Understanding AML-CTF in WA Real Estate

Transcript

Peter Fletcher

Peter Fletcher
We lcome to the WA Property Q&A, the podcast where I explore the ins and outs of buying property in Western Australia. I’m your host, Peter Fletcher, and each week I interview local property experts to help you to develop a deep understanding of the nuances of buying property in WA. From market trends to legal considerations, no topic is off limits. But before we dive in, a friendly reminder. While we provide valuable information, it’s important to note that nothing discussed in this podcast should be construed as personal investment advice. Always remember to seek the appropriate professional advice for your specific circumstances. Now, let’s get started and unlock the secrets to successful property buying in WA. Welcome, Ches Rafferty. Good to have you on again.

Ches Rafferty
Absolutely. Good to be here.

Peter Fletcher
Last time we were talking about AML CTF.

Ches Rafferty
We did cover a bit of that. And I think it’s sort of best practice in general. So a lot’s changed, hasn’t it, in that 12 months?

Peter Fletcher
Yeah, yeah. It was around cybersecurity last time, wasn’t it?

Ches Rafferty
That’s right, yeah.

Peter Fletcher
And that property theft that didn’t quite happen, almost happened.

Ches Rafferty
Yep.

Peter Fletcher
But this time we want to talk about, specifically about AML-CTF.

Ches Rafferty
We sure do. Probably one of the most significant changes to happen to the real estate industry for quite a number of years.

Peter Fletcher
Yes. Right. Let’s start off by clearing it up. What the hell is AML-CTF? Ches?

Ches Rafferty
Okay. So AML-CTF stands for anti-money laundering and counter-terrorism financing.

Peter Fletcher
Okay.

Ches Rafferty
So in simple terms, it’s an expansion of a federal act to minimize those two things, which is obviously money laundering and terrorism funding. It’s what you might remember from a, well, you might experience a few things when you get asked, for example, if you leave Australia, do you have $10,000 or more when you leave? That’s under the same system. Also, when you sign up for a bank account or an online gaming account or a, you know, international remittance company, you get asked to identify yourself to a certain standard. That has now changed to meet an international, a broader international standard, which will now mean that real estate agents, conveyances, lawyers, accountants, companies that set up, organizations that set up companies and trusts, and bullion and precious gems dealers will effectively need to do the same standard as those other organizations like banks have been doing for sort of 15, 20 years now.

Peter Fletcher
Mm-hmm. Okay. And so for the purposes of this podcast, the groups that we’re interested in are conveyances and real estate agents. Is that right? That’s correct. So very clearly, it’s only for property

Ches Rafferty
transfers and sales. So it’s not for property management. So to make that clear, property managers won’t fit under this. But for property sales and conveyances, obviously transferring property, they will absolutely be subject to this new regime, which comes in 1st of July, 2026.

Peter Fletcher
Approximately 12 months away.

Ches Rafferty
Yeah, just over.

Peter Fletcher
Okay. Now, tell me how is it that conveyances and real estate agents are going to be affected by these changes?

Ches Rafferty
Yeah. So broadly, there’s a few key things. So broadly, not broadly, specifically, I guess, all businesses who fit under this, as we’ve just described, it’s effectively virtually all real estate agents and it is all conveyances, will need to put together what’s known as an AML CTF program, probably cover it in a bit more detail. So I won’t sort of go into too much of that just now. They’ll need to do what’s known as customer due diligence on their customers. So that’s to actually identify who is the person or people behind buying the property. So as you can imagine, very, very simple if it’s a traditional husband and wife buying a property. A lot more confusing if you can think of things like an international buyer that might have a corporate or trust structure or corporate and trust structure behind it. It starts to get a lot more complicated. And then in the event that the behavior of those individuals purchasing the property is suspicious, then to file reports with Austract to identify that the behavior of those people involved in the transaction was unusual. That’s sort of your key obligations.

Peter Fletcher
Okay. So let’s dig into the weeds a bit because I don’t mind getting into the weeds.

Ches Rafferty
Totally.

Peter Fletcher
Cheers. So let’s say Jay and Jamie are buying a property.

Ches Rafferty
Yes.

Peter Fletcher
And they come to the real estate agent and they make an offer.

Ches Rafferty
Yes.

Peter Fletcher
And at what point is the real estate agent going to have to do their customer due diligence on Jay and Jamie?

Ches Rafferty
Yeah. Okay. And then this is a bit where it, of course, gets fun. We’ve got these regulations and requirements coming in 1st July next year. We don’t necessarily have all the detailed information from AUSTRAC yet of exactly what and when this needs to occur. That will be released January next year. Our expectation would be that when a person puts an offer in for a property, that would most likely be the point that you would then need to do your customer due diligence. So customer due diligence, what I mentioned before, involves identifying that person, And then it involves doing some additional checks around money laundering and terrorism lists.

Peter Fletcher
Can we park that just for a moment?

Ches Rafferty
Yeah, yeah.

Peter Fletcher
Because I’ll make sure I come back to this.

Ches Rafferty
I will, yeah.

Peter Fletcher
Because that’s important. So the verification of identity, you’re saying, well, there’s a question mark as to exactly when it’s going to need to be done. Now, if it’s prior, are we saying that it might need to be done prior to them entering into the contract?

Ches Rafferty
Yeah. Look, this is a really interesting, I think almost perhaps the most confusing part for people to get their heads around their obligations under this new regime and now AUSTRAC. And the first one is, it’s not your responsibility to be a police person in this situation. What I mean by that, it’s not your responsibility to accept or prevent that property transaction. We’re specifically talking about property.

Peter Fletcher
Okay. Yep.

