After being seen as an attractive avenue for money laundering, Australia’s real estate sector now faces one of its biggest regulatory shake-ups in decades, placing a raft of new compliance obligations on agencies and underlining the importance of having appropriate management liability insurance coverage in place.
From 1 July 2026, real estate agents who broker property transactions and property developers who sell directly off-the-plan without an independent agent will be classified as “reporting entities” under Australia’s anti-money laundering and counter-terrorism financing laws.
What Agents Must Now Do
The new obligations are wide-ranging.
Real estate agencies must develop and maintain a tailored AML/CTF program that identifies, assesses, mitigates and manages money laundering risks. They must implement customer due diligence procedures to verify client identities, understand the nature of business relationships and monitor transactions for suspicious behaviour.
Suspicious matters, threshold transactions and international funds transfer instructions must be reported to AUSTRAC within specified timeframes and detailed records must be kept for a minimum period as stipulated by the legislation.
Penalties for Getting it Wrong
Non-compliance carries serious financial consequences.
AUSTRAC can pursue civil penalty orders of up to $33 million for businesses and $6.6 million for individuals, along with enforceable undertakings, infringement notices and remedial directions.
AUSTRAC has shown it will use these powers and real estate agencies should expect action.
Where Management Liability Insurance Fits In
For a real estate principal, the AML/CTF regime creates real exposure at the director and officer level – not just the business entity.
While no insurance policy covers deliberate or criminal non-compliance, management liability insurance can cover the legal costs of responding to AUSTRAC investigations, defending regulatory proceedings and, where legally insurable, certain civil penalties arising from those proceedings.
As statutory duties on directors and officers increase, coverage for insurable fines and penalties has become an increasingly important part of management liability policies. However, the insurability of fines and penalties as a result of AML/CTF breaches can be an issue. Generally, insurance is not available where the loss is uninsurable at law (whether the policy provides such a term or not).
What does ‘Insurable at Law’ Mean?
‘Insurable at law’ means the law allows an insurer to pay out for that loss. Insurers are unable to pay some losses (i.e. ‘uninsurable at law’) because public policy says a person or company shouldn’t be able to benefit from deliberate, intentional or wilful wrongdoing and, by extension, may not be indemnified against the consequences of that wrongdoing.
Why it Matters for Fines and Penalties
A fines-and-penalties or statutory liability cover in management liability insurance covers certain fines imposed on a company or its directors, but the insurer will only pay where the fine is insurable at law and where not otherwise excluded by the policy.
Start Preparing Now
Reviewing your management liability insurance coverage should sit alongside building your AML/CTF compliance program, not as an alternative to your obligations.
You should have a clear understanding of what is and what isn’t insurable under your current policy. The team at RealCover can help you to understand your policy and put in place a policy that works for you and your business alongside the new AML/CTF regulations.
To learn more about the insurance solutions available through Realcover, please contact us on 1800 990 312 or visit realcover.com.au for more information.
Marsh Advantage Insurance Pty Ltd (ABN 31 081 358 303, AFSL 238 369) (“Marsh”) arranges this insurance and are not the insurer. The Real Estate Institute of New South Wales Limited (ABN 51 000 012 457) ("REINSW") is an Authorised Representative of Marsh for the purpose of promoting the Realcover products to members of REINSW. REINSW receives a financial benefit on the sale of a Realcover insurance policy arranged by Marsh.This webpage contains general information, does not take into account your individual objectives, financial situation or needs and may not suit your personal circumstances. For full details of the terms, conditions and limitations of the covers and before making any decision about whether to acquire the product, refer to the specific policy wordings and/or Product Disclosure Statements available from Marsh on request. This publication is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Marsh shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Marsh makes no representation or warranty concerning the application of policy wordings or the financial condition or solvency of insurers or re-insurers. Marsh makes no assurances regarding the availability, cost, or terms of insurance coverage. LCPA 26/2132