We Are Selling with Lee Woodward

177 - Money Laundering in Real Estate: What You Need to Know - Richard Manthel

• Lee Woodward • Season 1 • Episode 176

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Australia is one of the last countries in the world to implement anti-money laundering legislation for real estate agents, with new laws requiring compliance by July 2026. Richard Manthel of AMLHUB explains what agents need to know about the $4 trillion global money laundering problem and how the real estate industry will soon play a crucial role in detecting suspicious transactions.

• AML (anti-money laundering) legislation for Australian real estate agents passed in November 2024
• Agents must have AML plans and procedures in place by March 2026 for July 2026 implementation
• Money laundering involves moving illegal funds through assets like property to hide their origins
• Real estate is attractive for money laundering because it can move vast sums without detection
• Red flags include properties sold significantly under market value or unusual transaction structures
• Every agency must appoint an AML compliance officer with attention to detail and process skills
• Companies must develop a risk assessment and compliance program specific to their business
• AUSTRAC will regulate compliance with potential penalties of $19,000 per day for non-registration
• AML applies only to sales (residential and commercial), not property management
• Resources available through AMLHUB include training and end-to-end compliance solutions

Visit amlhub.com.au/contact for help with planning and education to meet your AML obligations, or email richard@amlhub.com.au



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Speaker 1:

Hello and welcome back to the podcast. We Are Selling Today a completely different direction. We're not talking about prospecting, listing and negotiation. We're talking about something far bigger, which is AML. And AML could be a new term to a lot of people listening, so I'm going to bring in a industry expert. Richard Mantle joins me from AML Hub, richard, welcome aboard. Thank you, lee, richard. Aml let's start with that. What does it even stand for?

Speaker 2:

Yeah, good question. So AML stands for anti-money laundering. It's a good term that's been used around the world for 20 odd years, but probably quite new to the Australian real estate market.

Speaker 1:

Very much so, because New Zealand has had the change already. When did the AML laws come in for real estate agents in New? Zealand?

Speaker 2:

Yeah, that law came into effect on the 1st of January 2019. So we've had that for a few years now and really has become part of the process I suppose you could say of the real estate agent in New Zealand for obviously many years.

Speaker 1:

This topic came to my attention with concerns of business owners and leaders and for the agents, operations and leaders listening to our program today. Legislation has been passed in November 2024 for Australia, and Australia is one of the last countries in the world that isn't governed, where accountants, lawyers and real estate agents are going to be required to report any anti-money laundering behavior with their trust accounts, which they haven't had to do before. One thing when I got excited, when you became available because this is a complex topic if you haven't been around it and we might just start with your background there of how long you've been in the space and what you've learned about that space from the transition with the New Zealand agents- Look, I've been doing this since 2012, and I think we've helped in excess of 4,000 companies now throughout New Zealand, australia and Pacific Islands, and the New Zealand legislation changed for the real estate agents only six years ago, so quite relatively new for the real estate agents, obviously.

Speaker 2:

The banks and the stockbrokers et cetera were captured well before then, and that's the same in Australia. We've been sort of working very closely with all real estate brands in New Zealand for the last six years.

Speaker 1:

So, richard, just for our listener that's saying, okay, I've heard of this anti-money laundering before, but what is it? Can you give us a definition of where the funds come from and what we need to be aware of?

Speaker 2:

The money laundering space globally runs to about $4 trillion, which means that $4 trillion of illegal funds is generated every year by what we call bad actors legitimate funds and they move it around the world through different asset classes to try and separate the origin of the money really to what they want to then ultimately spend the money on, which could be nice cars, yachts, you name it houses, et cetera, et cetera. So the purpose of money laundering and the global you could say legislation really is focusing on the detection of any suspicious activity. So what happens is that the obligations really fall upon the real estate agents to know their clients and then be in a position to spot red flags and then report that internally and ultimately that may get reported to the authorities.

Speaker 1:

So the authority in Australia is AUSTRAC. What is their role? What do they do?

Speaker 2:

So AUSTRAC is the regulator really of the anti-money laundering laws in Australia and so they will certainly provide the regulations and they will be receiving all the suspicious matters that are reported to them. Then they will coordinate the response really to those reports. Despite the legislation passing in November in 24, we're still waiting at the moment for AUSTRAC to release the final regulations for the real estate industry. We expect that to come out indication is in October. Still waiting for the final, final really regulations for the industry, but to date we're probably aware of what 90, 95% of things that need to take place.

Speaker 1:

And that was my understanding that the second draft of the legislation is being done now. By December, Everyone's going to have to have an AML plan in place. Well, actually by March 2026, because on the 1st of July 2026, this goes live.

Speaker 2:

Yeah, correct, and what needs to happen is that everybody needs to have their AML I call it regime, you could say in place and working effectively on that date. Really, we've got close to 12 months. To bring that into play, A little bit of planning required. We're obviously helping clients at the moment. We know that there's a lot of activity will happen once the regulations are released in October.

Speaker 1:

Very good, and just to make this really stick with our listeners, many other companies and businesses have had to go through the AML process, but the trust accounts of accountants, lawyers and real estate agents were never required to report or report them on suspicious behaviours. So, richard, how do people launder money?

Speaker 2:

So what launderers are trying to do is to move money really from an illegal bank account. I mean, sometimes it could be cash, but typically it's in a legal bank account and they're trying to make it look legitimate. So they're going to move it through different asset classes. So, for example, if I was going to move $20 million from an illegal bank account in Hong Kong and I wanted to take it to Switzerland, I'm going to move it through asset classes and I could move it through the real estate industry in Australia. And I do that because I know that the industry is not regulated, or not yet anyway. So I'd come down to Australia, buy some property, I might flip the property quickly, I might hold it for a year, but basically I'm trying to move the cash or the money through that particular asset class.

Speaker 2:

The reason why real estate's a great way to launder money is that we can move vast sums of money, millions of dollars, and sometimes without detection. What's the industry and what's the AML legislation all about? Well, it's about people being aware of this and spotting red flags or unusual behavior and obviously then reporting that to the authorities. The real estate companies need to have good processes, practices, procedures in place, training in place to learn about some of the red flags and the techniques people use so we can spot this activity.

Speaker 1:

The activity is a question in itself and for everyone to be clear on that, what industries is it coming from or what parts of the world is it coming from that makes this cash or this money that needs to be laundered?

Speaker 2:

Number one is child corruption, exploitation of people. You know human trafficking are very, very lucrative in the world and generates, you know, billions and billions of dollars. It could be straight corruption or it could be bribery, it could be kidnapping. The list goes on and on. We typically think of money laundering involving bags of cash, and sometimes it does.

Speaker 2:

Yeah, I agree that that does happen, particularly in the drug world, but really most of the money is generated from really quite nasty stuff and what we don't want to do is have places like Australia really been a conduit for this money and it's an easy touch and we can move money through the likes of real estate or the legal sector in Australia with ease because it's an unregulated AML sector.

Speaker 1:

Let's take a look at the banks. If any of us draw out $10,000 or $15,000, sector. Let's take a look at the banks. If any of us draw out $10,000 or $15,000, the banks are notifying AUSTRAC that this has happened and it happened on this date In real estate. Give us an example of how the Australian real estate agents are going to need to notify and be part of this AML process.

Speaker 2:

Spotting suspicious activity or matters is really really important. And so if a real estate agent spots something unusual and a good example would be I'm going to try and sell my house very quickly under value. It might be half a million dollars under its value. That's kind of unusual and you'd expect people to say, actually that's weird, let's discuss it internally and let's decide whether or not we're going to deem this suspicious and then report that to the authorities. And we'd report that to AUSTRAC and they've got good reporting techniques and we've got to put in information about that transaction or about that matter. And then, once we've done that, we've done our job and it's up to them to decide if they're going to take that matter further.

Speaker 2:

If things aren't being reported to AUSTRAC, then really the AML regime is really a waste of time because what we're trying to do is say we're trying to provide that deterrent and we're trying to provide a good process internally within our real estate firm to ensure that people aren't going to be using our firm for movement of illicit funds, and you could say it's a nice responsibility to have to ensure that these people can't use your firm. It makes Australia basically a safer place for everybody, obviously, who lives here.

Speaker 1:

Yeah, it's an important thing, isn't it? In some of the research I was doing prior to doing this interview with yourself, richard, all these data points, no one thing happens in isolation and it's not even that the agent's reporting something and it's going to happen to that person now, but it could be three years from now. They say, well, hang on. We had a report from a real estate office about an undersell. We had three notifications from the bank, one over here. Suddenly, there's enough information to take action.

Speaker 2:

Exactly, and the authorities today have a lot of data points and they can join the dots and that's not necessarily the real estate agent's responsibility. What they're doing is just spotting those things in isolation, things that don't pass your sniff test, and I think every agent can think back over the last few years about gee, that didn't sit quite right or that was a bit unusual.

Speaker 2:

And that's the kind of stuff that in the future, we're going to have to say well, actually, let's just talk about that internally and let's decide what we're going to do with it and how we're going to report that to the authorities. Once you do report to the authorities, you're in safe harbour, you've done your job. And I think that, of course, internally, you've got to have procedures in place to understand who your clients are. You've got to onboard your clients, know who they are, and there are some procedures regarding verifying their name and date of birth, etc. So there's those things that will become a procedural, new procedures for the real estate agent. But it's really good to understand that the reason we're doing this is that we're trying to really deter money laundering running through the real estate market in Australia and if we do see something, we're doing the right thing and reporting it to the authorities.

Speaker 1:

Reducing criminal activity is a big part of everyone's responsibility. Richard, what will the agents have to do in preparation to get ready for July 2026?

Speaker 2:

If you're listening as a you know, obviously a manager of a real estate firm, there's going to be some procedural change and that's something that is going to you can't really avoid. And basically, in a firm like ours, we help companies put in place those procedures and one of the requirements under the legislation is to have a risk assessment and then a compliance program. The compliance program I like to think it's a bit like an operating manual. So basically you put those in place and then, if you're an agent, you know you're really going to want to be trained in what you need to do when you're talking to your client, initially, and collecting information and really being aware of the red flags or the unusual activity that's, you know, austrac and other international agencies have deemed to be, you know, appropriate for the real estate sector. You know there's many, many of those, but it's a case of just being aware of them and being trained.

Speaker 2:

So I think to go into, you know, middle of next year unprepared is probably a little bit. You'd be undercooked and that's not going to sit well with those track, but I think so. Therefore you need to start preparing. You know, once the legislation gets, regulations get released, you know, in October certainly there's going to be a lot more information and a lot more assistance available, but if anybody wants to, you wants to get started well before then. We're already helping clients do that, so very happy to help people who have been proactive and want to get on with it.

Speaker 1:

Yeah, couldn't agree more. And every office is going to have to have an AML plan and a risk assessment done on the business, which is going to be connected to the type of clients you deal with, how you deal with them. Is it face-to-face, is it on Zoom? All those items.

Speaker 2:

And then you've got your compliance program or that operating manual and that can be certainly tailored to your business, and so very important that these two documents are created. But ultimately both documents have to meet the obligations of the legislation.

Speaker 1:

So let's just assume AML Hub's helped out. You've got all your documents, your procedures in place. The training happens with the company and the agents, so people know what questions to ask, what to look out for and then separate to that we need a responsible person in the building who's assigned to be the AML responsible officer. Is that correct?

Speaker 2:

Each company has to have someone who's appointed as the person responsible for the management and the effectiveness really of their AML regime and we can call that person the AML compliance officer. Could be a reporting officer, but basically the person who's going to be assigned really by the business to take that responsibility on. And that person will need to be trained, they'll need to be given the resources within the firm and probably the gravitas or have the gravitas to actually then talk to people within the firm with authority, including not only the agents but probably also the senior management, but quite an important role and we see a lot of people really step up and enjoy taking on that responsibility.

Speaker 1:

And Richard from the New Zealand rollout. What type of candidates suited that role? Because there is a lot of risk involved. They are running this on behalf of the company and educating the agents or sometimes saying you know we've missed something here, looking at our process. Are we tied on that? Who's suited the role from your experience out there?

Speaker 2:

The person who's really going to be quite dedicated, they've got good attention to detail, they like process, they like to record.

Speaker 2:

Quite dedicated, they've got good attention to detail, they like process, they like to record things correctly. They use a good system like the AML Hub where they can basically manage everything from one platform, take ownership of that and they really take pride in it and they want to understand a bit more about the legislation. So it's a really nice role for someone who's that way inclined. I think the danger is when a firm may say, oh, we've got someone maybe available who really is not interested in AML and they might be allocated the job and then all of a sudden, you know that becomes quite challenging for the firm. So I think choosing the right person whether it be a junior person or whether it be a very senior person, you know it's quite important, but I think people can be trained in the role. But they've obviously got to be dedicated and have that attention to detail and want to really step up and keep the records you know and information available for the agents.

Speaker 1:

So AML Hub is in New Zealand and Australia. A question I usually ask up front what does AML Hub do to assist the agents through this process?

Speaker 2:

Yeah, so we developed this platform really back in 2017, 18, before the New Zealand AML legislation went live with the real estate industry, and we launched it really for the real estate sector, and then it's grown and grown and grown and got better and better. Over the last six years We've had north of half a million properties run through the platform. So what we do it's a system really which is an end-to-end solution where a compliance officer can use it. It's in the cloud, it can link in with your own CRM system, but basically it's a full-blown system where it controls your AML obligations and allows people to manage their obligations. So you know, very, very nice tool. You know it's been developed over many, many years now and obviously gone through many iterations, but you know it really is fit for purpose and we're very proud of what we've built.

Speaker 1:

Richard, final questions for you, because I know you're going to be touring Australia when this all goes live. You've got some conferences that you'll be speaking and AML Hub will be rolling out face-to-face training and you've also got self-paced training, so everything's prepared on that side. It's just that decision to understand that this is even here, and I know when it was brought to my attention it was like people need to know this now. This is not. Don't wait till then. And, Richard, the fines are quite heavy If you don't have an AML plan in place. What are the fines?

Speaker 2:

Yeah. So AUSTRAC does have quite a healthy reputation for fining non-compliance, and so if you're not meeting the obligations of the Act, you know AUSTRAC is quite good at fining, and one of the fines I would just as an example is that every day you're not registered with AUSTRAC from next year, $19,000 a day. It's the kind of thing you just need to be aware of, and although it sounds like a lot of money and it's pretty terrifying, I'd be very disappointed if any of our clients got in a situation where they were being fined and in fact, we wouldn't be doing our job if that was the case. So I think the case is to be aware of the dates, be aware of what your obligations are, and I think you're right, lee, that if people start sort of thinking about this now and understand exactly what their obligations are, I hope to think that the fines aren't going to come chasing you, because I think they're very avoidable.

Speaker 1:

Richard, this is only for sales, not property management Is I think they're very avoidable, Richard?

Speaker 2:

this is only for sales, not property management. Is that correct? Yeah, correct. So property management's not captured, but it's the sale and purchase of real estate, and real estate that encompasses commercial as well.

Speaker 1:

And I loved before when you said does it pass the sniff test? In my research Australia has. Does it pass the pub test? Okay, which is a wonderful thing for our publicans over here. If someone at a pub doesn't get it, it hasn't been explained well. And really at the end of all this, richard, we're trying to get rid of this criminal intent, keep the real estate industry clean, but also, as real estate professionals, staying up with international law, because everywhere else in the world has gone through this process with international law, because everywhere else in the world has gone through this process, it just seems a good thing now that Australia is coming into the fold with international ways of doing business.

Speaker 2:

I think you're right. We know Australia is one of the last four or five countries to legislation and you're in company with countries like Madagascar and places like that, which doesn't sound too flash. But it's really really good that globally there's so many countries now taking money laundering very, very seriously and putting in place legislation, and I think it's just really Australia's really just doing their bit by having good legislation globally in the fight against money laundering.

Speaker 1:

Well, richard, we've definitely reached my goal today of notifying the Australian real estate industry that this is here, it's coming. We're in second draft of legislation, we've got dates, but from all my principals and managers and leaders and operations managers listening to this right now thinking where do we start, how do they get hold of AML Hub and what do they need to do?

Speaker 2:

Yeah, thanks for that, Lee. Look our website's amlhubcomau. That's the best place to start. We can certainly help with anybody with their planning and certainly with education, if that's what's required, but certainly happy to help.

Speaker 1:

Well, richard, thank you again for your time and if we can make it all tee up, we might even have you at our Complete Leader Conference this year to do a presentation, because we'll be closer to that time and all our leaders need to know. But on behalf of we Are Selling, thank you for joining us. Thank you very much.