Ches Rafferty
And in fact, there’s actually provisions that prevent you, what’s known as tipping off. So, you’re not allowed to advise someone, for example, if those behaviors you deem to be suspicious and you’ve filed a report. Whether it’s a positive, you know, I don’t see anything unusual about this, proceed. Or it’s a, I think things were suspicious, I’ve lodged a suspicious matter report. You still proceed. And the reason kind of makes sense, A, if there are criminals involved in these organizations, we don’t want to put the individual businesses at risk, real estate agents and conveyances. And secondarily to that, as you can imagine, in a lot of these cases, the Australian Federal Police and ASEAN, for example, will be often monitoring these criminal organizations or terrorist organizations. They want more information potentially rather than to actually tip off these people that something might be afoot, basically.

Peter Fletcher
Yeah. Okay. So using Jay and Jamie as an example, they’re just plain vanilla people.

Ches Rafferty
Yes.

Peter Fletcher
And they just want to buy a property, but they have some concerns about privacy. And they say, well, I don’t want to verify my identity. I don’t want to have my photo taken. I don’t want to share my passport or driver’s license. I will if I get the property. Or they might get, Now that they have secured the property and they made an offer, they still haven’t been verified.

Ches Rafferty
Yes.

Peter Fletcher
And then they go, I don’t want to be verified to the real estate agent. Now what happens?

Ches Rafferty
So.

Peter Fletcher
Might have their own little, you know, tinfoil hat kind of reasons. And possibly that’s even insulting to people who have genuine privacy concerns. And I respect that. So let’s, let’s rephrase that and then say for people who have genuine privacy concerns and don’t want to be verified, what happens next?

Ches Rafferty
Yeah, well, to answer you, to take it all the way back, I guess, to the beginning, is the responsibility lies with what’s known as the program officer, which in many businesses is likely to be the director, CEO, the principal, sole traders, the sole trader. Whoever that person is, and that’s identified with Austrac, has ultimate responsibility for that. That is, if they fail to meet their obligations, they have breached their OZTRAC requirements. And I guess this is where the excuse that they didn’t want to do it will not pass muster.

Peter Fletcher
Yes.

Ches Rafferty
Because it was your responsibility to do it, which is why some of these questions about when and where you do it, there may be legal decisions, whereas OZTRAC may say, we don’t mind where you do it. But from your perspective, you may not want to take the risk. And you may simply say, if you do not do your identity verification, your customer due diligence now, we will not proceed with signing this agreement. That’s your decision. You have the right to privacy. You also have the right to not purchase a property.

Peter Fletcher
Wow. Yeah. Yeah. Okay. That works.

Ches Rafferty
Because you can imagine, of course, what would every criminal say? I don’t want to provide information. I want to provide identity. So I think reasonably fairly, Oztrak has to be very black and white on that, that there is no gray area of, oh, people didn’t want to do it. Apparently now they can’t find their passport or driver’s license. They’ve got no identity on them. I think that’s just a point. If I was a real estate agent, my personal opinion would just be to be black and white. It’s a government regulation. By all means, do not give me your ID. By all means, I will not be getting a sale agreement from you. Now, if someone wants to tinfoil it all away, that’s their choice. But unfortunately, fortunately, whichever way you want to look at it, we live in a society with laws. There’s lots of laws I’m sure all of us would like to not do. We’ve all done. I’m not talking about serious ones, but I don’t know. I don’t want to pay a parking fine if I forget five minutes late, but the law is the law. You cop the penalty. And again, I think that’s taking one giant step back. These laws aren’t just to add more compliance and risk mitigation issues. These are about genuinely trying to prevent serious crime. Like money laundering sounds all very, I don’t know, harmless, right?

Peter Fletcher
Kind of like that Breaking Bad. It kind of like, oh, yeah, kind of, oh, they got away with it.

Ches Rafferty
A hundred percent. Yeah. But then if you seriously think about what’s behind money laundering, like we’re talking about child exploitation. We’re talking about human trafficking. We’re talking about, you know, drugs. We’re talking about standover tactics. We’re talking about all kinds of behaviors that I can’t think any sensible person would think is a good idea to have in our society.

Peter Fletcher
Yeah. Yeah.

Ches Rafferty
And I think another really important one to know, Australia’s not coming to this first. In fact, I’d go as far as to say Australia’s virtually coming to this last.

Peter Fletcher
Yeah.

Ches Rafferty
UK-

Peter Fletcher
We’ve been a bit behind the pace.

Ches Rafferty
We have been incredibly behind the pace. I think we agreed to do this in 2011. UK implemented it in 2017. New Zealand implemented it in 2019. So we are- and we’re doing it in 2026. So we’re seven years behind a country, and I’m not being disrespectful of New Zealand, but a country that is one-fifth, one-sixth of our size and population managed to pull it off six years, seven years before we did. So it certainly, you do hear a bit of chicken little like, that’s it. Every real estate agent’s going to shut down. Lawyers will shut down. And you say, well, they won’t.

Peter Fletcher
They won’t. So I think you’re right in saying real estate agents will be better off saying, verify your identity. Once you’ve verified your identity, then you can make an offer.

Ches Rafferty
Yes.

Peter Fletcher
The advantage of doing that is the name on the offer will be accurate.

Ches Rafferty
Absolutely. Yes.

Peter Fletcher
Which it’s often not now.

Ches Rafferty
Absolutely right. And again, if anything is to change, if someone gives you one name, you know, obviously if they give you John and the name and the ID is Jonathan, fair enough. But if they give you the name, you know, Peter, and then you get a name, David coming up later, you might want to, you know, kind of, if it’s Peter, David, you might understand why. But if there’s no David on there, hang on, why are you using this name David? You know, these are the types of behaviors that you might then go, well, you know what? I’m going to put a suspicious matter reporting because this guy kept saying his name was David. He’s given me his ID. There’s no mention of David anywhere in his name. Something feels not quite right here. And I’m going to, again, submit one of these reports.

Peter Fletcher
Yeah. Okay. So there’s a case for verification of identity up front.

Ches Rafferty
Yep.

Peter Fletcher
And that will probably work. There’ll be some rejigging of some processes.

Ches Rafferty
Yes.

