FIRB’s foreign property buyer fail

url

Regular readers will know that I view foreign investment in residential property and more generally as a positive. However, that does not mean that promised screens and protections of said property purchases should not be thorough and effective.

Instead, according to reader Gunnamatta, they are neither. Indeed Gunnamatta has, in the past few days, tested the efficacy of FIRB’s approvals process via a pseudonym called Mr Chodley Wontok and has exposed the FIRB process as flimsy at best.

Mr Wontok recently applied for FIRB permission to buy a pre-existing residential property in Melbourne for $598k (it must have been a long way out!).

Mr Wontok is nominally from Russia but has no passport or visa simply because he does not exist. Nonetheless, Mr Wontok applied to FIRB using bogus versions of all of the above, including a fabricated permanent residency visa. To his amazement, within 48 hours he  received the following missive in reply:

Capture

Mr Wontok is now armed with an official communication from the FIRB confirming that as a permanent resident he is able to purchase any property he so chooses. He can present this missive to a vendor or real estate agent and off he goes. Then again, maybe he won’t need even that, according to Gunnamatta:

In the last year I have been told more than once by real estate agents, and more than once by foreign purchasers of Australian residential property, that the system is a joke and that in some areas foreign purchases of residential real estate are a significant factor in local prices.  I have been told that the system has a 99.9% self-compliance rate – and as one Macrobusiness commentator asked last week ‘how credible is that?  I have been told that no party in the real estate process (certainly not real estate agents or property vendors) would ask to see permission or approval or evidence that a foreign buyer or potential buyer of Australian real estate had entered into the process such as it is, and that there is no review process.

So it currently appears that the issue of foreign purchases of Australian residential real estate is one which the relevant regulatory authority does not treat particularly seriously, and one where for wider political reasons there needs to be seen to be a process, but for other reasons there needs to be a process so feeble as to be barely a process at all.

Pursuing this issue is not about race or pro or anti-immigration or population policy, although no doubt they will be factors for some.  Pursuing the issue is about clearly identifying the impact that foreign purchases of Australian residential real estate has on existing Australians looking to enter the market, the function of price in that market as a balance between supply and demand, and the extent to which a greater or lesser degree of foreign purchases of Australian residential real estate discriminates against their interests in favour of those who have mortgages or already own Australian residential real estate, particularly in terms of the very significant numbers of market participants who own more than one property and have accrued significant debt to do so.

It would seem that we have a political/administrative system that has decided that we aren’t mature enough to discuss the issue, and that some fibs about the existence of a process, what that process does, and the accountability of that process, are preferable.

Returning to Mr Wontok, at some stage, who knows, he may be found out and lose his dough. But it’s not obvious how. There do not seem to be any further checks and and balances in the system to catch him, even when he sells. Perhaps this is why in 2010 the then Rudd government announced a ‘crackdown’ on foreign purchases of Australian real estate, including  a ‘dob in’ line for the public to report suspected instances of foreigners illegally buying Australian real estate and a ‘crackdown’ on the process.

While this accumulated evidence does not suggest that the FIRB is lax in its assessment of honest applications from foreign residents to buy residential property, it does show just how easy it is for the less scrupulous (or more risk tolerant) to get around the approval system.

Indeed, the system, if we can call it that, is akin to the honesty box left next to a lonely basket of tomatoes on a deserted country road.

Comments

  1. Is there any way to get this into the mainstream press? I’d love to see politicians duck and weave over this, not to mention the reaction of the average punter.

  2. The divergence of custom makes the honesty box or the taking the tomatoes the right thing to do. When I asked a foreign student who was downloading ‘her’ assignment for assessment how she could justify doing ‘the wrong thing’, she replied – “You’ve done nothing wrong, unless you get caught”. FIRB must be similar.

    • There’s been a lot of psychological studies devoted to the ‘honesty box’ and it’s surprising to find that most people actually do put money in, thieves are a small minority.

      I love the theory of not being caught/risk analysis – I worked with a lady who was a habitual fare evader and she worked out even with the two fines she’d received in twelve months she was still about $1,200 ahead by not paying. This is in Melbourne by the way – I’m sure she’s not alone !

  3. Bloggers and Blog commenters joining forces to shine a spotlight on administration and public policy failures.

    Excellent work all round

    A terrible day for the MSM?

    Only if they try and fight it rather than embrace the power of large numbers of people expecting more from our institutions and doing something about it.

    The next step is requiring the public service to return to serving the public and not the political (read often personal) interests of our increasingly conflicted so called representatives.

    • By return to serving the public I mean engage directly with the public. all government departments should have comment boards and some process for responding publicly to questions.

      The idea that our pollies should be gatekeepers for deciding what we hear about what our public servants are thinking has had its day.

