AUSTRAC’s pub test case may rewrite real estate money laundering laws

Australia’s real estate and housing markets are about to be pulled into one of the most significant regulatory overhauls in years.

From July, real estate agents, conveyancers and property professionals will fall under the same anti-money laundering and counter-terrorism financing regime that already governs banks, casinos and major wagering firms.

While the sector features big national brands, most agencies are in fact small or medium-sized businesses operating as franchise offices with lean governance and limited compliance infrastructure.

For many of these operators, the shift will be jarring. They have never had to run customer due diligence, monitor for suspicious transactions or justify their risk settings to a federal regulator.

The change is overdue. Property has long been seen as a soft target for laundering criminal proceeds. AUSTRAC is doing substantial preparatory work to support the transition, but bringing thousands of small agencies, alongside a handful of large corporate networks, into a sophisticated compliance regime will still expose how difficult, and at times ambiguous, Australia’s AML/CTF framework can be in practice.

The rules are grounded in sound principles, yet they must apply across a vast spectrum of businesses, creating wide variation in interpretation and execution.

AUSTRAC has emerged as one of the country’s most assertive regulators, with enforcement actions against banks, casinos and wagering firms underscoring the heavy cost of non-compliance.

“Proportionality can quickly blur into uncertainty when the boundaries are set by enforcement rather than law.”

Yet much of what industry draws about how the law operates comes not from the courts, but from guidance, settlements and behind-the-scenes negotiation. Compliance is often shaped more by discretion than by statute.

This ambiguity has led to confusion and uneven responses. Some businesses adopt a procedural, box-ticking mindset, outsourcing to consultants whose programs look impressive on paper but lack substance. Others are taking a more strategic route – embedding risk management into culture and recruiting seasoned practitioners to lead reform.

Even so, many well-intentioned businesses fall into a false sense of security. Overreliance on external advisers – without the governance, culture or internal capability to challenge or verify their advice – remains a common pitfall. A polished compliance manual is not a guarantee of genuine assurance.

These cracks matter even more as the AML/CTF net widens. Beyond real estate, next year’s “Tranche 2” reforms will extend obligations to lawyers, accountants and other professional service providers – sectors that, like property, have not previously operated under a substantive AML framework.

For many, this will be unfamiliar terrain. The key legal protection, the “reasonable precautions” defence in section 236 of the Anti-Money Laundering and Counter-Terrorism Financing Act, remains untested in court. How it is ultimately interpreted will shape how far businesses can rely on third-party advice, and how much liability falls to boards and executives.

Australia’s risk-based AML/CTF framework adds further complexity. It allows businesses to tailor controls to their own risk profile, but it also gives AUSTRAC wide discretion to question those judgments, often after the fact.

Proportionality can quickly blur into uncertainty when the boundaries are set by enforcement rather than law.

This is especially challenging in the gaming and wagering sector, where capability and resources vary dramatically – from community-based organisations with volunteer boards to listed corporations with dedicated compliance teams. Regulatory expectations must be realistic, sensitive to scale and maturity, yet firm on governance and culture fundamentals.

So far, no court has tested how the “reasonable precautions” defence operates in practice. Most enforcement actions have been settled rather than decided. Eventually, a case will test that defence in court – perhaps through AUSTRAC’s litigation with Entain, and possibly Mounties.

If it does, it could reset the landscape – clarifying the value of expert advice, the role of boards, and what constitutes reasonable compliance under a risk-based regime.

Such clarity wouldn’t constrain the system, it would strengthen it – grounding expectations in court-tested interpretation rather than the regulator’s preferred framing, and giving both AUSTRAC and industry the certainty they need.

For a framework built on risk, judgment and discretion, that is the next logical step.