Every franchisee that brokers property sales is generally a separate reporting entity under the AML/CTF Act. The franchisor's brand does not transfer the legal obligation or liability. However, the AML/CTF Rules 2025 enable franchise networks to form a reporting group where the franchisor acts as lead entity - centralising compliance while each franchisee remains individually enrolled with AUSTRAC.
If you run a franchise real estate network in Australia - or if you're a principal at a Ray White, LJ Hooker, McGrath, Harcourts, or Barry Plant office - you are likely asking a version of the same question right now: Is it my problem, or the franchisor's?
The answer matters enormously. From 1 July 2026, anti-money laundering and counter-terrorism financing (AML/CTF) obligations apply to Australian real estate agencies as new Tranche 2 reporting entities under the expanded AUSTRAC regime. Get the structure wrong and individual franchisees face regulatory penalties for obligations they assumed the network had covered. Get it right and a well-structured reporting group can reduce compliance costs across hundreds of offices while satisfying AUSTRAC's requirements.
This guide explains exactly how the law applies to franchise networks, who bears each obligation, and what both franchisors and franchisees must do before the 1 July 2026 deadline. This guide is grounded primarily in AUSTRAC's published guidance and the AML/CTF Rules 2025, with selected supporting commentary from other reputable sources.
Why Franchise Networks Face a Unique Compliance Challenge
Most AML/CTF guidance written for real estate treats every agency as a stand-alone business. That works for independent boutique agencies. It does not work for the hundreds of franchise offices operating under a shared brand, shared systems, and shared franchise agreements across Australia.
The complexity stems from a structural reality: in a franchise arrangement, the franchisee is not a subsidiary of the franchisor. Each franchisee is its own legal entity, running its own business under licence. This means that, by default, each franchisee that provides a designated service is its own reporting entity with its own independent obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the Act).
The default position: Every franchisee that brokers property sales is generally a separate reporting entity. The franchisor's brand on the door does not transfer the legal obligation - or the legal liability - to the franchisor. Action is required at the individual-entity level unless a formal reporting group is established.
This creates a coordination problem that Australia's major franchise networks need to resolve before July 2026. A network with 200 franchisee offices has, by default, 200 entities that must each enrol with AUSTRAC, build an AML/CTF program, conduct customer due diligence, train staff, and file reports. The administrative burden is enormous unless the network establishes a coherent group structure - which the AML/CTF Rules 2025 specifically enable through the new concept of a reporting group.
The Central Question: Who Is the Reporting Entity?
Under the Act, a reporting entity is any business that provides a designated service with a geographical link to Australia. The designated services relevant to real estate agencies are specifically defined in the Act and AUSTRAC's guidance - and it is important to understand them precisely, because the boundaries matter for how your network structures its obligations.
Brokering the sale, purchase or transfer of real estate on behalf of a buyer, seller, transferee or transferor in the course of carrying on a business. This covers typical seller's and buyer's agent services. Both the buyer and the seller are treated as customers of the same reporting entity for AML/CTF purposes.
Note: A seller's agent starts providing this service when the agreement to broker the sale is signed. A buyer's agent starts when the agreement to find a property is signed.
Selling or transferring real estate in the course of carrying on a business selling real estate, where the sale or transfer is not brokered by an independent real estate agent. This applies to property developers selling house and land packages, off-the-plan apartments, and blocks of land in new subdivisions directly to buyers.
Note: This service does not apply to standard franchisee real estate agencies acting as brokers - it captures developers selling their own product without an agent.
Important distinction for franchise networks: If any of your offices assist in planning or executing real estate transactions in a capacity other than as a broker - for example, a related conveyancing practice - those activities may fall under the professional services designated services (Table 6 of the Act), which apply to lawyers and conveyancers. That is a separate compliance obligation. Speak to a qualified adviser if your network provides both brokering and conveyancing services.
In a franchise model, the entity that provides the designated service - specifically, brokering the sale - is the franchisee, not the franchisor. A buyer walks into a Harcourts office in Geelong and is assisted by the franchisee operator, not Harcourts head office. It is therefore the Geelong franchisee who is the reporting entity by default, not the franchisor.
However, the AML/CTF Rules 2025 introduce a mechanism - the reporting group - that allows a franchisor to take on the lead compliance role for the network, streamlining obligations across offices and reducing duplication.
Reporting Groups: The Franchise Network's Compliance Solution
A reporting group is a formal arrangement under the AML/CTF Rules 2025 in which multiple entities agree to operate under a single AML/CTF program, led by one nominated lead entity. Reporting groups replace the old "designated business group" framework, which ceases to exist on 31 March 2026.