      Time to let the public hear the policy debates taking place behind locked doors.

      • +1 All major parties have promised to improve FOI and immediately squib on that promise after the election.

        The left are massive hypocrites at this.

      • From what I understand this would require some pretty significant overhaul.

        IMO, politicians dont want public servants talking about policy problems with the public because it exposes weaknesses for the opposition of the day to exploit (fairly or unfairly, we all know this is irrelevant when it comes to winning political points).

        This would be ok if Departments could still do their own thing anyway, but we don’t have permanent secretaries like the yes minister days. We have contracted senior executives who keep their jobs if they play ball with their Ministers. This gives the politicians a firm grasp over their Departments and the Departments live in fear of their Ministers (hardly a place to be in to provide ‘frank and fearless advice’!). This is why the public service is notoriously risk adverse.

        Politics > Policy

        Please note this is all just a personal opinion.

      • GunnamattaMEMBER

        Certainly agree gents

        But one thing I would guarantee is that somewhere inside the APS will be a file with instruction for whoever set up the FIRB real estate process, and on that file will be a clear indication of the strengths and weaknesses of the scheme.

        The risk averse nature of some lower level APS type would guarantee they have covered themselves by seeking clear instruction and probably pointing out the risks.

        The risk averse nature of some higher level APS type would almost certainly ensure that those papers are hidden.

  4. This is one for Chris Vedelago, surely

    Fantastic work – I like how they have gone through the effort of setting up a system for people to apply which ultimately means little or nothing, other than making sure there is a record of the application.

    It’s so easy to hide behind a “process”, very unlikely that anyone will find out.

    On second thought, it wouldn’t surprise me if people that matter aren’t even aware of this. It’s typical to see an IT system go live and that is it, no questions asked.

  5. The flow of speculative money into the established housing stock is bad, almost as bad as having no control over who is buying our housing stock.

    This is absurd and reflects how the banks and the property industry have corrupted the polity to turn housing into a free-for-all. It also reflects how unfettered growth and population growth is just sending all the systems and processes in Australia to capacity.

    • Exactly what I was going to say.

      Send it to Chris Vedelago, although weather his boss’s will approve it is another thing.

      • either he (or one of his peers) reports on it and claims the limelight, or the xenophobes at A Current Affair & Today Tonight will take the cake….they love this kind of stuff

      • Not sure that Chris Vedelago is still doing Domain reporting. I think he’s moved over to Business Day full-time.

    • We have agents (asians with residency) who are acting on behalf of other asians (some overseas) doing deals on property, developing units, apartments etc…
      .
      All our Australian clients (bar one) are asians!
      .
      If there was a hope that things would be put right and those that were found to have bought illegally were forced to sell or had their property confiscated then I could be a little more upbeat….But as it stands we have been sold down the river to foreigners!
      .
      I was ok with immigration in moderation, but what has happened in the last decade or so is nothing short of criminal!
      .
      I feel like the foreigner in the country of my birth!

      • It is borderline racist to say “All our Australian clients are asians!” You are basically categorising them based on appearance, rather than their nationality. I doubt you would make the comment “All our Australian clients are British” because they look British.

      • “If I said “most of my clients are caucasian” does that make me a racist?”

        No it does not. It is an observation.

      • DrBob127MEMBER

        it is only racist if you disparage or discriminate against someone based on their race.

        Identifying a persons ethnicity is not of itself racist.

      • I recommend a couple of you read the Racial Discrimination Act 1975. Section 18C in particular but the whole thing is relevant. If you can’t understand legislation then give the Human Rights Commission a call.

        Dr Bob is sort of right, but the question is whether writing that sentence was reasonably likely to offend or insult etc. I wrote “borderline racist” because there is a judgement call to be made.

        Personally, I think it is insulting to look at a person and describe them as Asian if they are Australian. There are plenty of people of Asian appearance who are second, third… sixth generation Australian.

      • Funny monkey how it is open season on Australian citizenship. If I went to India for a few years and started calling myself an Indian I would be laughed off the sub-continent.

      • DrBob127MEMBER

        And I am insulted every time someone calls me blonde, how dare they discriminate based on my physical appearance?

        Too much? (I sound like The Claw)

        I am supposing that Christiaan was technically being too specific in referring to those parties as Asians, hhen he should have simply said Foreigners (given that the topic under discussion is foreign ownership of Australian Real-Estate).

      • It is also illegal to vilify people based on their religious beliefs.
        Someone posting as “Christiaan” needs to be very careful in that regard.

