KYC for Real Estate Agents in Australia: Preparing for Tranche 2 Reforms

Charlotte Mason had built her Sydney-based real estate agency from the ground up over the past eight years. With a team of six agents and a solid reputation in the North Shore market, her business was thriving. But when she opened her laptop one morning in early 2025 and read about Australia’s incoming Tranche 2 Anti-Money Laundering reforms, her coffee went cold as she realised her entire industry was about to change forever.

By July 1, 2026, Australia’s comprehensive KYC compliance framework will expand to include real estate professionals like Charlotte—bringing an estimated 70,000 additional businesses under AUSTRAC’s watchful eye. This isn’t just another regulatory checkbox to tick; it’s a fundamental shift that will transform how real estate agents verify clients, manage transactions, and protect their businesses from criminal exploitation.

The Story Behind Tranche 2: Why Real Estate Became a Target

Real estate transactions have long been recognised as attractive vehicles for money laundering. With the ability to buy property using cash, significant transaction values, and historically limited oversight of the sector, properties offer criminals an ideal way to integrate illicit funds into the legitimate economy. The Financial Action Task Force (FATF) has repeatedly identified real estate as a significant money laundering channel, and Australia was one of only five countries in the FATF Global Network that had not regulated Tranche 2 entities within its AML/CTF regime.

The numbers tell the story: recent estimates put the cost of serious and organised crime to the Australian economy at almost $69 billion in 2023-2024. For real estate professionals, this means the likelihood of unknowingly dealing with money launderers is higher than many might think. The Tranche 2 reforms aim to close these regulatory gaps and align Australia with international standards.

Understanding Your New Universe: Which Services Trigger Compliance

Not every real estate activity will fall under the new regime. The reforms introduce specific ‘designated services’ that determine whether your business has AML/CTF obligations. Understanding these boundaries is crucial for determining your compliance requirements.

Designated Services That Require Compliance

Brokering Real Estate Transactions: If you’re acting on behalf of buyers, sellers, transferees, or transferors in real estate transactions as part of your business, you’ll be providing a designated service. This covers typical seller’s and buyer’s agent services that form the backbone of most real estate agencies.

Direct Property Sales: Property developers and businesses that sell house and land packages, apartments off-the-plan, or blocks of vacant land in new subdivisions will also be captured when they’re not using independent real estate agents.

Conveyancing Activities: Engaging in or giving instructions on behalf of a customer for any conveyancing to affect the grant, sale, purchase, or other disposal or acquisition of real estate or an interest in land falls within the designated services.

What’s Not Covered

Some real estate activities remain outside the scope, including property management services, residential tenancy services, and auctioneer services (unless the auctioning services are provided by the seller’s agent alongside the sale of the real estate).

The Five Pillars of Your New Compliance Framework

Once you’re providing designated services, five key obligations form the foundation of your AML/CTF compliance program.

1. Customer Due Diligence: Know Your Customer Inside and Out

Customer due diligence (CDD) becomes your first line of defence against criminal exploitation. This goes far beyond simply checking a driver’s licence—it’s about building a comprehensive understanding of who you’re dealing with and the source of their funds.

Initial Customer Due Diligence requires you to establish certain information about a customer on reasonable grounds before providing them with a designated service. This includes:

Collecting and verifying customer identity using reliable and independent documents
Understanding the nature and purpose of the business relationship
Identifying beneficial owners for non-individual customers
Determining if customers are politically exposed persons (PEPs) or subject to sanctions

Ongoing Customer Due Diligence means monitoring transactions and behaviours for suspicious activities throughout the customer relationship. For real estate agents, this might involve flagging unusual payment methods, last-minute changes to purchaser details, or transactions that don’t align with a customer’s apparent financial profile.

2. Risk Assessment and Management

You’ll need to develop a comprehensive money laundering, terrorism financing, and proliferation financing risk assessment tailored to your business. This assessment forms the foundation for the rest of your AML/CTF program and must consider factors like customer types, transaction types, and geographical areas.

3. Reporting Obligations

Several reporting requirements will become part of your regular business operations:

Suspicious Matter Reports (SMR): When you suspect on reasonable grounds that a person is not who they claim to be or that a matter is linked to criminal activity
Threshold Transaction Reports (TTR): For individual physical currency transactions valued at A$10,000 or higher
Annual Compliance Reports: Summarising how you’ve met your AML/CTF obligations each year

4. Record Keeping

You must make and maintain accurate and complete records for at least 7 years. These records provide evidence of your due diligence, risk management practices, and compliance with AML/CTF obligations.

5. AML/CTF Compliance Officer

Businesses providing a designated service must appoint an AML/CTF compliance officer to oversee the operation of the entity’s AML/CTF policies and updates. This person must be a ‘fit and proper’ person with appropriate training and authority within your organisation.