For franchise real estate networks, two types of reporting group are most relevant:
1. Business Group
This structure applies where the franchisor owns and controls the offices - for example, company-owned offices under one corporate structure. All offices are related entities within a control structure. A business group can be formed with the franchisor or parent company as the lead entity. The lead entity sets the AML/CTF program, oversees customer due diligence, maintains records, and coordinates reporting on behalf of the group. Critically, all members of the business group must be included - you cannot form a reporting group with only some members.
2. Elective Reporting Group
This is the more common structure for franchise networks, where franchisees are independently owned businesses trading under the brand. Franchisees that are not owned by the franchisor can elect to form an elective reporting group, nominating the franchisor (or another eligible entity) as the lead entity. Each franchisee must formally agree in writing to join the group and to operate under the lead entity's AML/CTF program.
AUSTRAC's guidance provides a direct example of this structure: a franchisor agrees to act as lead entity of an elective reporting group to assist franchisees with their AML/CTF obligations, with each member agreeing in writing and the franchisor having the capacity to determine the outcome of decisions about the group's AML/CTF policies.
A national real estate brand with 300 independently owned franchise offices establishes an elective reporting group. The franchisor acts as lead entity, develops and maintains a single AML/CTF program, provides standardised KYC procedures and training materials, and oversees network-wide compliance. Each franchisee agrees in writing, enrols individually with AUSTRAC, and implements the program locally. The lead entity must be incorporated or resident in Australia and must have the capacity to determine the outcome of AML/CTF policy decisions across the group.
Forming a reporting group delivers real benefits: the franchisor can centralise expertise and cost, franchisees avoid building programs from scratch, and the network presents a consistent compliance posture to AUSTRAC. However, it comes with meaningful obligations - and accountability - for both the lead entity and each member.
What the Franchisor Must Do as Lead Entity
Taking on the lead entity role is not a formality. It carries genuine, enforceable obligations under the AML/CTF Act and Rules 2025. AUSTRAC's guidance is explicit: as the lead entity, you take on the responsibilities of your members together with them. A franchisor that nominates itself as lead entity must:
- Develop and maintain a written AML/CTF program that covers the designated services provided across all member entities in the group, including the ML/TF risk assessment, AML/CTF policies, CDD procedures, training requirements, and reporting protocols.
- Conduct a money laundering, terrorism financing, and proliferation financing (ML/TF) risk assessment that reflects the risk profile of the network as a whole. The lead entity is taken to mitigate and manage all ML/TF risks associated with the designated services provided by all group members.
- Enrol with AUSTRAC if you are the nominated lead entity or are otherwise a reporting entity. Enrolment opens 31 March 2026. In practice, the lead entity should coordinate and verify that each member that is a reporting entity has enrolled.
- Appoint a fit and proper AML/CTF Compliance Officer. This is an explicit requirement under the reformed Act. As a general rule, AUSTRAC must be notified within 14 days of appointment. For newly regulated Tranche 2 businesses, AUSTRAC's transitional rules currently extend the notification deadline to 29 July 2026.
- Keep accurate and up-to-date membership records for the group, documenting which members can discharge obligations on behalf of other members and maintaining readily accessible records.
- Develop and deliver - or coordinate - staff training across the network so that all personnel carrying out AML/CTF-related functions understand their obligations.
- Your AML/CTF policies must identify which members can discharge obligations for other members. Members of the group can discharge obligations on each other's behalf, but accountability remains with the reporting entity whose obligation it is.
- Commission an independent evaluation of the AML/CTF program. For newly regulated businesses, the earliest date for the first evaluation is 1 July 2029, with further deadlines staggered at six-month intervals.
AUSTRAC is explicit that the lead entity is accountable for each member's AML/CTF program. If a member fails to meet obligations that the lead entity was responsible for discharging, that failure can amount to a contravention of the Act and result in civil penalties against the lead entity. This is not a formality - it is active, ongoing accountability.
What Each Franchisee Must Do - Even Inside a Reporting Group
Joining a reporting group does not remove a franchisee's obligations under the Act. Each franchisee remains a reporting entity in its own right. What the reporting group does is allow members to discharge obligations on each other's behalf - with the reporting entity whose obligation is being discharged retaining ultimate responsibility for its own compliance.
Each franchisee that is a member of a reporting group must:
- Enrol with AUSTRAC individually as a reporting entity. Enrolment opens 31 March 2026. If obligations commence 1 July 2026, you must be enrolled by 29 July 2026.
- Agree in writing to form the reporting group and to nominate the lead entity. This written agreement is the formal legal step that creates the group - a franchise agreement alone does not establish a reporting group under the Act.
- Implement the lead entity's AML/CTF program locally at the branch level. This means operationalising it - training staff, applying CDD procedures to real transactions, establishing a reporting pathway - not simply acknowledging its existence.