Peter Fletcher
integrations of verification of identity platforms, yours included, into things like offer platforms, REI forms, that sort of thing. So there’s some work to do.

Ches Rafferty
Yep, there’s some work to do. And there is some expansion on your classic verification of identity, which I guess is more simply, generally it’s a few pieces to it, but generally is, is that person real and do they belong to the IDs presented? So some biometric analysis on the faces on there and also taking that information and doing some back-to-source verifications. You know, is that Western Australian driver’s license data or details matching to what’s on the Western Australian driver’s license database? You have to expand that further, which is to do what’s known as sanctions and politically exposed person’s checks. So that sanctions are, are you actually on any of these money laundering watch lists? Every country in the world has them. Sorry, money laundering and terrorism watch lists. And then the second one is what’s known as politically exposed persons checklists. I won’t go into it because it’s quite complex, but in simple terms, it’s, is the person you’re dealing with a person in a position of authority? Think anything from a judge to a politician who could be subject to corruption. So the classic example I give to someone is, imagine a UK Supreme Court judge is buying a house in Australia. They would be very well off because of their career and even what they’re getting paid UK Supreme Court judge, buy a $2 million house in Margar River, if you can find one for that price. If you saw someone perhaps from a poorer third world country who’s a judge and their salary is supposed to be $25,000 Australian dollars a year, buying a $2 million house in Margar River, probably want to ask a lot more questions. Won’t go into really more detail than that, but that’s some of the other things that again you’ll need to provide those suspicious matter reports.

Peter Fletcher
Now, there’d be people listening to this going, how would I know if somebody’s politically exposed? How would I know if they are on some sort of counterterrorism watch list? Are there going to be platforms that will address that issue?

Ches Rafferty
Yeah, look, and not to-

Peter Fletcher
Go on, promote. Get into it.

Ches Rafferty
Something that we already do for other clients. It’s built into our core systems already used by real estate agents and conveyances currently. It’s not turned on for those industries because, as I said, there’s no requirement for it. But that will simply be another check in our system to say we’ve done these other checks and there’s nothing to return. Or alternatively, we’ve returned this. We’ve seen a match that seems suspicious.

Peter Fletcher
And will that give the real estate agent or the conveyance a safe harbor? So if I run a client through the system that you’ve developed.

Ches Rafferty
Yes. And it comes back as saying, yep, this client is good to go, not politically exposed, not on a counterterrorism watch list. Yep.

Peter Fletcher
And two months later, it is revealed that they actually were.

Ches Rafferty
Yes.

Peter Fletcher
Is that going to give us safe harbor to say, yeah, well, we did all of our checks.

Ches Rafferty
Yep. What will give you safe harbor?

Peter Fletcher
And this is a really tough question to ask, isn’t it?

Ches Rafferty
It is a tough question. It’s a curly question. And I hope none of this I’m trying to appear like I’m trying to evade the questions when I answer it. At a simple level, the business is always responsible. There is no way to abrogate your actual risks. In other words, because, of course, Australia’s not dumb. They know what everyone would do if they could do that. Everyone would just outsource their risk to a third party and say, hey, those guys handle everything. They stuffed up. Kick them in the butt. You can’t do that. What obviously you can do, and you can use the party providers to do that, is if you have done what you just described there, so you’ve done it correctly, the information clearly articulates that everything was clear. You maintain the records. Now, record keeping is, again, understandably a core component of what you need to do under your obligations. Specifically so, if Oztrak comes later on, they can show that you kept getting warnings saying this didn’t seem above board, and you’re like, I don’t think they really meant that. like, well, the other partner said that there’s concerns here and you didn’t follow the suspicious manner report. But as long as you’ve done that and you can show that, because you’re quite right, obviously a person can be legitimately on a, not be on a watch list today, but can be on a watch list in two months time. And how are you to know that? That’s not your job. There is, and I feel like this is part of everything I say with these changes coming. There’s always another but to this. And one of them is, and I don’t think it affects many businesses that are under the Oztrak regime. My feeling is it will affect very few businesses under who are real estate in the real estate and conveyancing sector is if you have an ongoing relationship with that person, you’re required to do what’s called ongoing due diligence. And that is specifically for that example, make it really simple. You open a bank account, you’re not in a watch list. The bank is required to do regular rechecks to make sure that you’re still not on a watch list. because you’ve got the bank account. In individual transactions, I don’t see it being necessary because average seven years, a property person buys and sells a property on average, I think. They may not go back to the same real estate agent. They may not go back to the same conveyancer. Those people might’ve moved on from the business, et cetera, et cetera. I don’t see any need to do that. There may be some special cases. For example, if you work with a a professional buyer, right? Someone who buys and flips property for a living, you probably will need to do ongoing due diligence on that and not just say, hey, Peter signed up two years ago. That’s fine. I don’t need to verify him again. You probably will need to say, okay, he buys properties every two, three months of me. I’ve got some little check that once a month goes and checks that. You don’t have to go get the data off him again, the ID. You just keep checking, are they on any watch lists?

Peter Fletcher
So you ping your database or your system? which then returns a negative match and you’re good to go.

Ches Rafferty
Still keep saying, still good, still good, still good. And of course, if it pops up, lagging that to that business saying, hey, this person we’ve done 10 times in a row is all good. This last time has popped up with a warning that they appear to be on a watch list.

Peter Fletcher
And people’s circumstances do change.

Ches Rafferty
Absolutely.

Peter Fletcher
You could easily imagine how that might happen. What about for sellers? Do you have to do that with sellers as well?

Ches Rafferty
Yep, buyers and sellers.

Peter Fletcher
Buyers and sellers.

Ches Rafferty
Yep.

Peter Fletcher
Because we don’t know where the money is going to.

Ches Rafferty
Yep.

Peter Fletcher
Okay. On the money side of things, are we required to know where the funds are coming from?