The Technology Advantage: Digital Solutions for Seamless Compliance

The compliance burden might seem overwhelming, but modern technology can significantly streamline the process. Digital verification of identity (VOI) solutions are already being used by hundreds of real estate professionals across Australia, and these systems are being updated to meet the new CDD and KYC requirements.

Digital solutions offer several advantages:

Efficiency: Streamlined verification processes reduce time and effort compared to manual methods
Accuracy: Advanced technologies minimise human error and enhance detection of fraudulent documents
Compliance: Automated systems ensure adherence to regulatory requirements with audit trails and real-time reporting capabilities
Customer Experience: Faster onboarding without compromising security

Your Compliance Timeline: Critical Dates and Deadlines

Understanding the implementation timeline is crucial for preparation:

December 2025: AUSTRAC finalises Tranche 2 sector-specific guidance
1 July 2026: AML/CTF obligations commence for Tranche 2 entities
29 July 2026: Final deadline to enrol with AUSTRAC (within 28 days of providing a regulated service)

With AUSTRAC expecting to finalise guidance in January 2026, this leaves a scant 6 months for affected reporting entities to implement compliant systems. Starting preparation now isn’t just advisable—it’s essential.

Your Decision Framework: Is Your Business Ready?

To determine your readiness for the Tranche 2 reforms, work through this practical assessment framework:

Step 1: Service Scope Analysis

Ask yourself: Do I provide designated services as defined by the new regulations? Consider whether your business brokers real estate transactions, sells properties directly, or provides conveyancing services. If yes, you’ll need full compliance.

Step 2: Current Process Audit

Evaluate your existing practices: How do you currently verify client identities? What records do you keep? Identity verification practices among real estate professionals vary widely, ranging from not completing verification at all to using comprehensive digital solutions. Identify gaps between your current processes and the new requirements.

Step 3: Resource Assessment

Consider your capacity: Do you have the technology, personnel, and systems needed for compliance? Will you need to invest in digital verification solutions, appoint a compliance officer, or train existing staff?

Step 4: Risk Profile Evaluation

Assess your exposure: What types of clients do you serve? Do you handle high-value transactions or work with international clients? Your risk profile will determine the depth of due diligence required.

Making Your Choice: Three Pathways Forward

The Proactive Path: Like Isabella Chen, a Melbourne-based agent who began implementing digital verification systems in early 2025. “I realised that getting ahead of the compliance curve would give me a competitive advantage,” she explains. “While my competitors scramble in 2026, I’ll be focused on serving clients.”

The Collaborative Path: Some agents are joining industry associations and working groups to develop shared compliance frameworks. Real Estate Institutes across Australia are in consultation with AUSTRAC, providing feedback and submissions on behalf of their members.

The Partnership Path: Engaging compliance specialists or technology providers who understand both the real estate industry and AML/CTF requirements. This approach works particularly well for smaller agencies that lack internal compliance expertise.

Beyond Compliance: The Hidden Benefits of Robust KYC

While compliance might feel like a burden, robust KYC processes offer unexpected advantages. Professional and well-run businesses that maintain strong AML/CTF measures often find they:

Build stronger client relationships through thorough onboarding processes
Reduce transaction delays and disputes by verifying client capacity upfront
Protect their reputation and avoid association with criminal activity
Gain competitive advantage over less compliant competitors
Improve operational efficiency through systematic client management

Preparing for Success: Your Action Plan

Start your preparation with these immediate steps:

Conduct a service audit to determine which of your activities constitute designated services
Assess your current systems for identity verification and record keeping
Research digital VOI solutions that can streamline compliance while enhancing customer experience
Identify your AML/CTF compliance officer and ensure they receive appropriate training
Develop your risk assessment framework based on your client base and transaction patterns
Create implementation timelines to ensure you’re ready well before July 2026

The Strategic Partnership Advantage

Navigating the Tranche 2 reforms doesn’t have to be a solo journey. Charlotte’s story from our opening found its resolution when she partnered with compliance specialists who understood both her business needs and regulatory requirements. “I realised that compliance isn’t just about avoiding penalties,” she reflects. “It’s about building a more professional, trustworthy business that clients can rely on.”

The most successful real estate professionals will be those who view these changes not as obstacles, but as opportunities to strengthen their operations and build competitive advantages through superior client management and risk mitigation.

Ready to transform your compliance challenges into business advantages? Connect with CAFX’s compliance specialists who understand the unique challenges facing Australian real estate professionals. Our team can help you develop a comprehensive AML/CTF strategy that not only meets regulatory requirements but enhances your operational efficiency and client relationships.

Related Resources

For comprehensive guidance on Australia’s evolving compliance landscape, explore our detailed coverage of related topics: