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The anticipated Tranche 2 legislation for Australia

  • The anti-money laundering (AML) and Counter-Terrorism Financing (CTF) Tranche 2 legislation consultation phase is expected to be completed later this year.

  • It will broaden the scope of the AML and CTF 2006 Act to include 115,000 organisations as opposed to the current 15,000 organisations.


The practical implications


The anticipated AML/CTF Tranche 2 legislation refers to a set of new regulations aimed at specific industries to help prevent money laundering and the financing of terrorism in Australia. The proposed legislation will include the “gatekeeper” industries in the current AML/CTF regulations which already applies to financial institutions. In addition, it will bring Australia’s AML/CTF regulatory framework in line with international standards set by the Financial Action Task Force (FATF).


Bart Puszko, Director of Lysis Australia pointed out that “International statistics clearly indicate that money laundering operations often utilise ‘gatekeeper’ industries to thrive. The key “gatekeeper” industries that will be targeted by the legislation include real estate, law firms, and accounting. This is due to some of these non-financial industries being used for money laundering activities by hiding behind legal concepts which law enforcement is unable to penetrate.”


This observation is also highlighted by the Australian Transaction Reports and Analysis Centre (AUSTRAC), better known as the financial crime regulator, which estimates that $1 billion were laundered through Chinese interests during 2020 alone. This could result in Australia becoming a “destination of choice” for illicit funds and therefore, locking many Australians out of owning their own homes, so to speak. This is due to reports indicating that potential homebuyers could be competing with organised crime members at property auctions.


According to the latest annual report by the Foreign Investment Review Board (FIRB), foreigners purchased $17 billion worth of Australian real estate between 2019 and 2020. They further added that, due to COVID-19 lockdowns and international restrictions, and estimated $82 billion of illicit funds have been channelled through commercial property during 20220 and 2021; a double digit increase from the previous year.


Closing the gaps


When asked what the short-and long-term implications of the Tranche 2 legislation will be on the targeted industries, and on the country as a whole, Bart stated, “Over the short-term, there could be an increase in the awareness of how to identify potential money laundering activities which could lead to a surge in suspicious activity reporting to AUSTRAC. The long-term effect will be the improvement of the intelligence capabilities of Australia’s law enforcement, which will reduce the appeal of Australia’s real estate market as a money laundering haven.


In addition to this, to implement a formal register that records all real estate purchases by foreigners and local firms should go a long way towards transparency since some firms could be subsidiaries of foreign-owned criminal enterprises. An Ultimate Beneficial Ownership (UBO) register will therefore enable law enforcement and AUSTRAC to identify and crack down on criminal activity in the property market.


Choosing the right partner


Bart concluded by saying,From a reputational point of view, and to avoid hefty fines, it is imperative that real estate firms are included in financial crime regulations and implement robust policies, standards, and training to mitigate the risks. The Lysis Group understands that the implementation of Tranche 2 legislation can be a time consuming and costly function.


If your firm is looking for expert advice and a cost-effective way to comply with the Tranche 2 legislative requirements, then look no further. Lysis Group offers vast experience and has a thorough understanding of all financial crime controls that must be implemented in the real estate industry.

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