      • But there’s the problem Dr Bob, they aren’t foreigners, they are Australians. Christiaan seemed to imply there was a separate category of Australians who because of their ethnic heritage deserved to be judged differently with regard to their home purchasers. You are right, FIRB has nothing to do with ethnicity and race and everything to do with citizenship.

        The Racial Discrimination Act does not apply to your blondeness.

        Racism in other countries does not make it acceptable in Australia.

      • Monkeys worldwide should make a stand against humans calling themselves monkeys. Monkeys have feelings too.

      • DrBob127MEMBER

        “All our Australian clients (bar one) are asians!”

        OK, I see the sentence that offended you and I’m at a loss to explain it. Maybe he means ‘recent’ Australians?

        Christiaan?

      • DrBob127MEMBER

        “Racism is usually defined as views, practices and actions reflecting the belief that humanity is divided into distinct biological groups called races and that members of a certain race share certain attributes which make that group as a whole less desirable, more desirable, inferior or superior

        http://en.wikipedia.org/wiki/Racism

        There is no discrimination for or against Asians in what Christiaan said. Just identification of them as Asians(perhaps unnecessarily?).

      • …or we could all just focus on the contents of this posting which are far more interesting. I think enough has been said about this rather small issue.

      • “Vortex what gives you the right to speak on behalf of Monkeys?”

        I have no right DrBob127, I apologise to all monkeys worldwide, unreservedly, and commit to reading the animal rights act forthwith. Hopefully I understand it. (just trying to lighten up the conversation Monkey. No offense intended.)

      • Dr Bob, Wikipedia is fine for a little bit of fun, but it hardly trumps Commonwealth legislation. And anyway, identifying buyers by their ethnic background in the context of Chistiaan’s comment is clearly designed to imply that they are less desirable and inferior to Australians who are not Asian. The underlying argument seems to be that we should somehow preserve property for real Australians rather than pesky migrants.

        FIRB is not about ethnicity or race, it is about citizenship. Christiaan chooses to ignore this and instead makes a comment that is clearly intended to dismiss people based on their heritage.

  6. I must be missing something here, why would FIRB need to do anything? The purchaser clearly stated that they were a permanent resident, and as the letter says, permanent residents are exempt from FIRB approval. Permanent residents do not need to even apply.

    The hole would be in the property transfer – if the applicant was able to complete the transaction without either proof of permanent residency or FIRB approval.

    IMO all that letter says if you are a permanent resident you can buy property.

    • That’s the point, all you need to do is tick a box saying you’re a permanent resident and you get approval. No follow up checks or anything. If push came to shove, the person with the approval would simply say ‘woops I ticked the wrong box, but what are you going to do about it now?’.

      • No, you don’t need FIRB approval if you are a permanent resident – that’s my point.

        The letter states:

        “Based on the information provided, the proposal is exempt as outlined above”.

        He was not “approved”, he was declared exempt from FIRB approval process.

      • Is there anywhere else down the line where residency would be questioned?

        If so, I can understand how FIRB would have responded as they did….seems almost an auto response to the enquiry

      • Exactly, if Mr Wontok ticked the box saying he was an Australian citizen would they have approved him?

        Of course not, he doesn’t need FIRB approval – he would have got the same response.

        I really think this is all blown out of the water.

        That’s not to say there should not be checks on ability to purchase down the line, but surely those should be handled at the transactional stage unless the FIRB is to review every property purchase in Australia?

      • GunnamattaMEMBER

        Mate, they havent checked whether I am a permanent resident or visa golder or anything.

        They have sent an email saying I am exempt on the basis of pure bullshido.

        But I have been told straight out by virtually every person asked (agents, buyers and even journalists in the RE sector) that absolutely nobody in the game would ever even ask to see the piece of paper or email, nobody would ever think to look once I had purchased the property.

      • Ask your solicitor Gunna. Every buyer has to sign the transfer document, and that signature must be witnessed by an authorised witness eg solicitor, JP etc although in Victoria they accept doctors, chemists etc.

        I don’t know every states regulations but if the buyer is living overseas it may have to be witnessed by a public notary –
        http://en.wikipedia.org/wiki/Notary_public

        The legal implications are outside my area of expertise, so you should phone up a solicitor that you may be friendly with for some advice.

        Look I agree that it’s very easy to get FIRB approval – Mickey Mouse could get it, but Mickey mouse can’t buy a house in Australia unless he is a real person.

        That said anyone in Beijing with the cash can easily get FIRB approval and buy a house in Australia as long as they house is new. I believe that a purchase of an existing home is also possible as long as the buyer applies first, but that’s something that I’ve only seen once. It may be common or it may not be.

        The government isn’t concerned with overseas residents buying houses, but they are concerned with any attempts at money laundering or financing terrorism.