Ches Rafferty
So again, this falls into one of these gray areas again. If the way that that money is coming appears to be non-suspicious, then you do not need to. So a simple example, I just sold a house with an agency. They know that I, you know, sold it for $1.5 million. Now I’m buying a $1.55 million house and how you’re affording it, I’m affording it from the money from my last house plus a loan from my bank. Okay, pretty straightforward. If the way that they engaged in that transaction changes, then you may be required. So let’s say I say I’m going to pay with this financing. most loans, right? Most transactions. And then I suddenly come to you three or four days out from perhaps at settling and go, you know what? Actually, I just think I’ll pay cash for that one and a half million dollar house. That’s very unusual position to go from. I’m going to get financing to I’m going to pay cash. That’s quite a change. In that case, you might want to ask, where did that come from? Now, maybe they sold the business recently. Maybe they had other investment properties, in which case you get that information, the source of their funds, And you put that into it and then you decide that feels normal or if it still seems suspicious, it hasn’t truly answered that, you would need to then provide another suspicious matter report.

Peter Fletcher
So this is going to be, this little area here is going to throw up some real ethical problems. And let me explain.

Ches Rafferty
Absolutely.

Peter Fletcher
So I was involved in a transaction 18 months ago, property at about 2.6 million.

Ches Rafferty
Yep.

Peter Fletcher
And competitive offer situation and my client made an offer of 2.6 million cash.

Ches Rafferty
Yep.

Peter Fletcher
And so I said to my client, now you understand that 2.6 million is cash, is cash. It means you have the money. Do you have the money? Well, no. I do, but I don’t have it like now.

Ches Rafferty
Yeah.

Peter Fletcher
But I will. Okay. How are you getting this cash?

Ches Rafferty
Yes.

Peter Fletcher
Well, it’s coming in from overseas.

Ches Rafferty
Yep.

Peter Fletcher
Okay. Are you, do you know how it’s going to come in? Yeah, yeah, yeah. Now, you understand that, you know, like 2.6 million coming in.

Ches Rafferty
A chunk of change.

Peter Fletcher
Coming in from overseas.

Ches Rafferty
Yep.

Peter Fletcher
Is going to get the attention of Oztrak.

Ches Rafferty
Yes.

Peter Fletcher
There’s no question about that.

Ches Rafferty
Over $10,000. So there’s your answer. Significantly over.

Peter Fletcher
Yes, yes. All good with that. I’m happy with that. Okay. And sure enough, about five days before settlement, $2.6 million appeared in their account.

Ches Rafferty
Yep.

Peter Fletcher
And $2.6 million appeared in our trust account.

Ches Rafferty
Yes.

Peter Fletcher
Now, the answers to my questions around, well, where’s it coming from overseas?

Ches Rafferty
Yep.

Peter Fletcher
I felt quite, well, there was part of me that thought, is this legit?

Ches Rafferty
Yeah.

Peter Fletcher
There’s another part of me that didn’t want to pry into someone else’s business.

Ches Rafferty
Yeah.

Peter Fletcher
People have overseas businesses. I know this person was connected to overseas and both through birth and through family and business connections. So 100% could be legitimate.

Ches Rafferty
Yeah.

Peter Fletcher
And this person, I would class them as a mate.

Ches Rafferty
Yeah.

Peter Fletcher
Like not a close mate, but, you know.

Ches Rafferty
Yeah.

Peter Fletcher
Somebody I could go to the pub with and have a beer with.

Ches Rafferty
Yeah.

Peter Fletcher
So there’s the scenario.

Ches Rafferty
Yes.

Peter Fletcher
What’s the, where do we, how do we play that?

Ches Rafferty
Yeah. Now, I think, first of all, I think sometimes it’s easier when there is actually clear government regulation because it’s not so much you asking as an individual from someone. You’re stating this is a legal requirement. Here it is very clear in the act that this is something I need to do. So, I think that can sometimes help. If a person is unable to give you the data that would make you feel confident. And again, let’s take the ridiculous example. It’s Bill Gates. He goes, yeah, I’m going to transfer some money from international. you know it’s Bill Gates you don’t have to worry about asking these guys going to have money all over the world it’s it’s a rounding error for a guy that’s worth whatever he’s worth 100 billion or something um if it’s someone who’s not answering and isn’t able to say very clearly I’ve got a business in Singapore it does x y and z here you can see the website um you know here’s some newspaper articles about how successful it is and I’m going to transfer from my international thing and I’ll show you coming out of a bank account the transfer from my company in Singapore into this bank account in Australia. Here’s a transfer. And you go, that all seems legit. You would want to keep, again, as part of the record keeping to show you’ve done that. That’s all you need to do. If someone’s very, and you probably say, look at all, that doesn’t feel suspicious at all, right? That feels, I don’t want to sort of oversimplify this, but there is a little bit of, with this process, does it pass the pub test, right? If you’re sitting there going, I still don’t really get where that money came from. That’s when, again, you want to, again, it’s very important that you don’t block the transaction. You have no requirement to be a, it’s not even, I guess, a police officer. It’s more of a judge, right, to make a call on what happened there. It’s simply to say, the guy goes, oh, yeah, here it is. It’s like XYZ Corporation, XYZ. What’s XYZ Corporation? Oh, that’s, you know, some business stuff that I sort of have overseas. Okay, that would not fill me with confidence. You’d flag it, you’d put the suspicious matter report in, and you’d sell the property to the person. so again it’s very important to it’s kind of it kind of sits weirdly in your head you’re like but i think they’re doing something illegal it’s like and then i still proceed it’s like yes you still proceed even if you think it’s illegal it’s not your job to make the decision it’s the job of oztrak and then oztrak if you think about it is uh is the regulator but they’re also kind of the clearinghouse they collate all the data and then they decide which government agency whether that’s say, Border Force or Federal Police or ASIO gets that parcel of information, perhaps all three of them. Your job is to, I guess, to, you know, it’s oversimplified, almost be a clerk that’s just kind of collecting information and just handing it on. So, and obviously if someone’s like, I can’t tell you the money came from and I can’t do this, that in itself is incredibly suspicious, right?