- Conduct customer due diligence (KYC) on buyers and sellers in accordance with the group's AML/CTF program. For the party you act for - the seller if you're a seller's agent, the buyer if you're a buyer's agent - initial CDD must be completed before you start providing the designated service. For the other party to the transaction, AUSTRAC permits delayed CDD in certain cases: verification must be completed no later than 15 days after exchange of contracts or before settlement, whichever is earlier.
- Ensure suspicious matter reports (SMRs) are filed with AUSTRAC when there are reasonable grounds to suspect a transaction or customer is linked to money laundering, terrorism financing, or other serious crime. Within a reporting group, another member (including the lead entity) can discharge this obligation on your behalf - but the franchisee whose obligation it is remains responsible for ensuring it is met.
- Ensure threshold transaction reports (TTRs) are filed for any cash transaction of $10,000 or more. These are mandatory regardless of whether anything appears suspicious.
- Maintain your own transaction and customer identification records, which must be readily accessible to the member discharging obligations on your behalf.
On reliance for CDD: A franchisee may rely on another reporting entity - such as a conveyancer or the lead entity - to complete customer verification in certain circumstances, but this must be covered by a written reliance agreement. Even under a reliance arrangement, the franchisee retains ultimate responsibility for ensuring the KYC has been properly completed.
A Summary of Obligations by Role
| Obligation | Lead Entity (Franchisor) | Member (Franchisee) |
|---|---|---|
| Enrol with AUSTRAC | Lead Must enrol if it is the nominated lead entity or is otherwise a reporting entity | Member Must enrol individually |
| Written agreement to form group | Lead Accepts nomination in writing | Member Agrees in writing to join; required to form the group |
| Develop AML/CTF Program | Lead Develops for the whole group | Member Implements locally; remains responsible for compliance |
| ML/TF Risk Assessment | Lead Covers all members and their services | Member Covered by group assessment; lead manages all risks |
| Appoint Compliance Officer | Lead Appoints; notifies AUSTRAC within 14 days (transitional deadline: 29 July 2026 for Tranche 2) | Member Recommended to appoint a local contact |
| Customer Due Diligence (KYC) | Lead Sets procedures; can discharge on members' behalf | Both Conducted at transaction level; member retains responsibility |
| File SMRs | Lead Can discharge on members' behalf under group policy | Both Member retains responsibility for ensuring obligation is met |
| File TTRs (cash ≥$10,000) | Lead Can discharge on members' behalf under group policy | Both Member retains responsibility for ensuring obligation is met |
| Staff Training | Lead Develops training; can deliver across network | Both Must be completed for all relevant personnel |
| Record Keeping | Lead Maintains group membership records; must be accessible to all | Both Transaction, KYC, and training records at office level |
| Independent Evaluation | Lead Commissions for the group; first due 1 July 2029 at earliest | Member Covered by group evaluation |
| Annual Compliance Report | Lead Can submit on behalf of group members | Member Covered by group report |
An Important Note on Reporting Group Membership Changes
The AML/CTF Rules 2025 include specific rules about how membership changes affect reporting groups. These rules apply differently depending on the type of group:
For business groups: all members of the business group must be included in any reporting group formed. You cannot form a reporting group with only some members. If any member of a business group is part of an elective reporting group, the entire business group must join or leave that elective reporting group together - individual business group members cannot participate independently.
For elective reporting groups of independently owned franchisees: membership changes should be documented promptly, as the lead entity must update AUSTRAC of any changes to enrolment details within 14 days of the change. Franchisees who stop providing designated services should apply for removal from the Reporting Entities Roll.
The practical implication for franchise networks is that the lead entity must actively maintain the membership register and manage changes - particularly where a network includes a mix of company-owned offices (a business group) and independently owned franchisees (an elective group). The two structures have different membership rules and must be managed separately.
Key Compliance Dates for Franchise Networks
What Happens If a Franchise Network Gets This Wrong
AUSTRAC is an active and well-resourced regulator. The penalties for non-compliance are not theoretical. Australia's recent enforcement history includes the $1.3 billion civil penalty against Westpac and the $450 million penalty against Crown Resorts - both for systemic AML/CTF failures. For newly regulated Tranche 2 entities, non-compliance can attract significant civil and criminal penalties under the Act, including penalties for operating without enrolment, failing to maintain an AML/CTF program, and failing to file required reports. The amounts are material and increase with the scale of the breach.
For real estate franchise networks, the four most significant risks are:
1. Individual franchisees failing to enrol. If individual franchisees assume the franchisor has handled enrolment and no formal reporting-group structure is in place, those franchisees may miss the 29 July 2026 enrolment deadline and face enforcement risk under the Act.
2. Treating a franchise agreement as an AML/CTF compliance document. A franchise agreement is a commercial contract. It does not create a reporting group under the AML/CTF Act. Only a formal written agreement meeting the requirements of the AML/CTF Rules 2025 achieves that result. Networks that rely on franchise agreements without taking the required formal steps are legally exposed.