      • Maybe you should call back the FIRB and check if that letter qualifies as an FIRB approval to purchase. To me it says no such thing.

        All they told you was you don’t need to apply.

      • GunnamattaMEMBER

        Peter this is more bull.

        Yes an authorised person needs to witness a contract signing.

        If a person from overseas is standing in the room then that authorised person will ask to see proof of identity and presumably be shown a passport. There is nothing nowhere indicating they will look for a visa or permission/approval/notification from FIRB.

        That makes it very easy for anyone to buy a house in Australia.

        If they arent physically in Australia then it would still be all perfectly doable by having someone act as a legal representative. I have done it myself. And no legal representative or notary from one side is going to ask about a non present buyers right to own an Australian residential real estate property – they are more likely to simply just ask for the correct spelling and maybe a passport number.

        For sure I agree with you on this

        ‘The government isn’t concerned with overseas residents buying houses,’

        I dont mind that if that is the government position, I dont mind if they come out and openly state that position. I do mind when they intimate there is a process to ‘crack down’ on regarding vetting ‘applications’ from people to buy Australian real estate, when that process is an overt sham.

      • IT’s not so much the contract gunna, but the transfer document that is lodged with the government department registering ownership transfers of property. It must be signed and witnessed correctly. Titles office employees are about as pedantic as they get. They are on the lookout for fraud, and they take that responsibility seriously.

        If you are presenting an overseas passport to your solicitor without a residency visa embeded into that passport, don’t you think that your solicitor will ask some uncomfortable questions. Do you think that he/she will be willing to throw away his/her future livelihood to make a few hundred dollars witnessing a shonky document? Why wouldn’t they insist on FIRB approval – it’s easy to get in most circumstances.

        Maybe the odd shonky transaction gets through, but I can’t believe there is a tidal flow of these happening.

        The FIRB is a policy enforcement agency, not a law enforcement agency. As I see it government policy is that overseas residents are welcome to buy homes here, just as I can buy in NZ or the USA and many other countries quite easily.

        If you don’t accept that then that’s fine by me.

      • As a recovering ex-lawyer, let me provide a point of view. Witnessing a signature usually only requires the witness to satisfy themselves that the person signing the document is who they say they are. This is accomplished by, for example, sighting the passport. Unless the witness is also confirming the signatory’s residency status or otherwise on the document then PF’s point is completely moot.

      • You are correct Pat, he didn’t even have to apply if he was a permanent resident. In fact any real estate transaction cannot take place because Mr Wontok has no identification. He needs 100 points, so he needs an Australian passport, or a licence issued by one of our states, or a Birth Certificate issued in Australia, or naturalisation papers, or a visa confirming residency status embeded in his overseas passport. In fact he needs two of those methods of identification.

        Foreign buyers also need 100 points of identification. This was introduced some years ago in the “Anti Money Laundering and Anti Terrorism” legislation.

        The FIRB rule on ability to purchase and the rest of the system checks the other detail. It’s very easy to get FIRB approval, but it’s very difficult to buy property or open bank accounts in false names in this country.

      • GunnamattaMEMBER

        Specious Bull Peter,

        The 100 points of identification refers to Australian bank accounts.

        Any person can transfer money into Australia from a bank account anywhere. As someone who has moved money into and out of Australia I know there are few questions asked.

        If they were to transfer into an account of a vendor or an agent, in the event of a regulatory authority asking what the money was for they would say ‘to buy a house’ – the regulatory authority would not ask for proof of permission or a visa for the person sending the money, they would want just a logical reason for the funds transfer.

        At the point of signing a contract the only proof required would be proof of identity – a passport does fine. Neither vendors or agents would ever ask to see a visa. I have been told this by buyers and vendors and agents.

        as for

        ‘It’s very easy to get FIRB approval, but it’s very difficult to buy property or open bank accounts in false names in this country.’

        That isnt what we are talking about – but you knew that already.

      • It looks like you’re talking ‘fraud’ here Peter. But really on the topic of foreign property acquisition – it seems to me like all you need is a bank account and you’re in the game.

        Gunna has used the false name as a foil for the analysis – the 100pt check would be effective in preventing false bank accounts, but lets face it, this probably stops everyone but the criminals.

      • General Disarray

        It shouldn’t be that easy to get FIRB approval regardless of any other ID checks elsewhere.

        Maybe they should just drop “Review” from the title and go with “FIB” – it would seem very appropriate in this instance.

      • Well the point is if you are not engaged in fraud and have an aussie bank account – there is nothing to stop you from speculating in established australian real-estate regardless of whether you are australian or not.

      • So Peter, how do these transactinos occur for non-residents buying legitimately (eg. new properties). Is there some special exemption to this 100 points check? I believe you’ve been learning at the knee of 2d. “Deny, deny, deny.”

