How much money is laundered through Aussie homes?

By Leith van Onselen

Back in April, the Paris-Based Financial Action Task Force (FATF) on money laundering released its report on Australia, which found that Australian residential property is a haven for international money laundering, particularly from China. The report also recommended that Australia implement counter-measures to ensure that real estate agents, lawyers and accountants facilitating real estate transactions are captured by the regulatory net [my emphasis]:

Australia remains at significant risk of an inflow of illicit funds from persons in foreign countries who find Australia a suitable place to hold and invest funds, including in real estate…

Large amounts are suspected to be laundered out of China into the Australian real estate market. China and other countries within the Asia-Pacific region were also seen as likely sources of corruption proceeds that are laundered in Australia…

Most DNFBPs, including real estate agents and legal professionals, are also not subject to AML/CTF controls or suspicious transaction reporting obligations, even though they are highlighted as being high-risk for ML activities…

The authorities should place more emphasis on pursuing ML investigations and prosecutions at the federal as well at the State/Territory level.

Then in June, the Australian Transaction Reports and Analysis Centre (AUSTRAC) released a strategic analysis brief, which warned that “laundering of illicit funds through real estate is an established money laundering method in Australia”:

AUSTRAC has identified high-value goods, including real estate, to be a significant money laundering channel in Australia. Asset confiscation cases show the breadth of criminal investment in high-value goods and the scale of criminal wealth that can be laundered and invested this way…

Criminals may be drawn to real estate as a channel to launder illicit funds due to the:
◾ability to buy real estate using cash
◾ability to disguise the ultimate beneficial ownership of real estate
◾relative stability and reliability of real estate investment
◾ability to renovate and improve real estate, thereby increasing the value.

Criminals are also motivated to buy property for further profit or lifestyle reasons.

Compared to other methods, money laundering through real estate – both residential and commercial – can be relatively uncomplicated, requiring little planning or expertise. Large sums of illicit funds can be concealed and integrated into the legitimate economy through real estate…

Today, News.com.au has reported another damning assessment from the Paris-Based FATF, which has named the Gold Coast as a money-laundering hotspot in an international crime report, and slammed the blind-eye from authorities, which has allowed money laundering activities to go on unimpeded:

The Financial Action Task Force, a Paris-based group which fights money laundering across the world, said authorities had turned a blind eye to the Gold Coast’s problem.

“Federal and state action is not effectively coordinated,” the report said.

“For example, while money laundering of foreign illicit proceeds through real estate is perceived to be a risk for Queensland’s Gold Coast, Queensland has no money laundering convictions for this activity.

“(The) Australian Federal Police indicated that it does not focus on this risk, believing this money laundering activity relates to state level predicates, whereas the Queensland Crime and Corruption Commission stated it does not focus on this risk as it relates to foreign money and is thus a matter for Australian Federal Police.”

It is worth re-iterating that the draft rules on anti-money laundering affecting real estate were released in 2007, but have been all but ignored by the federal government. In the meantime, dodgy money, especially from China, has been allowed to enter Australia largely unimpeded, helping to price young Australians out of home ownership (assisted of course by egregious tax policies, the immigration ponzi, and planning bottlenecks).

It is quite astonishing that the Abbott Government spends so much time breeding fear around the threat of terrorism, all the while it allows corrupt foreign funds to be washed through our homes.

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Comments

  1. Oh but a little bit of cash ain’t a real crime is it?? Peoples heads being lopped off that’s another story…

    • I’m not going to belittle the cutting off of heads because words cannot describe how horrific and wrong it is.

      Illegal behaviour that significantly contributes to preventing 2 generations now of owning an affordable home is a huge crime and a complete waste of potential and time. No wonder ice use has increased, it’s a rattle vs nuke in this war.

      • Illegal drug profits have been recycled into property development in Victoria at least,for quite some time. The money is usually made clean and often turns a profit. A win win outcome for those who purvey misery on a large scale.