Peter Fletcher
So, basically the government want us to dob on people.

Ches Rafferty
Government want us to provide information that will assist them to prevent criminal activity. Yep. Call it dobbing. Again, to my earlier comment, if you really dial this back, yes, there is quote unquote victimless crime. Maybe someone’s doing tax evasion in their country or something like that. You know, plenty of country, people in countries that have restrictive foreign transfers, for example, like to try and get their money out to safe places, which Australia is. Call it quote unquote victimless. But again, inside all that victimless is incredibly victim and harmful. This is true, but equally there’s people that are completely innocent who are accused of something that they didn’t do. You’re not accusing them of anything. You’re simply stating that their behaviour was… No, but I’m providing them, providing a government body with the… Sure, but let’s say…

Peter Fletcher
With the tip off.

Ches Rafferty
I don’t know. you see me doing something weird at my house and you’re ringing the police and the police come around and I’m like, I don’t know. Uh, it looks like he was doing something really weird. He’s got his white powder everywhere and it’s going everywhere. And the cops come around and go, oh man, I’m trying to plaster my bloody house and look at this mess. I’ve got white powder going everywhere. It’s not a cocaine operation in my whatever. Yes. You’ve dogged me in the police come around. They’re looking and go, this guy’s just got plaster all in his. Hmm. Um, It’s about making that, but in the case where I have got massive amounts of cocaine, we’re preventing those illegal drugs going into our streets. So, it’s, again, it’s not our job. It’s our job to report suspicious behavior. It was the one we had a lot around 9-11, you know, if you see something, say something. It’s that sort of mindset. I imagine, without knowing any of the numbers, that 99% of stuff that goes into Oztrak just goes into a giant shredder at the end of it effectively in a sense that they’re like, what’s this? No, that’s just a guy transferring money. I imagine a very, very tiny percentage of that is ones where Oztrak is like, this doesn’t make sense.

Peter Fletcher
Let’s follow this up or give it, as I said, to those agencies to follow up to try and determine if there’s illegal behavior. Okay. So let’s say that these regulations were already in effect.

Ches Rafferty
Yes.

Peter Fletcher
And I’ve done this transaction that I just described.

Ches Rafferty
Yep.

Peter Fletcher
And let’s say my mate was actually laundering money.

Ches Rafferty
Yep.

Peter Fletcher
And I didn’t file a report, didn’t do my stuff. What happens to me then?

Ches Rafferty
That would be a bad idea. So, Oztrak is an incredibly powerful agency, not well-known. The powers they have under the Act are vast. So, first one that’s really, really quite full on is they have the capacity to put criminal charges, not just civil charges, on you. So, that is failing to submit a suspicious matter, for example. Again, I was trying to not come over someone making a simple mistake and forgetting to do something, right? But deliberate egregious behavior, they have the right to do.

Peter Fletcher
What if my mistake was simple?

Ches Rafferty
Yep.

Peter Fletcher
And it was like I thought, you know, like I assessed it. I go, I actually think this guy’s legit. I’m not going to put in a report.

Ches Rafferty
Yeah.

Peter Fletcher
And so I’ve done what I think is right.

Ches Rafferty
Sure.

Peter Fletcher
But then they could come after me and then what sort of fines could I be-

Ches Rafferty
Well, look, I mean, the fines range, I mean, literally they range up to $6 million for an individual and $24 million for a business now.

Peter Fletcher
In other words, I’m out of business.

Ches Rafferty
Effectively.

Peter Fletcher
I’m broke and I’m out of business.

Ches Rafferty
Look, I’ve heard some people say things like, I’m just not going to bother to enroll when that first July comes around. If you’re just not enrolling, they’re entitled to charge you penalties of like tens of thousands of dollars a day every day that you’re not enrolled.

Peter Fletcher
Right. So you’ve got to enroll in this thing?

Ches Rafferty
Yes.

Peter Fletcher
And there’s a second word for-

Ches Rafferty
Okay. So this one, enroll and register. Good news is you don’t have to worry about the register. So the register is only for the Ritminton’s company.

Peter Fletcher
So this is the business?

Ches Rafferty
This is the business. So enrolling is, there’s a few key elements to it. So enrolling is, you need to actually say to Austrac, you know, we are a real estate agent. We will fall under what’s known as a designated service provider because of these new changes coming in. Here is our corporate structure at a high level, you know, how we own, who owns us, who’s our director, and who, again, is going to take on the compliance officer role and be that, as I said, the person who ultimate responsibility sits with. Now, in large organizations, let’s take your Commonwealth Banks, for example, or, you know, a big remittance company. Understandably, they pay people lots of money to take that role on and the risk with it, right? And of course, that person’s role is also to then make sure that the company is adhering to it because otherwise they’re on the hook. I don’t think many small businesses, and in most cases, real estate agents and conveyances are going to fall into the small business category, are going to be able to convince too many staff to take legal responsibility for failing to meet their obligations. So I think in that sense, the director, the CEO, the proprietor, the licensee is going to be the person who has the ultimate risk for it.

Peter Fletcher
And it has to be a real person? As in…

Ches Rafferty
Are we talking about every real estate agent renaming their dog Johnny or something?

Peter Fletcher
No, it has to be an individual. It can’t be a corporation.

Ches Rafferty
No, it has to be an individual. Again, Oztrax, fairly clued up. They’ve thought about what would every business organisation sensibly do to remove risk, and they’ve stripped that out. And that’s why, for example, you specifically, you don’t just get to say, we’ve got five directors. And then obviously, if it all goes wrong, you can jump ship and go, there’s only one director left. You have to nominate a specific person who is the only person who’s responsible for this.

Peter Fletcher
So this person is in the frame for the $6 million welcome home.

