate agents will have to comply 18 months after Parliament passes the amendment Bill.

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