      • Illegal drug profits have been recycled…

        So, by extension, adopting and rigorously enforcing AML regs would simultaneously be the most constructive thing Sir Tony could do to slow any illegal drug epidemic and to slow terrorist activities home and abroad.

        No wonder he doesn’t do it.

  2. The Patrician

    “(The) Australian Federal Police indicated that it does not focus on this risk, believing this money laundering activity relates to state level predicates, whereas the Queensland Crime and Corruption Commission stated it does not focus on this risk as it relates to foreign money and is thus a matter for Australian Federal Police.”
    lol Australian numpty law enforcement at its best. Stop the boats!

      • In defense of the police, they are totally overwhelmed and under resourced.

        There are departments the public is not even aware of. A recent conversation with an industrial chemist and a police man revealed that there is a section of the fraud squad in Victoria that deals with nothing but product black mail threats.
        Criminals either threaten to contaminate products or actually do contaminate them and blackmail the businesses that make the product. The cops dont talk about it because it gives other criminals ideas about black mail and its impossible to police every product in every shop.

        The business owner cant do much about it. If they do a recall, they look bad. If they pay they are open to more black mail and retail is all about maintaining a good reputation with the public.

        And I was never even aware this was going on. The copper said it was a busy department too. So while I think the money laundering is incredibly important thing to police, I can see why protecting the public from a more immediate and potentially physical threat is important.

      • can’t fight the system! the money will find its way into real estate one way or another

  3. In the end, Chinese money laundering activity is a nett gain for Australia, so the motivation to stop it must be weak.

    Yes, it makes homes even more unaffordable, but importing all that money makes Hockey etc very happy.

    • Well, that is the certainly the narrative desired by those who have knowingly and quite purposefully facilitated criminal activity. This requires nothing less than a Royal Commission.

    • Short term gain long term pain.

      That is the political way of the world.

      Never let it be short term pain, long term gain.
      That would be inhuman.

    • How is it a net gain if it places an additional load on all households and hence the economy. If the land including residential is a productive input then at all levels we’re on the wrong track.

    • R2M
      It’s like when you know the Mafia makes your restaurant a favourite haunt. You know they are crooks but jeez they really know how to make the cash registers ring

      • Hmmm.

        Mick Gatto used to pay the owner of ‘La Porcella’ a little something to keep a table reserved for him – until he killed would be assassin Andrew Veniamin there, and the restaurant never opened again.

        Swings and roundabouts I suppose.

  4. The AFP must have investments in real estate ? Maybe they also support ISIS indirectly. Or is Hockey just waiting to sell his farm before he does anything about it ?

    • you guys still don’t get it.. almost everyone has an interest in real estate! you can either sit on the sidelines and complain or jump in and gain

  5. I copied this link to another thread

    http://www.bbc.com/news/world-australia-33339804

    Facing a dwindling number of investment opportunities in their own country, Chinese buyers are snapping up new Australian apartments and homes at a record rate, says real estate experts.

    They have their eye on homes with a quality finish and a splash of grandeur.

    The interest is so strong – with predictions of billions of dollars more to come thanks to changes in Chinese offshore investment rules – that Australian real estate agents are setting up offices in Beijing and Shanghai to take advantage of the demand.

    Chief Executive of property website Juwai, Simon Henry, describes it as an “incoming wall of Chinese investment” that Australia isn’t ready for.

    Mr Henry expects it to continue for some time, in part because Beijing has relaxed currency rules making it easier for wealthy Chinese to invest in overseas property.

    Stand proud Australia

    On one hand we have international authorities warning us of Australia being a hotbed of money laundering through property, and on the other we have commercial interests promoting the exploitation every which way they can.

    We need someone high profile to bat for Australian people, nobody will listen otherwise. Can Dick Smith be approached to be more vocal?

    • this IS being done for the Australian people, for the 70% or so who outright own or a purchasing a property

      • Interesting number that 70% – it refers to the buildings, not their occupants.

