PEP and sanctions screening: what real estate agents need to know

You have probably come across the terms "PEP screening" and "sanctions screening" in the context of AUSTRAC's Tranche 2 reforms. If they sound like something from a banking compliance manual rather than a real estate agency, you are not alone. Most agents who ask us about them have never dealt with either concept before.

The short version: from 1 July 2026, you must have a formal, documented process for screening every client against Australia's official sanctions list and checking whether they are a Politically Exposed Person (PEP) -- as part of your AML/CTF program. Sanctions laws already apply to all Australians, but the Tranche 2 reforms add a structured screening obligation to your compliance program for the first time.

This post explains what both terms mean, when you must screen, what to do if you get a match, and how the whole process connects to your broader customer due diligence obligations.

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What is sanctions screening?

Sanctions are restrictions placed on individuals, companies, and governments by the United Nations Security Council and by Australia's own government. The purpose is to cut off financial and commercial dealings with people or entities linked to terrorism, proliferation of weapons of mass destruction, serious human rights abuses, or other threats to international peace and security.

In Australia, the Department of Foreign Affairs and Trade (DFAT) maintains the Consolidated List -- a single database that combines UN Security Council sanctions and Australia's autonomous sanctions. You can find it at dfat.gov.au.

Sanctions screening means checking your client's name against the Consolidated List to see whether they appear on it. Sanctions offences under the Autonomous Sanctions Act 2011 and the Charter of the United Nations Act 1945 are strict liability -- meaning that if you deal with assets of, or make assets available to, a sanctioned person, you can be committing a criminal offence regardless of whether you knew they were listed.

The list is updated as new designations are made. That is why AUSTRAC guidance recommends checking it regularly, not just once at the start of the relationship.

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What is a PEP?

PEP stands for Politically Exposed Person. The term refers to individuals who hold, or have recently held, prominent public positions -- and whose role gives them potential access to public funds or significant decision-making power.

Under the AML/CTF framework, there are three categories:

PEP screening is not about assuming that politicians or government officials are criminals. It is about recognising that individuals in positions of power have elevated exposure to bribery, corruption, and the misuse of public funds -- and that real estate is a well-known vehicle for concealing proceeds of corruption.

Under AUSTRAC's guidance, a person generally ceases to be classified as a PEP once they leave their qualifying role. However, former PEPs may still carry elevated ML/TF risk depending on the influence they retain. Your program should set out how you assess and monitor former PEPs -- the key point is that the PEP classification and any associated enhanced monitoring should be reviewed, not simply removed, when someone leaves office.

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When must you screen?

Sanctions and PEP screening are part of your initial customer due diligence (CDD) obligations. They must be completed as part of the CDD process before you provide a designated service -- in practice, before you formally act as the client's agent in a property transaction.

For most transactions, this means running a check when a new client engages your agency. For existing clients in an ongoing relationship, it means checking again when the sanctions list changes or when circumstances suggest a re-check is warranted.

The requirement to re-screen when the list updates is worth noting specifically. Sanctions can be applied to a person at any time. A client who was clear at the start of a transaction may subsequently be listed. Checking the list once is not sufficient.

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What to do if you get a match

Screening will occasionally produce a potential match -- a name that looks similar to an entry on the Consolidated List, or a client profile that raises a PEP question. A potential match is not the same as a confirmed match, and most potential matches will turn out to be false positives.

Here is how to work through a match:

Step 1: Review. Compare the details carefully. The Consolidated List includes identifying information such as date of birth, nationality, and aliases. A common surname alone is not grounds for refusal.

Step 2: Confirm or dismiss. If the details match -- or if there is enough similarity to create genuine doubt -- treat the match as confirmed while you investigate further. If it is clearly a different person (different date of birth, different nationality, no common identifying information), document your reasoning and dismiss.

Step 3: Document your decision. Whether you confirm or dismiss a match, record your reasoning. AUSTRAC expects you to be able to demonstrate that you conducted screening and made a considered, documented decision -- not just that you ran a name through a list.

Step 4: If confirmed -- do not proceed. A confirmed sanctions match is a legal prohibition, not a judgment call. Do not provide the designated service. File a Suspicious Matter Report with AUSTRAC and seek legal advice promptly about your obligations, including whether assets need to be frozen.

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How PEP screening connects to Enhanced CDD

Identifying a client as a foreign PEP does more than flag them on a screening check -- it triggers a higher level of customer due diligence.

Under the AML/CTF Act, a foreign PEP is one of the key triggers for Enhanced CDD (ECDD). When Enhanced CDD applies, you must go further than standard identity verification. The additional steps required include:

• Senior management approval before proceeding with the relationship or transaction
• Enhanced ongoing monitoring throughout the relationship
• Additional identity verification
• Source of funds and source of wealth verification
• Understanding the purpose of the transaction

Enhanced CDD for a foreign PEP is not optional. If you identify a client as a foreign PEP and proceed with standard CDD only, your agency is not meeting its legal obligations.

Domestic PEPs are handled differently. They are identified and monitored, but they do not automatically trigger Enhanced CDD in the same way a foreign PEP does. Your agency's risk assessment and program procedures should set out how you handle domestic PEPs specifically.

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A real-world example

Real-world example

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Putting it into practice

Sanctions and PEP screening do not need to be complicated. The practical requirements are:

• Screen every client at onboarding as part of initial CDD
• Re-screen when the DFAT list is updated
• Record all screening results with timestamps
• Document your decisions when potential matches arise
• Escalate confirmed sanctions matches and foreign PEP identifications appropriately
• Keep all screening records for seven years

What makes this manageable at scale is having a consistent process built into your CDD workflow -- so screening happens automatically for every client, not as a manual step that might get overlooked in a busy period.

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AML Simple runs sanctions and PEP screening against the DFAT Consolidated List as part of the client CDD workflow -- every screening result is timestamped and stored automatically, ready for your records.

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