3. Having a program on paper but not in practice. AUSTRAC's focus for newly regulated industries is on building foundational capability - risk awareness, staff training, robust programs. An office that has received a head office policy document but has not trained its staff, applied KYC procedures to real transactions, or established a reporting pathway does not have a compliant program.
4. Underestimating the lead entity's liability. AUSTRAC is explicit: as lead entity, you are accountable for each member's AML/CTF program. This means compliance failures by member franchisees can constitute contraventions by the lead entity. Network heads must treat this as an operational responsibility, not a governance formality.
A Note on Property Management Within Franchise Networks
A common point of confusion in franchise networks is whether property management operations are captured by Tranche 2. In general, pure property management - leasing and managing residential rental properties - is not a designated service under Tranche 2. AUSTRAC's real estate designated services are specifically directed at the brokering of property sales and transfers.
However, many franchise offices provide both property management and property sales under one licence. Where an office provides both services, only the property sales function triggers AML/CTF obligations - but the entity is still a reporting entity, and AML/CTF controls must be in place for the sales side of the business.
Network heads should audit each office's service mix before finalising their reporting group structure. An office that provides only property management and does not broker property sales may not need to enrol - but this must be assessed on a case-by-case basis. Any change in services, such as commencing sales activity, triggers enrolment and compliance obligations.
What Franchise Networks Should Do Right Now
The 1 July 2026 deadline is the hard stop. But the effective deadline for network-level decisions is well before that. Franchise agreements take time to review and update. Written group agreements require legal documentation separate from commercial contracts. ML/TF risk assessments require time and expertise to complete. Staff training at scale requires a content build and a delivery plan.
The networks that manage this well are those that act now on five things:
- Decide now - not in April - whether to centralise compliance through a reporting group or require each franchisee to operate independently. Both are valid structures; neither is simple to build at scale close to the deadline.
- Execute the written agreement that formally establishes the reporting group. This document, separate from the franchise agreement, is the legal foundation of the group's compliance structure.
- Appoint a Compliance Officer with real authority and dedicated time. As a general rule, notify AUSTRAC within 14 days of appointment - for newly regulated Tranche 2 businesses, AUSTRAC's transitional rules extend this deadline to 29 July 2026.
- Build a complete, documented AML/CTF program - risk assessment, policies, CDD procedures, training materials - that is network-specific, not a generic template. AUSTRAC's starter kits provide a foundation; they are not a finished product for a multi-office network.
- Build an ongoing compliance rhythm: annual risk assessment reviews, regular staff refresher training, and a clear process for updating the program when AUSTRAC issues new guidance or when the network's structure or services change.
GateCrown works specifically with Australian real estate agencies and franchise networks to design, install, and document compliant AML/CTF programs ahead of the 1 July 2026 deadline. Our work includes the initial ML/TF risk assessment, fully drafted policies, CDD procedure manuals, role-specific staff training modules, and AUSTRAC enrolment support - built for real estate networks, not adapted from a financial services template.
Your Network Needs a Clear Compliance Structure
GateCrown installs complete, audit-ready AML/CTF compliance programs for Australian real estate agencies and franchise networks. From ML/TF risk assessment to staff training to AUSTRAC enrolment support, we handle the full implementation build so your offices can commence with the right compliance structure in place.
Talk to a Compliance Specialist →Frequently Asked Questions
Who is the reporting entity in a franchise - the franchisor or franchisee?
By default, each franchisee that provides a designated service (brokering property sales) is its own reporting entity under the AML/CTF Act. The franchisor's brand does not transfer the legal obligation or liability to the franchisor. However, the AML/CTF Rules 2025 allow franchise networks to form a reporting group where the franchisor acts as lead entity, centralising compliance while each franchisee remains individually enrolled with AUSTRAC.
What is a reporting group under AML/CTF?
A reporting group is a formal arrangement under the AML/CTF Rules 2025 in which multiple entities agree to operate under a single AML/CTF program, led by one nominated lead entity. For franchise networks, an elective reporting group allows independently owned franchisees to nominate the franchisor as lead entity. Each member must agree in writing, and the lead entity develops and maintains the group's AML/CTF program.
Do all franchisees need to enrol with AUSTRAC individually?
Yes. Even within a reporting group, each franchisee that provides designated services must enrol with AUSTRAC individually as a reporting entity. Enrolment opens 31 March 2026 and must be completed by 29 July 2026. Joining a reporting group does not remove this obligation - it allows the group to share a common AML/CTF program and for members to discharge certain obligations on each other's behalf.
Is property management covered by AML/CTF Tranche 2 obligations?
In general, pure property management - leasing and managing residential rental properties - is not a designated service under Tranche 2. AUSTRAC's real estate designated services are specifically directed at the brokering of property sales and transfers. However, if a franchise office provides both property management and property sales, AML/CTF controls must be in place for the sales side of the business.