From 1 July 2026, most Australian real estate agencies will become “reporting entities” under the Anti Money Laundering and Counter Terrorism Financing (AML/CTF) regime. AUSTRAC has confirmed that AML/CTF obligations will apply to the real estate sector from that date, supported by new “tranche 2” risk and indicator guidance.

Real estate has been assessed as a high money laundering risk sector, and agents will need to enrol with AUSTRAC, conduct customer due diligence and report suspicious activity, guided by AUSTRAC’s “Risk insights and indicators of suspicious activity for the real estate sector”.

This is a significant shift. A question we’re already hearing from principals is: “If we get something wrong on AML/CTF, will our professional indemnity (PI) policy respond?”

“Over the last 12 months, AML/CTF has gone from a ‘future issue’ to a front of mind concern for our real estate clients,” says Peter Lynch, Aon National Relationship Manager – Real Estate. “Principals are asking very practical questions: What do we need to put in place, what is AUSTRAC expecting of us, and where does our PI insurance start and stop if something goes wrong?

“From Aon’s perspective, the key message is that PI is an important part of your risk framework – but it’s not a substitute for a well-designed AML/CTF program. The agencies that will manage this best are those treating AML/CTF as a business change project, not just an insurance or legal issue.”

PI insurance is primarily designed to:

• Respond to civil claims alleging a breach of professional duty in your agency services

• Pay defence costs in defending those claims

• Sometimes, cover certain regulatory investigations, depending on the wording

AML/CTF obligations, by contrast, are statutory duties owed under the AML/CTF Act and Rules and enforced by AUSTRAC, which issues sector specific guidance and indicators of suspicious activity.

When an AML/CTF failing occurs, the consequences typically fall into four categories:

1. Regulatory fines and penalties
   AUSTRAC can impose substantial civil penalties for serious or systemic non-compliance where reporting entities breach their AML/CTF obligations. (austrac.gov.au) Most PI policies exclude fines and penalties, particularly where they are uninsurable at law or arise from deliberate or reckless conduct.

2. Remediation and uplift costs
   AUSTRAC may expect you to uplift systems, engage external advisors, retrain staff or undertake historical file reviews, aligned with your obligation to assess and manage money laundering/terrorism financing risk and monitor for suspicious activity. These expenses are generally treated as business costs and may not constitute insurable loss under PI. Learn more in AUSTRACs real state program starter kit.

3. Third party financial loss claims
   A client, lender or other party may allege they suffered loss because you failed to apply appropriate AML/CTF controls – for example, a transaction is unwound or funds are frozen. This is where PI may potentially respond, provided the claim arises from a covered breach of professional duty in your agency services and no relevant exclusion applies.

4. Investigation and legal costs
   As AUSTRAC increases engagement with new tranche 2 sectors, real estate agencies can expect enquiries and, in some cases, formal investigations. Some PI policies may include a regulatory investigation or inquiry extension, which may assist with legal representation costs in responding to official investigations. Coverage is wording specific and often subject to a sub limit.

“From an insurance wording perspective, it’s critical that agencies understand what PI can and cannot do in the AML/CTF space,” notes Michael Gapes, Partner at Carter Newell Lawyers. “In most policies we see, civil penalties imposed by a regulator like AUSTRAC are expressly excluded, and remediation costs to uplift systems are treated as business expenses rather than insurable loss.”

“Where PI can be very important is in responding to third party claims alleging financial loss linked to an AML/CTF failure, and in some cases assisting with the cost of regulatory investigations. Whether that cover is available in a particular scenario will turn on the detail of the policy – especially the definition of professional services and any exclusions for statutory breaches, dishonesty or intentional non compliance.”

Real estate professionals are now classed as a designated service under Australia’s reformed AML/CTF framework, alongside other tranche 2 professions such as lawyers and accountants. PI insurance can help with certain downstream financial consequences, particularly third party claims and, in some cases, investigation costs. It will not:

• Pay AUSTRAC fines and penalties

• Fund your AML/CTF program

• Replace robust systems, training and risk culture

Now is the time to use AUSTRAC’s real estate guidance and suspicious activity indicators to build or uplift your AML/CTF program.

To understand how your policy would respond to an AML/CTF breach, speak with your broker or Aon adviser and review your PI insurance now, before the new regime goes live.

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