The growing complexity of Australia’s AML reforms could leave agencies exposed to hefty penalties, with one compliance expert outlining the key steps businesses need to take.
With more than a decade in the compliance space, AML Partners founder and managing director John Nguyen said that ensuring requirements were met could be more difficult than businesses realise.
“Given that it is so difficult for banks to become compliant, they’re always getting things wrong; what chance does a local real estate agency have in being AML compliant?” Nguyen said.
To ensure they were considered compliant, Nguyen said agencies had to carry out three tasks: develop a program, appoint an AML compliance officer and perform a risk assessment.
He said agencies needed to have a practical AML program in place that clearly outlines how they manage their responsibilities, and to appoint a team member to manage it.
Additionally, he said businesses must conduct a risk assessment to gauge their susceptibility to exploitation by consumers attempting to launder funds.
“They’re the main things to set you up, and then there is a whole bunch of ongoing activities,” he said.
Agencies face hefty fines
Nguyen said that while a significant aspect of compliance with the reforms involved understanding clients, that was only a small portion of the final result.
“Most people’s misconception is that AML is just screening your customers, but there’s actually a lot more around it than that.”
He said any staff who had direct contact with the customers needed to have completed proper AML training, not just the sales agent handling the transaction.
“You basically need to have a record that you train your staff every single year on AML,” he said.
Nguyen said that agencies could be hit with significant fines for failing to meet the requirements.
He said that fines could be as much as $19,000 a day for real estate agents or buyer’s agents who had not registered with AUSTRAC, with recent data finding that more than half were not yet registered.
“You probably wouldn’t believe it, but the fines are actually the same as what the banks face,” he said.
“There is a $33 million fine for companies per breach, and a $6.6 million fine for personal breaches. It’s basically a wipeout event.”
Buyer’s agents beware
While professionals across the industry are required to uphold the compliance standards, the requirements varied between selling agents and buyer’s agents.
Nguyen said that buyer’s agents actually had greater responsibility to be considered compliant than sales agents.
“The real tricky and grey area is actually on the vendor side of things. AUSTRAC actually requires the buyer’s agent to screen the vendors,” he said.
With the vendor on the opposite side of the transaction and the majority of contact going through the respective sales agent, Nguyen said buyer’s agents may struggle to gain access to the seller.
He said that selling agents might be reluctant to provide contact information for their vendors, since it could be used as a point of leverage in negotiations.
Similarly, he said that buyer’s agents would likely encounter similar restrictions if they attempted to reach out to the conveyancer for the vendors' details.
“That’s the challenge that the industry is facing at the moment because you’re being asked by AUSTRAC to do this, but there is no real way for you to do it, so everyone’s doing different things,” he said.
Some of the red flags buyer’s agents needed to be aware of to identify a suspicious transaction included a willingness to lose money, an expedited timeline, or serviceability not aligning with their purchase.
How leaders can approach compliance
Nguyen said that the agencies that best handled the compliance changes were those that understood the scale of the task.
He said that, rather than adding to the workload of their existing admin team and making compliance their job, appointing someone whose primary focus would significantly boost their ability to meet the requirements would be better.
“AML laws are so complex, it’s very hard for somebody to bridge the gap between ‘what does AML stand for’ and compliance,” he said.
“Getting to a point where you are actually compliant is a massive gap, and people don’t realise that it’s an ongoing thing.”
If agencies were struggling to manage compliance on top of their typical workload, Nguyen said they could look to outsource it to an AML program.
“Think about how much time it is actually taking your staff, and is this the best use of their resources?”
“You could do it yourself, but can they be doing higher income-producing activities?”
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