        As a result, the almost 1 million adults living with their parents, for example, are excluded from consideration.

  6. Ha-ha, now we know why the AUD is holding high, although the mining cliff. All those hundreds of millions and billions are coming here and have to be exchaged to AUD for the millions piced houses to be paid. Abott is a …… Who would have the guts to vote for him?

  7. What’s the difference by between ‘dirty’ Chinese money and regular foreign money? Its all legal tender.

    • Terror Australis

      It doesn’t bother you that Aust governments are throwing aspiring home owners under a bus, all in the name of helping criminals look respectable?

      • Can you prove they are criminals? And even if they are, their money doesn’t disappear into thin air. It remains in the system.

      • how are they ‘throwing people under a bus’? another way to look at it is they are providing liquidity and price appreciation for those Australians who own a home. It also provides a solid floor under house prices for those who are considering buying a home, by ensuring prices won’t go down.

      • Terror Australis

        “…another way to look at it is they are providing liquidity and price appreciation for those Australians who own a home.”

        You must be new here.
        Home prices NEED to fall. That’s the whole point.

      • James, why do we need to provide a solid floor? By that, I mean I know why the government will continue to provide a floor by which to keep prices artificially growing but it is a bad thing that it is happening, and Australians are all the worse for having these bubble blowing policies. So yes, Australians are being thrown under a bus. And the bus is grinding them flatter and flatter into the ground.

    • It doesn’t stay in the system – it sloshes through. That’s its point.

      An obvious difference is that there is a risk that an overseas government launches a prosecution and impounds the asset pending court proceedings, which would be a pain if there were people looking for housing.

    • Possible terrorism related money laundering.

      That should be the line thrown at our law makers.

      • Its an open secret. Terrorists money and drug money buy real estate in Aust. We are greedy for a higher price and don’t care who we sell too.

        Australia is literally open for business to anyone with cash….no questions asked

  8. Meanwhile outside of the Sydbourne Bubble

    “All over the world, bankers are contacting their customers and forcing them to fill out paperwork to comply with idiotic US government regulations. Even when there’s no connection to the US.

    Here in Singapore, the bankers are completely miserable about it.

    They’re so angry for having to call customers and say, “Yes I know you’re in India, and I know we’re in Singapore, and I know you’ve been a customer for 10 years. But you still have to fill out this US government form or else we’ll close your account.””

    http://www.valuewalk.com/2015/07/jp-morgan-private-banker-we-cant-make-money-anymore/

    AUSTRAC more worried about Betfair accounts than multi-million dollar homes

    • I had to do that in HK with HSBC. I said, I’m Australian, and my business is incorporated in HK. Why do I need to fill out the U.S. Form? The guy was bottom rung process monkey so he just spouted policy back at me. Very annoying.

  9. “It is quite astonishing that the Abbott Government spends so much time breeding fear around the threat of terrorism, all the while it allows corrupt foreign funds to be washed through our homes.”

    It is not astonishing at all. The astonishing thing is that you are astonished by it.

    • +1… although never be surprised when a bear is surprised that reality doesn’t fit their models

  10. http://www.watoday.com.au/business/first-sydney-now-tokyo-chinese-descend-on-japans-property-market-pushing-up-prices-20150703-gi49qu.html

    “The trend has already hit Sydney, Vancouver and the US. Now it’s happening in Japan: busloads of real estate buyers from China coming in, buying up homes and pushing prices higher.

    Realty agencies in Beijing are organising twice-monthly tours to Tokyo and Osaka, where 40 Chinese at a time come for three-day property-shopping trips, seeking safe places to invest their cash abroad. They’re being prompted by the yen’s decline to 22-year lows and excitement over the 2020 Tokyo Olympics driving up prices, as they did in Beijing in 2008. Property tours will soon start from Shanghai too.”

