New reforms to monetary disclosure are being finalised as part of a wider remodelling of Australia’s anti-money laundering and counter-terrorism financing schemes. If you’re purchasing property, involved in a family law property settlement involving large financial transfers, or even just thinking about transferring funds from overseas, you need to understand how these new changes affect your ‘source of funds’ obligations.
On 29 November 2024, Parliament passed the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (Cth). This introduced transformational changes to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth).
In line with these regulations, Australia’s primary financial crime regulator (AUSTRAC) will require certain professionals – such as lawyers, accountants, and real estate professionals – to scrutinise and report the origin of client funds, particularly in high-value transactions. These obligations will take place from 1 July 2026, and are aimed at reducing illicit financing mechanisms and better reflecting modern business environments by aligning Australia’s AML/CTF regimes with international standards and closing regulatory gaps.
What is ‘Source of Funds’ and Why It Matters
‘Source of funds’ refers to how and where you obtained the money used in a transaction. Under these new reforms, your solicitor may be legally required to ask you:
- Where did the funds for this purchase or settlement come from?
- Was it earned income, a gift, a loan, or from the sale of an overseas asset?
- Can you provide documents to prove the origin?
This applies even if you’re using legitimate savings – if the amount is significant, you must be ready to show evidence demonstrating its source. This may be done by producing:
- Bank statements and/or payslips dating back at least three months showing employment or business income;
- Business activity statements, accountant’s letters, and/or company tax returns showing business income;
- Contract of sale, a settlement statement, and/or a letter from your solicitor/accountant confirming sale of property or other assets;
- Loan agreement or mortgage documents;
- Statements evincing earnings from dividends or general investment income;
- Legal documents (e.g., a will, letter/statutory declaration from the giver) showing income earned through inheritance or gifts;
- Statement of retirement or pension benefits, or an official letter from a government agency such as Centrelink;
- Any other supporting documents deemed appropriate in the circumstances, such as a signed declaration or statement of explanation.
Scenario 1: Buying Property in Australia
If you are using a large lump sum – any amount in excess of $300,000 – to purchase real property, your solicitor or real estate professional may refuse to proceed without satisfactory proof of funds. This may lead to further property settlement consequences, such as a forfeiture of the deposit or termination of the contract. To comply with AML/CTF obligations, you should be prepared to demonstrate the legitimacy of your funds at the request of your solicitor. Be aware that funds used from an Australian bank account is on its own no longer enough – you must be able to explain and document how those funds got there in the first place.
Scenario 2: Family Law Property Settlements
If you are receiving or paying out a lump sum as part of a family law settlement – such as proceeds from the sale of the matrimonial home or a cash equalisation payment – your solicitor may similarly require you to explain the source of these funds. You may be required to provide an explanation if you are receiving financial assistance from family or overseas entities, but be aware that your solicitor may need to confirm their source of funds. Similar rules apply if your ex-spouse is transferring a large sum to you.
It is therefore important to document and track the origin of funds used, particularly where external parties are involved, as your solicitor may not be able to finalise consent orders or complete lodging with the Court until the necessary information is provided.
Scenario 3: Transferring Money from Overseas (e.g., China)
Transferring funds from overseas for use in a property purchase or divorce settlement is common. However, your solicitor will now require more than just a SWIFT receipt; to avoid delays or compliance red flags, prepare the following:
- Any relevant contracts of sale for property/business sold overseas;
- Statements explaining currency exchange paths (e.g., use of friends or third-party accounts);
- Tax receipts or government approvals, if required under relevant foreign laws (e.g., Chinese law);
- Signed declarations or explanations of lawful sources of funds.
You should always strive to keep translated versions of documents and maintain a clear transaction trail from the original source to your Australian account.
What You Should Do Now
To ensure ease and swiftness in all future transactions, you should:
- Disclose all funding sources early, especially if you are using foreign or third-party funds.
- Keep proper records and evidence for every step of the transaction.
- Choose a solicitor who understands cross-border fund tracing and AML compliance, and seek legal advice if you believe that you may be affected by these new regulations.
At W & G Lawyers, we can help you understand your financial obligations under the new AML/CTF changes. Whether you’re seeking advice as a party in a large lump sum transaction, or a professional now required to scrutinise the source of client funds, we’re here to assist you at every step.
Contact us for expert legal advice:
📞 (07) 2810 5666/ 0466 923 441
📧 info@wglawyers.com.au
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Disclaimer:
This article is for general informational purposes only and does not constitute legal or financial advice. You should obtain tailored advice based on your individual circumstances before acting on the information provided.