      • No McPaddy, legitimate buyers need to meet the same requirements.

        Are you suggesting that as a lawyer handling the conveyancing for an overseas resident paying cash for a large purchase of property in Australia, you would not enquire about FIRB approval or report a large foreign currency transaction if it was paid direct to your trust account?

        Exactly how would the cash transaction be managed if not directly through the solicitors trust account or though an ADI who must obtain 100 points of ID.

        If it was paid direct to the vendor, would you not consider that you had a fiduciary obligation to inform the buyer that the transaction would be reported and if it was a case of money laundering or any other type of illegal activity they might see their new asset consficated by the state?

        OR alternatively if the buyer arranged finance, are you suggesting that the broker and the bank would waive the government anti money laundering legislation requirements?

        Are you recovering from the law, or is the law recovering from you?

      • GunnamattaMEMBER

        Peter, that’s another serve of specious bull mate. I am reliably informed you are busy today though.

        Are you suggesting that a lawyer handling conveyancing for an overseas resident paying cash is concerned about anything other than making sure the title deeds are in order?

        Bank accounts for said conveyancing lawyers can receive very large sums of money – sure that will be noted in Austrac, but one of the standard responses to an Austrac query is ‘Real Estate purchase’ – Austrac wouldn’t in their wildest dreams ask about visa status of anyone in the process, all they want to know is what the money is for. If it was from a suspicious location or account or they had some reason to doubt its provenance then they may ask questions, but that would only be in a blue moon.

        Is it the conveyancing lawyers job to ask for a visa from their client? I put it to you the answer is no.

        Is it the conveyancing lawyers job to ask for a visa on behalf of FIRB or anyone else? I put it to you the answer is no.

        If the funds were paid directly into a vendors account, is it their job to ask for a visa? I put it to you the answer is no.

        Is it someone at the lands office or title and deeds registrars (or whatever they have in each state) to ask for an appropriate visa when a property transaction is processed? I put it to you the answer is no.

        The 100 points of ID is required for a bank account. Most people in Australia have them, same as most conveyancing lawyers I know of.

        The lawyer should certainly tell potential buyers that the transaction will be recorded – as it will. But who has ever heard (and I have just looked in http://www.austlii.edu.au for any case history – and found none) of anyone ever looking to overturn a contract on the basis of a foreign buyer not having a relevant visa?

        There is no process to weed out ‘incorrect’ buyers after they have purchased an Australian residential property, there is no process by which a member of the public could appeal such a purchase except the ‘dob-in line’ brought in by Rudd in 2010.

        If the buyer arranged finance, are you suggesting that the broker and the bank would even look at the provenance of funds provided that the money was coming from a legitimate bank account somewhere, was going to a legitimate bank account somewhere, and had a clearly articulated purpose with which they agreed (buying real estate seems to be something they encourage) ?

      • Gunna I have friends who worked in the overseas department for one of the big four handling international transactions.

        911 changed everything – you can believe whatever you like.

      • Peter:

        “Are you suggesting that as a lawyer handling the conveyancing for an overseas resident paying cash for a large purchase of property in Australia, you would not enquire about FIRB approval or report a large foreign currency transaction if it was paid direct to your trust account?”

        You are confusing two completely separate issues. Money laundering is one thing; evading FIRB requirements which are obviously not policed is quite another.

        In answer to your questions:
        – A lawyer would do what ever checks are required to establish compliance on the face of the documents. If a FIRB certificate such as that obtained by Gunna is the standard way to do this (I expect it is, but I am not sure) then this is what would be done and NOTHING more. It’s not for a lawyer to be second guessing the government’s own written authorisations unless there is a specific requirement/duty to do so. You seem to be confusing the legal profession with the police (a common misapprehension).
        – A lawyer would report what ever transactions he/she is legally required to report and nothing more. Subject to certain well defined legal ethical requirements (eg. not to mislead a court) a lawyer’s duties are always and only to his/her own client. Again, what this has to do with bogus FIRB approvals is beyond me. In your haste to paper over the issue you seem to have strayed far beyond your area of competence and you’re embarrassing yourself in the process.

      • @PF – What has Austrac got to do with it? A legitimate foreign person opens a legitimate bank account in Aust (easy) – it appears they can then use that money to speculate in Australian property with Impunity.

        If what you say is true that Austrac tracks every transaction by a foreign person with an australian bank account then we would have exact data on foreign persons buying residential property in Australia – i highly doubt this from what i’ve seen.

    • I don’t know what happens round signing or endorsing a contract what identification and/or bona fides are generally used? Ditto for title?

      However, according to friend at a major bank in mortgages, said that they are incredibly cautious about temporary residents…. too much risk….