    Anyone want to bet Japan wont allow it to continue ?
    I suspect that govt at least will look after its citzens

    • Japan’s population shrank by over 200K last year, so they will welcome the Chinese buying up empty apartments. Allowing the Chinese to live in Japan however is another matter.

      • Terror Australis

        Yes, the population of Japan as a whole IS shrinking.
        But paradoxically, the population of the Greater Tokyo Area is actually GROWING.
        That “sucking” noise you can hear is the rural areas of Japan being drained of people.
        I had a buddy who spent a year in a small rural town. He reckons the youngest person he met was about 55 years old. He got invited to a Mizu Shobai house (kind of a slap and tickle place where you buy over priced drinks for the girls and flirt but nothing else). He said even the women in that establishment were in their 60’s and were complaining of crook backs and arthritis.

      • With about 28% of the Japanese populace living in Greater Tokyo compared to about 9% living in a rural setting across the whole country, it seems like rural people increasing the Greater Tokyo population is likely to be a pretty short lived trend.

    • which is never going to happen…. the CPC must love the idea of its Chinese citizens owning hard assets abroad. Also helps them slowly liberalise their capital account.

  11. So which of the opposition parties are going to call a Royal Commission into the real estate industry & money laundering, as an election promise? It strikes me that it could be a real vote winner (Greens I’m looking at you!)

  12. Why dont foreigners need to prove that the millions they are using to buy pre existing australian houses is legitimately gained? How do we know it is not proceeds of crime?
    How are they able to get more than $50K out of china.

    Why doesnt any australian politician take notice ?????? Will this only ever be discussed on on MB :(

  13. Australia is going to go the way of Florida. Massive housing bubble built on corrupt money and it crashed dramatically.

    • wishful thinking brought about by tenuous extrapolation without emprical foundation

      • James is a straight-faced version of Reus without the wit. Which I think is great, because he might actually sway a few people to lever up big into Australian property. My take is, the more people who can be convinced to do this, the better at this point! I want to see just how high this thing can go. Ha ha!

        As for money laundering, when one’s mates are getting rich from it, who cares? Ha ha!

    • James. I like alternate views. We can all get stuck on a thesis and not prepared to re evaluate it because our egos get in the way. The analysis is simply too hard to put in one post – will bore everyone. Lindsay David’s book is a good start. You own a house in Perth right now you are down 16% for the year if it is south of the river. 20% is considered a crash. Perth housing has done next to nothing for 8 years in real terms. Perth is the home of Australia’s ‘real’ economy producing real products for the world. What is happening (and yet to happen) in Perth is coming to Sydney and Melbourne/ But hey the best thing about these arguments is eventually one of will be proven right!

      • IF cpi was 3% per year for 8 years, then you missed out on say 26.6%.

        On a $500k house, you miss out on around $100k growth.

        Rent over that period would be?

  14. It “sloshes through” in to the hands of the vendor who presumably then has more money to spend.

  15. Sounds like a loop-hole for terrorists! Surely our-Tony isn’t condoning this, is he? And doesn’t he have duel citizenship! Oh my, back he goes!

  16. The government is missing a money making opportunity here.

    The anti-money laundering department could not only be self funding but profitable.

  17. Tony helicopters on to the command ship of the U.S. Seventh fleet and says how reassuring it is to have the U.S. Navy in Australia
    What happens when the docks are bought from under his stupid nose by the Chinese under his “open for business” rules ?

  18. Finally!
    I posted comments about the Chinese Money Laundering issue in Ozzy Real Estate and the Chinese $50K US$ restriction early in 2014. Maybe even earlier.

    If it ain’t invented here syndrome?

    Maybe I should stick with the herd and just make pithy comments about other posts?

  19. Is this sustainable or realistic ? Where is the future for hard working men and women and future generation. 200 Cressy Road North Ryde. A block of land having approx. 696 sqm of land comprising a dated 1960’s clad home. Sold on 11 May 2013 for $880,000. Some two years later with no works carried out sold on 24 Jun 2015 for $2,000,000.