Ches Rafferty
Yes, the daily fines. If you don’t register, sorry, don’t enroll, don’t use register. That’s a word you, again, people say both. Only one you have to worry about. failure to submit suspicious matter reports, failure to, you have to do annual reporting, failure to do annual reporting. There are lots of ways that you can be caught out. Again, I don’t mean caught out in the sense that, you know, you forgot to do one simple thing, you made a small mistake. But obviously if, and I have unfortunately, and this happens in every industry where government regulation comes in, people that kind of take the hard position of, no, government’s going to come into my business and tell me what to do. You’re like, you don’t pay taxes? I’m pretty sure you do. So there’s a few people playing tough, but yeah, this is not like ATO, right? Where you can play stupid with ATO and they’re very commercial. So the ATO will say, hang on, you haven’t filed a tax return for three years? Right, Let’s have a conversation. Here’s what you back pay. Here’s your interest. We’ll square this all up. Away you go. If you’re playing like that with Oztrak, they have the capacity to literally shut your business down. And again, it makes sense. We’re dealing with very serious issues. They can’t afford to be playing with people who want to just try and, let’s be blunt, play silly buggers. There’s no gray area for you to move into. You’re either black or you’re white if you want to be black.

Peter Fletcher
Which is a bit rich coming from an organization that has sat on their hands for the last 10 or 12 years.

Ches Rafferty
Well, I mean.

Peter Fletcher
They could have brought this in over the last.

Ches Rafferty
It does require, we’ve obviously had an election, but not to throw anyone. Multiple successive governments of all persuasions have not been convinced to bring this in. So Oztrak is obviously a regulator, but they can only regulate the laws that the parliament puts in. And until November last year, those laws had never been passed. So the regulator had no capacity to do anything. I’m sure they advised government, hey, this looks pretty poor. The rest of the world’s already done this. Our closest neighbor and ally did it five years ago, six years ago. UK, one of our closest allies did it coming up eight years ago. But unfortunately, if the government doesn’t pass it, then we just sit there looking a bit silly.

Peter Fletcher
So back to Jay and Jamie.

Ches Rafferty
Yep.

Peter Fletcher
Bought this property, done the due diligence on them. And they, no, back to my example.

Ches Rafferty
Yes.

Peter Fletcher
And I fail to, I do my due diligence. I fail to submit a suspicious matter report. Yep. Oztrak come after me.

Ches Rafferty
Yes.

Peter Fletcher
With a big fat.

Ches Rafferty
Fine.

Peter Fletcher
Six million dollar fine.

Ches Rafferty
Yep.

Peter Fletcher
plus another fine from a business.

Ches Rafferty
Yep. Now, those are maximum fines. I don’t necessarily think they’re going to be firing $6 million fines, but could they be firing multi? Look, to give you an example, in the UK, firms have been done for multi-100,000 pound, I believe it’s pound, but more equivalent Australian dollar fines for that type of behavior.

Peter Fletcher
Are there going to be insurances that can be put in place to insure me against that risk? Because it’s almost too big a cross to bear.

Ches Rafferty
It is. And look, a big part of this is, and it’s really important for this, is record keeping. So, if the record keeping shows that you got all this information back and you didn’t file a report, and they didn’t send me any logical reason why you wouldn’t file a report other than, it looks like Peter and this guy head to the pub every month or so, you’re probably going to cop a sizable fine. If they came down and you’ve put notes in there that say, you know, this didn’t seem to make sense or the information he provided about his source of wealth seemed pretty legitimate. You know, now it makes sense I didn’t do it. And they can look and go, well, yeah, okay, that’s fair enough. To give you an example, on Austrack’s own website, when they give examples, so there is no exhaustive list of what would be a suspicious matter report. Maybe we should just call them SMRs going on. We’ll make this conversation faster. There are literally dozens, and I’m not talking low dozens, I’m talking high dozens, 100 different examples and scenarios where they would recommend that you would fire a suspicious report. And that’s everything from questions they might ask you, such as, is this something Oztrak looks at when I am doing this transaction, through to things around, well, if I did it this way, that would probably be better for me not having to pay tax on this, right through to obviously, you know, obvious criminal things. Someone said something, I’m doing criminal or their ID documents don’t check out. Like the list is non-exhaustive and yet it’s incredibly comprehensive alone.

Peter Fletcher
So using my example, let’s say that I was an employee of the firm.

Ches Rafferty
Yep.

Peter Fletcher
So I’ve had this conversation with my mate.

Ches Rafferty
Yes.

Peter Fletcher
So I’ve, I’m out in the field. So my principal is back in the office.

Ches Rafferty
Yes.

Peter Fletcher
doing principally things, you know, just checking stuff. And I’m out in the field and I’m on the front verge of this house and we’re having this conversation.

Ches Rafferty
Yep.

Peter Fletcher
Mate, where’s the money coming from? Don’t worry about it, mate. It’s coming from overseas. It’s all good. It’ll be here. And I, as the employee, don’t report that back to the office. Now all the office sees is a cash deal.

Ches Rafferty
Yes.

Peter Fletcher
And now the, and that’s, that’s it.

Ches Rafferty
Yep.

Peter Fletcher
They, they, how do they know?

Ches Rafferty
Well, exactly. So, you know, so, so the print, the principle of the agency does all I see is a cash offer.

Peter Fletcher
And that’s, I don’t know whether it’s, it’s right to expect that for them to know more. Look, one thing we didn’t cover is it is important that under this regime, all staff or at least all customer facing staff are required to have some level of understanding that they are now sitting under an AML CTF program in their business. Can they be fined as well?

Ches Rafferty
I don’t believe individuals can be fined for that.

Peter Fletcher
Okay.

