When a property transaction reaches settlement under Australia’s Tranche 2 AML/CTF regime, responsibility for verifying the beneficial owners of the purchasing entity sits with whichever reporting entity is providing the relevant designated service, ordinarily the conveyancer or lawyer managing the trust money and executing the transfer, unless a proper reliance arrangement shifts that verification work elsewhere.
That distinction matters more than it sounds, because a typical property transaction now involves several separate reporting entities, each carrying its own customer due diligence obligation under the Anti Money Laundering and Counter Terrorism Financing Act 2006.
More Than One Reporting Entity in the Same Transaction
A single sale can involve a real estate agent, a buyer’s agent, a financier, a property developer and a conveyancer or lawyer. Several of these businesses may each provide a separate designated service and therefore hold their own AML/CTF obligations.
AUSTRAC’s guidance on real estate designated services confirms that agents, developers and conveyancers can each fall within the regime depending on the role they play in the same deal, and one professional’s customer due diligence does not automatically satisfy another’s obligation.
For conveyancers and legal practitioners specifically, AUSTRAC’s professional designated services guidance confirms that receiving, holding, controlling or managing property when assisting a client to plan or execute a transaction is itself a designated service. This is the service most conveyancing firms provide at settlement, since trust money handling and executing the transfer sit at the centre of the role.
That designated service is what makes the conveyancer, rather than the agent who first onboarded the buyer, the reporting entity carrying responsibility for beneficial owner verification by the time the file reaches settlement.
Reliance Reduces Duplication, Not Responsibility
Buyers understandably do not want to repeat identical identification checks with an agent, a lender and a conveyancer on the same transaction. The AML/CTF Act allows a reporting entity to rely on customer due diligence already collected and verified by another reporting entity, provided a proper reliance arrangement is in place.
As AUSTRAC’s guidance on reliance under customer due diligence arrangements sets out, the relying entity must have reasonable grounds to believe the arrangement is appropriate having regard to money laundering and terrorism financing risk, and must be able to obtain the underlying information within the required timeframe.
This is a genuine efficiency, but it is not a transfer of liability. A conveyancer relying on an agent’s earlier check must still be satisfied that the verification actually covers the beneficial owners of the purchasing entity, not merely the individual who signed the contract. If the reliance arrangement is informal or the underlying verification is incomplete, the conveyancer remains exposed at settlement regardless of what the agent did earlier.
Settlement Has Its Own Timing Rule
Settlement preparation is where a separate but related rule matters. Real estate transactions permit delayed initial customer due diligence, meaning a conveyancer or legal practitioner does not always need to complete verification before providing the designated service.
Under the AML/CTF Rules, that verification must be completed by whichever comes first, twenty eight days after exchange of contracts or three days before the agreed settlement date. On a fast settlement, the three day deadline binds first, and firms working to the twenty eight day figure alone risk missing it.
Why the Ownership Chain Matters More Than the Signature
Where the purchaser is a company, a trust or a self managed superannuation fund, identifying the person who signed the contract is not the same as establishing beneficial ownership.
AUSTRAC’s guidance on determining ownership and control structures confirms that a beneficial owner is an individual who ultimately owns or controls twenty five per cent or more of the customer, directly or indirectly, and that where ownership runs through multiple entities, the reporting entity must follow that chain until it reaches the relevant individual.
A purchasing company held by another company, ultimately controlled by one person, still requires the chain to be traced to that person rather than stopping at the immediate purchaser.
This is particularly relevant for the kinds of layered corporate and trust structures our corporate and commercial law clients commonly use to hold property, where the purchasing entity may sit several steps below the individuals who actually control it. A change of trustee, a new shareholder or a restructure between exchange and settlement can shift the beneficial ownership position, and the conveyancer’s verification needs to reflect the structure as it stands on settlement day.
What Conveyancing Practices Should Have in Place Before Settlement
A practical settlement readiness checklist includes the following.
- Confirm which reporting entity holds verification responsibility for each file, rather than assuming an earlier check by an agent or lender satisfies your own obligation.
- Put reliance arrangements in writing before relying on them, and confirm the third party’s verification actually addresses beneficial ownership.
- Track both settlement timing deadlines, twenty eight days from exchange and three days before settlement, and act on whichever falls first.
- Trace the ownership chain for corporate and trust purchasers, checking again close to settlement rather than only at instruction.
- Keep records showing who verified what, when and under which arrangement, for the required retention period.
Where This Sits Alongside Your Existing Obligations
We covered the broader background to Tranche 2, including what beneficial ownership verification involves and which designated services trigger the obligation, in our earlier article on what the anti money laundering reforms mean for lawyers.
This article picks up from there. The practical question most conveyancing and property teams are now asking is not what verification requires, but who in the transaction chain is accountable for it once the file reaches settlement.
How Warlows Legal Can Help
Warlows Legal advises property purchasers, vendors and firms through our conveyancing law service and corporate and commercial law teams, helping clients work out where AML/CTF responsibility sits in a transaction chain and how reliance arrangements should be documented before settlement.
If your firm has not confirmed who holds beneficial owner verification responsibility on your current files, now is the time to review it. Reach out to Warlows Legal to discuss your settlement readiness under the Tranche 2 regime.
This article is general information only and does not constitute legal advice. You should obtain specific advice tailored to your transaction and business before acting on anything in this article.
