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 changes to the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act.

To help real estate agents understand the risks they face, the Department of Internal Affairs has just released a sector risk assessment(external link) (SRA) on its website.

On this page:

If you’re a registered real estate agent, you may need to put AML/CFT measures in place .

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 and terrorism.

Here’s a summary of the proposed changes.

Do 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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When do I need to start complying?

If you provide any of the services outlined above, you’ll have to comply from 1 January 2019.

To get ready, you’ll need to take a number of steps beforehand. For more information, see “What do I have to do to comply with the AML/CFT Act?”

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Why does 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, a real estate agent may detect ‘red flags’ that might not be picked up by banks or other financial service providers who interact with the same customers. That’s because you may have more information about the people or funds involved in a particular transaction.

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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 may have fewer risks than a large firm with clients around the world.

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What do 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 clients 
  • verify the identity of purchasers who pay cash deposits of $10,000 or more. 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 $10,000 or more, or an international wire transfer of $1000 or more
  • monitor customers’ accounts to identify potential warning signs of money laundering and terrorism 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 regularly
  • submit an annual report to the Department of Internal Affairs, which will supervise your sector.

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What can 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?

The Department of Internal Affairs (DIA) will supervise real estate agents, as well as other businesses that Phase 2 of the Act applies to. DIA 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.

 A range of existing guidance material is already available to help get you started.  Now the Bill has been passed, we plan to engage with sectors to develop regulations, which will provide more clarity, and produce more guidance material.  For more information, see: AML/CFT supervision and support for businesses

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