Deposit Verification
AUSTRAC red flag: depositing cash directly into agent's trust to buy property, then pulling out and requesting refund by different method.
Property Transactions
Source of Funds Verification for Real Estate
How real estate agents should verify source of funds under AUSTRAC Tranche 2. Learn about deposit verification, red flags for property transactions, and documentation requirements.
Key Information
Understanding Where Property Purchase Funds Originate
Source of Funds (SOF) verification is a critical component of your Customer Due Diligence obligations as a real estate agent under AUSTRAC's Tranche 2 reforms. From 1 July 2026, you must understand where your clients' purchase funds originate.
AUSTRAC Risk Assessment: Real Estate
AUSTRAC's Money Laundering National Risk Assessment 2024 found real estate poses a HIGH money laundering risk in Australia. Real estate is one of the most common property types found by law enforcement in proceeds of crime investigations.
Property is attractive for criminals because:
- It can be negatively geared and generate income with strong investment returns
- Real estate professionals are often the first contact point for criminals
- Cash (non-financed) purchases avoid CDD obligations in the regulated loan market
- Complex structures and trusts can hide beneficial ownership
AUSTRAC SOF Red Flags
According to official AUSTRAC guidance, watch for customers who:
- Seem nervous or reluctant to undergo CDD
- Can't explain their source of funds or provide false/misleading information
- Use complex loans or deposits from unusual sources
- Use third-party transfers, private lenders, offshore banks or virtual assets
- Use promissory notes, bills of exchange, or securities payable in cash
- Make full or partial payment in cash to the real estate agent
- Renovate and quickly sell property with no obvious funding source
AUSTRAC Unusual Transaction Red Flags
- Instructions with no obvious financial purpose
- Changes instructions multiple times without good reason
- Asks to hold deposit in trust longer than needed, then requests changes to distribution
- Quickly buying or selling properties for no clear reason
- Offers to pay more than market value
- Happy to accept less than market value
- Directs sale proceeds to unrelated third party
- Back-to-back transactions with rapidly increasing values
- Direct/indirect title transfers where no money changes hands
AUSTRAC Delivery Channel Red Flags
- Wants to complete processes online when usually done in person
- Gives limited contact options (only messaging apps)
- Uses third parties to distance themselves from the transaction
- Uses different name on contract to who you've been dealing with
- Buying property they haven't inspected
Cash Deposit Red Flags
AUSTRAC specifically warns about these suspicious cash activities:
- Depositing cash into agent's trust to buy property, then pulling out and requesting refund by cheque or transfer
- Paying deposit in cash or making large one-off cash payment
- Paying in foreign currency at settlement without legitimate reason
Documentation and Records
Keep all SOF records for at least 7 years after the transaction. Document your inquiries, client responses, and your assessment of whether sources are consistent with the client's profile.
Key Requirements
Cash Purchase Scrutiny
Non-financed purchases have higher risk - criminals avoid CDD obligations and the regulated loan market if they can self-finance.
Third-Party Payments
Using third parties can hide true identity of buyer. AUSTRAC warns this is a key delivery channel risk in real estate.
Overseas Funds
AUSTRAC foreign jurisdiction risk: funds from or sent to tax havens, secrecy jurisdictions, or high-risk countries warrant enhanced scrutiny.
Complex Structures
AUSTRAC warning: corporate entities with complex structures or financing, especially shell companies or trusts for residential purchases.
Red Flag Patterns
Back-to-back transactions with rapidly increasing values, direct/indirect title transfers where no money changes hands.
Frequently asked questions
Why is source of funds critical in real estate?
AUSTRAC's Money Laundering National Risk Assessment 2024 found real estate poses a HIGH money laundering risk in Australia. Real estate is one of the most common property types found by law enforcement in proceeds of crime investigations. Criminals use property to store illicit funds, generate income, and create distance from criminal activity.
What are AUSTRAC's SOF red flags for property transactions?
Key AUSTRAC indicators include: can't explain source of funds or provides false information, uses complex loans or deposits from unusual sources, uses third-party transfers/private lenders/offshore banks/virtual assets, uses promissory notes or securities payable in cash, makes full or partial payment in cash to agent, renovates and quickly sells property with no obvious funding source.
What unusual transaction patterns should I watch for?
AUSTRAC warns about: offering more than market value for property, accepting less than market value, directing sale proceeds to unrelated third party, back-to-back property transactions with rapidly increasing values, direct/indirect property title transfers where no money changes hands, unreasonably urgent transactions or last-minute changes.
How do complex arrangements hide ML/TF activity?
AUSTRAC warns that third parties being responsible for all transaction costs without clear reason is a red flag. Requests for property title to be transferred to complex corporate structure instead of individual buyer is another warning sign. Complex legal structures with multiple company layers or trusts hide beneficial ownership.
What are the foreign jurisdiction SOF red flags?
AUSTRAC identifies: using offshore legal structures without clear reason (especially if in high-risk jurisdiction), customer is foreign resident or based in high-risk jurisdiction, lives in or has company in tax haven or secrecy jurisdiction, funds from or sent to high-risk jurisdiction, funds to/from sanctioned countries.
Streamline SOF Verification
ARCaml provides integrated source of funds verification tools for real estate agencies. Document fund origins, flag suspicious patterns, and maintain audit-ready records for AUSTRAC compliance.