  7. Great work. This is similar to the horse meat scandal in Europe – there were rules but no one was applying them.

  8. Gotcha journalism at its best (worst), welcome to Australia.

    About all this does say is that we have too much government doing not very much.

  9. I’m sure if MSM got hold of this they’d still prefer to run stories on Big Kev from the biggest loser. knobs.
    The last thing they want is to scare off cashed up Hong Kong buyers – after all – they inflate prices in certain suburbs, resulting in an overall inflated market.

  10. This needs to be reported in the MSM. It’s a big enough story to feature on 60 Minutes, and certainly a big enough story for ACA, Today Tonight or the 7.30 Report.

    Very few people are aware of the extent of this issue, and most people would think it’s under control, bound by laws, when in fact it’s virtually unrestricted and very definitely keeping Australians from being able to buy a home.

    Does anybody out there have a contact in the MSM who would be willing to shine a spotlight on this rort?

    • Vedelago is on it:

      “Chris Vedelago ‏@chrisvedelago 32m
      Got a story going up in next hour on how Australia’s foreign buyer compliance system has been exposed as a farce #realestate #FIRB”

  11. C Vedelago said he was “on it” on Twitter. Be interesting to see if it makes it to Domain.

      • Wonder if you will score an interview on 2day2nite or ACA? Where they show you busy handing files to a receptionist….

      • Hah … not surprised. Presumably he wore out his welcome at Fairfax. Journalism re property issues not really welcome there I guess.

      • So there you have it … I have strayed far beyond my area of competence … and have embarrassed myself!

        I was confusing Business Day with Business Spectator… which may also be Fairfax, for all I know!

        But all this aside, I hope you remain at Fairfax, CV. On RE matters you are really the only credible voice left there.

  12. The t r o l l alarm has gone off!
    As if the Dept would go after someone and by doing so expose their own flawed system. Too funny!

    • GunnamattaMEMBER

      Yeah my email attached to my twitter is filling up with spam all of a sudden. I suspect my name has been loaded to a load of sales sites today or something.

      I also understand someone at another site is copying the posts I have made here and loading them there as another guy by the name of barista.

      Just so punters are aware.

      • GunnamattaMEMBER

        Yeah I know, but I have also been given an interesting tip

        The onshore protection unit of the department of immigration has apparently written to the Treasury at some point in the past,

        ‘outlining concerns with the operation of the FIRB real estate ‘application’ process, noting the implications this has for immigration policy, and noting a range of specific circumstances where the process has been known to be abused.’

        I am given to understand that that particular Memo will be on file at both Treasury and Immigration somewhere.

        The tip also said that almost all government departments are down to 5% random sampling of all investigations of nearly all processes across the APS (due to budget constraints), with the exception of onshore protection of immigration and customs down to 7%.

        I also understand that some of the more gung ho immigration boys want to have a surprise visit at auctions in the coming weeks for data collection purposes.

        Might be more to this story yet.

      • Yep, if you are interested, I can detail the tactics quite well. Bullion Barron did a post on it all.

      • GunnamattaMEMBER

        If you have a link to that post that would be nice.

        I have a mate in Belarus who hacks sites for a living. I might cut to the chase and get some pre emptive hacking in.

  13. Well done Gunna & CV for exposing this complience problem. I was reading the FIRB annual report last weekend. There’s a section explaining their compliance activity in the most general terms (p8-10 from memory), but no actual figures counting those complience actvities. I concluded regulatory enforcement would most likely be pretty lame, and Gunna’s experiment has confirmed that conclusion. But just how lame? From the anecdotal reports given above it sounds as if it is worthy of some systemic rectification.

  14. The cognitive dissonance here is showing.

    FIRB received an application from a permanent resident to which they responded saying you don’t need to apply.

    No Approval was ever given.

    If you want to commit fraud, why didn’t you just say you were an Australian citizen in the application? Maybe all Australians should be subject to FIRB review?

    What are you hoping to achieve by pushing this to MSM? Some people wont be happy until everyone is micro chipped for ID and you cant leave home without having 50 background checks.

    • GunnamattaMEMBER

      More bull Peter,

      FIRB tells people it takes ‘applications’ it also tells ordinary punters that its regular compliance activities involve information sharing arrangements between FIRB and the Department of Immigration.

      I didnt tell them I was a permanent resident, they told me. More to the point the only basis they could have gone on for that was my suggesting I had a subclass 878 visa – which it has been established today doesnt actually exist. That went with a fake name and a fake passport number.