Ches Rafferty
But they have a requirement at least to report to you. Perhaps the other way around. The guy came in, he was talking to me. I’m the receptionist. And he started asking about how we could send the money in different ways. And could he come down here with just cash instead of paying this? That front level employee facing customer has a responsibility to take that up. And say, oh, he came in actually and just said something really weird about how he wanted to bring in a briefcase of cash instead. And I said, I don’t think we do that. but I want to let you know, then you again would be in your obligation. Of course, if Oztrak came along and then I have to ask your employee, oh, I told Peter quite clearly, he said he wanted to pay cash. Again, that would fall back on yourself. So, you know, Oztrak is not stupid. They’re aware that criminals, hopefully, not hopefully, that’s definitely the wrong word to use. They expect criminals are likely to be somewhat self-aware of Oztrak and to try and probably ask things intelligently, which is, I think, why they cast this net so wide of, you know, here’s anything that might fall under suspicious. And I think you’ve got to separate one that we perhaps haven’t talked about is what do you care most about? Do you care most about your mate potentially money laundering or do you care most about your business? And hopefully, I expect Oztrak’s belief is the vested interest of an individual is, you know what, I submit the report. I never mention it’s submitted.

Peter Fletcher
Sorry to interrupt, Ches, but my concern is for the principals of agencies out there who they just are not aware or I don’t know how they could reasonably be aware of the source of the funds unless, of course, it gets pushed to, as often is the case, the settlement agent.

Ches Rafferty
Yes. So, yeah, and again, partly why there is the top and tail of the real estate transaction has both been included in this process, I believe at least, is to have that backstop, right? We’re getting two, you know, bites of the cherry, so to speak. We have the real estate agent at the front doing it, and then we have the settlement agent in the back. And then hopefully, if this person is doing suspicious behavior, one or both sides pick that up and send that through. So, that’s probably why they have this stop gate procedure. Because you can imagine the flip side is, why don’t I just let settlement agents handle it all? They’ve got the title risk, why not put all the other risk on them as well? And I think it’s probably because there’s probably a lot of that early conversation at the real estate level that the conveyances simply don’t get a lot of that, what would you call it, color around that property transaction.

Peter Fletcher
What is the process? What are the triggers for identifying suspicious behavior? So as a settlement agent, we’re sitting on a $2.6 million cash transaction.

Ches Rafferty
Yes.

Peter Fletcher
And the conveyancer says, we’ll need the money into our trust account five days pre-settlement.

Ches Rafferty
Yep.

Peter Fletcher
Client says, no problems at all. And the money turns up. Yep. How do we, how do we say, oh, well, that’s suspicious. Again, it’s, and part of this,

Ches Rafferty
it really is, there’s a lot of this part of the journey, a lot of subjectivity, right? So again, if that makes sense for why the person is paying 2.6 million, if they’ve got a history of buying, selling property, all these things can do it. If a 18 year old kid turns up and says, I want to pay $2.6 million to buy this property, should flag off a hell of a lot more questions than a retired couple buying a $2.6 million house. That’s not unusual. What’s the money coming from? We just sold our family home. We’re downsizing, moving south, whatever it might be. All of that wouldn’t really fire off too many questions, but an 18-year-old kid turns up and sort of says, I’ve got 2.6 million or someone whose career doesn’t seem to reflect their cash. Yeah. You know, I’m a, I’m a 28 year old, I don’t know, chef. You’re buying a $2.6 million. Like chefs, you know, you know, they can earn good money. They can be in the mines. They can do stuff like that. But like, that’s a lot of money for anyone to be buying at that age. Now he might quite simply say, Hey, have a look at mom and dad. They’re very successful. They’ve lent me two of the 2.6. No problems. But again, that’s getting that source of wealth. you aware of any visibility that we will have into the source of the funds? As in, will

Peter Fletcher
we be able to see who the sender was?

Ches Rafferty
I think that will depend on how they provide the information to you. So if they are able to provide some kind of receipt, for example.

Peter Fletcher
I think in some other jurisdictions, there is a required visibility into the transfer of funds so that you can see both the sender and the receiver.

Ches Rafferty
Yes. Which would go a long way, at least if you- It would also go a long way reducing fraud.

Peter Fletcher
Exactly.

Ches Rafferty
Broadly. Now, I’m pretty sure all of the big four have now committed to have that in, I think it’s 2026 as well, so that they will actually truly be able to say the name on the sender. And we already, I think we may have spoken about this last time. We already have that to an extent. If we use the pay to Oscar.

Peter Fletcher
Pay ID.

Ches Rafferty
Pay ID. You can’t spoof yourself when you send it to someone, right? He will only send you the bank accountant holder’s name as the person transferring that money. That is going to be expanded out across whatever. And, you know, as I spoke about previously, it has been one of my giant bugbears around fraud. The UK forced it in, I don’t know, a decade ago, decade plus. Their bank fraud dropped like 80% overnight when they did it.

Peter Fletcher
If we had that in place, a lot of the frauds would go away tomorrow.

Ches Rafferty
And when we see it time and time again, it’s almost maybe weekly, a bit of a gross exaggeration, but very regularly, monthly, we see these frauds where they obviously get the intercept invoice and someone transfers money to a real estate agent, or they think they’re transferring it to a real estate agent, of a conveyance and they’re transferring it to a criminal organization just wouldn’t happen if you looked at it and it went, well, that’s not the name of my conveyancing or real estate firm. I think why it frustrates me so much is it is solved and the banks are just literally taking their time because it’s going to cost them money to do it.

Peter Fletcher
Honest to God, the banks are taking the piss.

Ches Rafferty
Yeah. And the government to be the flip side, and again, I don’t want to blame governments because it’s successive, could have been solved a decade ago if any government of any persuasion had stepped in and said, you’ve got 12 months to do this. Well, how much are you guys making profit a year? 8 billion. We’re going to take 25% of your profit until you get this resolved. It’d get done in two weeks. Side note anyway.

Peter Fletcher
Ches, I’m just mindful of time. You’ve got places to be. I’ve got places to be. We’ve only just scratched the surface on this. I’m hoping we can do a follow-up session on this.

