Impact of Tranche 2 to Australian conveyancers

Australia’s Tranche 2 anti-money laundering (AML) and counter-terrorism financing (CTF) regime took a significant step forward in 2023 with the announcement by the Attorney-General of two rounds of public consultation. The first round closed in June, and the second commences in September 2023.

In his announcement, AG Mark Dreyfus said that significant regulatory gaps and vulnerabilities have made Australia an increasingly attractive destination for laundering illicit funds. “No legitimate business wants to assist the laundering of money which funds serious crimes, including terrorism, child abuse, and the illicit drug trade,” he said.

“The purpose of the AML/CTF regime is to assist businesses to identify these risks in the course of providing their services.”

A crucial aspect of the Tranche 2 AML laws is to extend the coverage of AML/CTF regulations to previously unregulated sectors. Among those affected by these new laws are conveyancers and other professionals involved in property transactions, such as lawyers, accountants, and real estate agents.

Tranche 2 builds on the foundation laid by the initial AML/CTF regime that came into force in 2016 and which focused primarily on financial institutions and casinos. The latest reforms are designed to address the growing threat of money laundering and terrorist financing through the real estate sector and associated professions.

Because of the position of trust they hold, money launderers may target law firms, for instance. They often handle large amounts of money confidentially for their clients, including escrow on sale transactions. As a result, using a solicitor's client account can give criminals a way to enhance the credibility of transactions.

Tranche 2 obligations for conveyancers and related professions

According to lawyer Peter Jones from leading Australian law firm Hall & Wilcox, the consultation proposes that the applicable obligations under the Act apply to Tranche 2 entities when they provide the following specified services:

• Customer due diligence. Verifying a customer’s identity before providing a designated service.
•  Ongoing customer due diligence throughout the business relationship.
•  Reporting particularly of ‘suspicious matters’.
•  Having an AML/CTF Program with systems and controls to mitigate and manage ML/TF risks.
•  Record keeping for seven years, which is available to Australian law enforcement.
•  Enrolment with Australia’s financial crime watchdog, AUSTRAC (Australian Transaction Records and Analysis Centre). 

For conveyancers, lawyers, and accountants, those specified services are:

• Buying and selling of real estate.
• Managing client money, securities, or other assets.
• Management of bank, savings, or securities accounts.
• Organisation of contributions for the creation, operation, or management of companies.
• Creation, operation, or management of legal persons or legal arrangements (e.g., trusts).
• Buying and selling of business entities.

Tranche 2 impacts on conveyancers

1. Registration and compliance obligations. Tranche 2 AML laws will require conveyancers to register with AUSTRAC, the government agency responsible for AML/CTF regulation and enforcement. Once registered, conveyancers must comply with the AML/CTF regulations, which include implementing customer due diligence (CDD) measures, maintaining records of transactions, and reporting suspicious activities to AUSTRAC.

2. Customer Due Diligence (CDD). Conveyancers will be required to conduct thorough CDD on their clients, including identifying and verifying beneficial owners. This will help highlight potential risks and make sure that the parties involved in the property transaction are not involved in money laundering or terrorist financing activities.

3. Reporting obligations. Under Tranche 2 AML laws, conveyancers must report any suspicious transactions or activities to AUSTRAC. These reports will help Australian law enforcement agencies identify and investigate potential money laundering and terrorism financing cases.

4. Training and awareness. Conveyancers will be expected to undergo AML/CTF training, so they have the knowledge and skills to recognise and address money laundering risks. If they’re aware of the red flags associated with suspicious activities, conveyancers will be better equipped to fulfil their compliance obligations.

5. Penalties for non-compliance. Conveyancers could face severe penalties if they fail to adhere to Tranche 2 AML laws. AUSTRAC can impose fines and penalties for non-compliance, which can significantly impact a conveyancer's reputation and business operations. 

How One AML can remove the stress from your AML auditing

Australia's Tranche 2 AML laws represent a significant step towards combating money laundering and terrorism financing more effectively. By extending the scope of regulated entities to include conveyancers and other professionals involved in property transactions, the aim is to create a more robust and comprehensive AML/CTF framework.

By taking steps to comply with the new laws, conveyancers can help to protect the integrity of the Australian real estate sector and financial system and contribute to the fight against money laundering and terrorist financing.

If your business is affected by Tranche 2, One AML can help you understand and meet your AML/CTF obligations. We provide robust, cost-effective, and seamless solutions. Get in touch today.