      Who is committing a bigger fraud? Me for making an application to see what the process is like (as someone married to a foreign national maybe I was quite genuinely looking to see if I could buy a place i might quite like, under a genuine belief that whatever laws applied to her might apply to me), or FIRB for suggesting that their system has some sort of integrity for actually doing what they tell people it does?

      • Again, they didn’t approve you – they told you that you are exempt based on the fact they have assumed (mistakenly as you mentioned) you are a permanent resident.

        They still didn’t give you an approval.

      • GunnamattaMEMBER

        Yeah right, Peter.

        So I go to an auction or just make a bid for the place.

        The agent is only going to talk about price. The vendor is only going to want to see the money.

        If, in the remote likelihood, someone asks about my right to buy a place I look them in the eye and say ‘Oh I am exempt, and dont need approval’ and show them the email.

        They nod vigorously and I sign a contract showing them my passport (not visa page) as proof of ID.

        I write a check for deposit (maybe) and tell them I will direct deposit the rest in a week or whenever. I transfer cash to nominated bank account.

        Those japesters at Austrac happen to twig. Ask agent or vendor why they are receiving money from foreign national. Agent or vendor says house being sold. Austrac says okey dokey.

        Final handover has my conveyancing man ensure deeds are dandy. Not a soul looks at my right as a foreign national to buy Australian residential RE.

        Agent gets fee, vendor gets readies, I get abode, FIRB nods back off (looking at 5% of applications)

      • So you committed fraud – congratulations.

        BTW its Pat – not Peter, I’m an expat, under your regime I would be subject to FIRB review before I could purchase property in a country where I have been granted permanent residence – a process you must know is quite extensive and long winded (even painful) given your wife is a foreign national.

        Australians are perfectly capable of screwing up their own property market, this is a red herring at best.

      • Gunnamatta deserves credit for exposing a glaring hole in the system. Hysterical allegations of fraud or criminal behaviour are misguided (or intentional attempts at distraction) that simply miss the bigger issue at play here.

      • GunnamattaMEMBER

        But how is anyone ever going to know? That is what is happening.

        Yeah I know the permanent residency process is a pain. But once you have it you arent part of the FIRB process.

        Yes I know all too well Australians can screw up their own markets. I believe they have done so here.

        But I disagree with you on last. This is not red herring, it is a very live issue- and I am not the only one saying so. Foreign national have spent circa $98billion on Australian residential RE in past 5 years. Process according to my latest information may be looked at at best 5% of the time. RE agents I have spoken to have said same – it is a significant factor in price in specific locations.

        I dont mind of government says ‘we dont care’ as long as they say that to punters. If they say ‘we do care and we have system to ensure there is no abuse’ and that system is demonstrated to be bull then the govt is in the firing line.

        It isnt about foreigners one way or the other. It is about feeding Gens XYZ to babyboomers using residential real estate as mechanism. Visa holders are just being used to make sure heavily indebted speculating boomers get the payoff.

      • If the real gripe is that FIRB didn’t run a background check on your details before returning correspondence then you do have a point. Maybe they should do this for all enquiries – but what is the cost? I personally don’t see why background checks should be run on people who don’t require an application.

        However if you were to take the correspondence they sent you and buy a property without actually being a permanent resident then you would be committing fraud.

        All systems have to rely on self regulation to some extent. There is nothing in place to stop my lying on my income tax return for example. There is nothing stopping me covering my license plates, driving up to a petrol station, filling up and then driving off.

        As I mentioned in my earlier post – the checks need to be at the transaction stage, if as you are alluding to all the associated entities involved in the real estate transaction are not verifying identity and ability to purchase then it would seem that they should be the target of this thread?

      • Firstly to write a cheque you must have provided 100 points of ID.

        Secondly property settlements are not conducted by transferring funds to a nominated account. What you are proposing would be highly irregular and impossible to arrange finance within Australia.

        I don’t have an issue with your assertion that it is very easy to get FIRB approval – I agree with that, but if you are suggesting that overseas residents can fraudulently buy homes here in ficticious names with the blessing of the FIRB, well that’s quite a different matter.

      • @PF – we have already established that opening up a legitimate bank account in Aust is easy regardless of nationality.

        This is not relevant to the discussion. What is relevant is once you have a bank account – by legitimate or fraudulent means, then it is easy to speculate in australian property.

        Given the nature of your comments however, i am actually starting to suspect you know this however.

      • Yes aj it is easy to speculate on Australian property, as it is for property in the USA and many other countries.

        When was that point ever in doubt?

      • GunnamattaMEMBER

        Peter that is more utter Bull

        I am not saying foreign national are buying Australian residential real estate fraudulently. They can do it using their own names and their own passports.

        As someone who to this days works for a foreign bank on almost any given day I can tell you that I can hand over a cheque as a deposit on an Australian abode and that cheque will not be questioned (assuming I used cheques and I dont). Absolutely nobody is going to ask me for 100points of ID.