Ches Rafferty
Absolutely.

Peter Fletcher
there’s a massive need to educate the industries we represent or that I represent or don’t represent, but I’m part of real estate and settlements. There’s a massive education piece required there. And there’s a lot of people that just are not aware of what’s the tsunami that’s coming. And look, I would say, to be honest, it’s the vast majority of people

Ches Rafferty
unaware and that’s in no criticism whatsoever. Partly the legislation got passed. I don’t know if you sort of remember that weird day they had in parliament last year where they passed 30 acts. There was virtually no awareness in the industry or people providing AML, CTF that this was going to get passed because it had been told so many times it was going to come at some stage. It was almost when you read it the next day, you’re like, there’s no way they wouldn’t just slam that through in one evening. And yeah, they did.

Peter Fletcher
Yeah.

Ches Rafferty
So that doesn’t help. Look, and I think the other really important bit is we are in the education phase of this process. So there’s several things that I’d like to kind of finish with because one is, as we mentioned, the day is the 1st of July, 2026. We’ve got over 12 months. There is now need to panic or rush into this. This is the phase to get educated. The second really important piece, because unfortunately, anytime significant regulatory changes occur. Excellent businesses are already there or coming potentially from other markets to support it. But of course, what we also get in these situations is the fly-by-nighters, people in here who are just trying to make some quick cash. I’ve seen a lot of things saying, A, people have a fully compliant solution. Let me be clear, it is impossible to have a fully compliant solution. And the reason is, AUSTRAC will not be releasing the industry-specific guidelines that real estate agents and conveyances and the other sectors I mentioned until January 2026. You cannot get yourself set up and compliant before January next year. So let’s make that really clear. So for a start, don’t panic, be aware, start learning, but you don’t have to, you cannot do anything until after January. That’s really important. And the second one is trying to handle this all yourself, I genuinely believe is a recipe for disaster. But there are good technology providers out there that can assist you to make this process and not just technology, there’s service providers as well that can make this much simpler for you. There’s going to be a lot. Do your research, find trusted businesses, be aware of course of the classic, you pay for what you get. So some of these fly by nyers will come in and tell you they’re going to solve everything and it’s going to cost peanuts. You will have to pay a bit of for this. But I think, and I’m not talking, I think you’ll see people come from both things. I think you’ll see fly-by-nice, I’ll tell you it costs nothing and they’ll provide you nothing. You’ll have other businesses that will come in and tell you you need a gold-plated toilet and will charge you tens of thousands. Just take your time, look what’s happening. And again, you cannot do anything before January. I would also caveat that very carefully. Do not wait until June next year to start looking at this. That is a recipe for disaster. And let me make at how clear it’s a recipe for disaster. You have to enroll with Oztrak. It currently takes three weeks. There are currently 15,000 registered designated businesses under Oztrak. It goes to 90,000 with these new businesses coming on. If it takes three weeks today, I would not be surprised if it may take months for enrollment. If you are not enrolled, if you do not have a program, if you do not have your staff trained, and if you do not have a way to do customer due diligence, You cannot settle a property. You cannot sell a property. It’s that serious. So, whilst I want to say don’t panic, you’ve also got to be smart.

Peter Fletcher
Start moving.

Ches Rafferty
Start moving. Start planning. So, in, say, February or March, you’re making those decisions, giving yourself a really nice window so that you can roll in. You’re already set up. Everything’s in place. You might even start doing this before July so that when July 1 comes around, you’re like, we’ve been doing it for six weeks. Everyone in the team knows the process. It’s business as usual. No one’s stressed. move on. So that’s sort of like ended. So hopefully that’s not a too serious a note, but it is really critical. It’s a good way to put it, Ches, it’s start doing stuff now.

Peter Fletcher
Yes. Educate yourself, start preparing, get yourself enrolled when you can and start some sort of compliance program. Now you guys are building a platform. Is that right?

Ches Rafferty
Yeah, so we’ll be announcing it very shortly, but it will be an end-to-end tranche to AML-CTF compliant program. And what we mean by end-to-end, there are certain elements that a business has to do directly that we can’t be part of. For example, enrolling, but we will assist businesses to make sure they enroll correctly. But helping create a tailored program that you need, helping make sure that that tailored program and your customer due diligence match up. Having that technology when these matters we believe are suspicious, giving you advice around why we think they’re suspicious and why we would advise that you put a report in. As I said, it’s technology. We can’t see those conversations you’ve had. So, you’ve got to have that awareness of like, I felt uncomfortable about this conversation. I’m going to flag off, sorry, flag that and file a report. And then again, making sure all that record keeping is in one place and then also assisting with that in annual compliance requirement you have to do as well. And again, the annual compliance requirement, I think currently sits around 100 questions. So it’s quite a detailed annual compliance obligation you have. We’ll be announcing that very shortly. We’re getting a lot of excitement around it because some providers out there only do certain elements of this. They might only help build a program or they might only help do the customer due diligence. But I believe that Complexy is going to be managing all those different elements. And that’s why we want an end-to-end solution.

Peter Fletcher
Well, I’m excited to see it. Ches, when it rolls out.

Ches Rafferty
You’ll be the first to see it.

Peter Fletcher
Excellent. All right. Thanks so much for your time. And I’ll see you on the next episode.

Ches Rafferty
Sounds good. Always a real pleasure having these chats.

Peter Fletcher
Good, Ches. Thank you. And that wraps up another episode of the WA Property Q&A. We hope you found our discussion valuable and gained some valuable insights into the world of property buying in Western Australia. Remember, while we strive to provide useful information, it’s crucial to consult with the appropriate professionals before making any investment decisions. Don’t forget to tune in next week for another exciting episode where we continue to unravel the mysteries of the WA property market. If you have any questions or topic suggestions, feel free to reach out to us. Until then, happy property hunting and remember to seek the right advice for your personal circumstances. Thank you for listening.