        If they did I show them a passport and an international credit card – boom, there is my 100 Pts.

        I guarantee you, as someone who has talked with RE agents about buying houses, that I have said to them if I leave them a 10K deposit – in cash more likely than cheque – and quite literally go online to my (overseas) bank account (and I could do it before their very eyes) to transfer funds to their nominated account, every last man jack of them has said ‘Yes that will be fine’

        It would not be highly irregular for anyone.

        The simple fact of the matter is that many overseas punters can pay cash and dont need to go through a mortgage. Getting money into the country is very straightforward.

        The unadulterated truth is that we make younger people doing this through a mortgage go through far more hoops, identity checks, pay slips etc simply because they are borrowing the money. If there is no need to borrow, then absolutely nobody anywhere will ask for the provenance of the funds.

        And gettings those funds into or out of Australia is childs play. The same goes for getting ‘permission’ or ‘approval’ or ‘exemption’ from FIRB, presumably because FIRB know fill well that there is not a hope in hell that anyone buying Australian residential real estate would get discovered anywhere along the line for not having an appropriate visa.

        This is the intention of the process.

      • aj – I know it’s possible to get FIRB approval on existing dwellings, but I don’t know whether it’s automatic or limited.
        It’s almost automatic on new builds, which is where most of the approvals are directed to.

      • Peter
        What is your point? Are you against the possible flaws in the FIRB or not? I take it you are a big supportor of selling our RE to OS investors at the expense of the following generations?

        I really am having trouble undeerstanding why you and the t r o l l s would have a problem with Gunna’s exposure of FIRB flaws?

      • @ Pat – your comments are deeply flawed. Gunna has used a hypothetical to expose the gaping holes in the rules that regulate speculation by foreign nationals in our property market.

        Gunnamatta has shown that speculation on established realestate by foreign nationals using both legitimate and suspect methods is easy and poorly regulated.

        What is most likely is that politicians and the industry know this already – they want prices to rise and they don’t give two sh&ts about how they get this effect, and the don’t give two sh&ts about the generations or families they leave behind.

      • No he hast, he has used a hypothetical to prove that if you apply for FIRB review and state you have a visa they will advise you don’t need a review.

        Here is a link to FIRB exemptions:

        http://www.firb.gov.au/content/exemptions/exemptions.asp

        “Certain acquisitions do not require notification or approval under the Foreign Acquisitions and Takeovers Act 1975. Foreign persons should determine whether their proposed acquisition is exempt and if in doubt, seek legal advice. Please note that we do not issue exemption letters.”

        ~~Please note we do not issue exemption letters~~

        He has not been approved and there is no such thing as an exemption letter. He has merely received correspondence (admittedly wrong) telling him he doesn’t need to apply.

        Also from the link:

        “Foreign persons should determine whether their proposed acquisition is exempt and if in doubt, seek legal advice”

        Foreign buyers must prove on their own whether their transaction is exempt – according to the letter he is exempt if at the date of purchase he is a visa holder and clearly he will not be.

        The FIRB did not give an exemption or an approval. The burden of proof falls on Mr Wontok and any court in Australia that was half sober would find against him.

      • @P – That is the point isn’t it. It is not regulated or enforced.

        Foreign nationals are free to speculate in established australian property.

        Pointing out that it is not meant to be done under the established regulations is adding nothing to the debate (other than proving you are an apologist for the industry).

        Have regulations that are not enforced is like having no regulations at all.

      • GunnamattaMEMBER

        Hang on Hang on

        With Pat, I think we are just saying different sides of the same coin.

        He is saying it isnt legal and that I dont have ‘approval’

        I am saying OK but who the hell is ever going to do something about it. Sure any half sober court may find me guilty of buying a place when I shouldnt have been able to.

        My point is that after I have that email from FIRB, who the hell is ever going to take me to court? Not the vendor or the agent – they have their dough. Someone else who wanted to buy the property? – how the hell would they know my visa status? Who is going to realistically say ‘this guy shouldnt be buying an Australian residential property’ ???

        A lot of potential foreign buyers of Australian residential real estate property know this.

  15. It’s no wonder the FIRB never were able to respond to Veldago’s FOI requests!

    The response from a number of parties suggests that there are clearly vested interests at play trying to silence and distract from this issue – however, their clearly hysterical allegations of fraud and criminal activity easily identified and dismissed for the histrionic illogical responses they are. The property industry has failed to react, but that is to be expected given the standard of astroturfers employed.

    Gunnamatta and MB have done the community a service by being able to get this important news out into the media which is something the trolls could only ever dream of.