AUSTRAC: Global dirty money washed in Aussie homes

By Leith van Onselen

Yesterday I noted that the Paris-Based Financial Action Task Force (FATF) on money laundering had in April 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.

Today, 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…

As I noted yesterday, the draft rules on anti-money laundering affecting real estate were released in 2007, but have been all but ignored by the federal government ever since. In the meantime, dodgy Chinese money has been allowed to price young Australians out of home ownership, assisted of course by egregious tax policies (e.g. negative gearing), the immigration ponzi, and planning bottlenecks.

Enough is enough. It’s time to end the Australian Government’s willful neglect of foreign funds being laundered through our homes.

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Unconventional Economist
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    • One of the few Q&A episodes I actually watched – and I was in amazement when they collectively termed us racist – and no one said anything! You could see nodding all around.

      Other than a couple of other times – I refused to watch Q&A after that. Its extremely biased, left leaning, and Tony is they key guy driving it. Its no wonder Malcolm Turnbull loves it. They should invite Keating, or Kim Beasley – or Howard… but maybe they are too smart to participate.

      • ABC and SBS have transitioned to corporate governance, shades of what has happened to PBS in America.

      • “Other than a couple of other times – I refused to watch Q&A after that. Its extremely biased, left leaning, and Tony is they key guy driving it.”

        I’m left leaning and I refuse to watch it. Not because I see or care about any particular left/right bias but just because it’s moronic dribble.

      • Tassie TomMEMBER

        As Keating once said (as well as I can recall), “Why would a public figure in an important role want to sit as an equal with a bunch of intellectual nobodies?”

        I think that a) PK is too smart, and b) we’re not going to see him on Q&A any time soon.

      • drsmithyMEMBER

        As Keating once said (as well as I can recall), “Why would a public figure in an important role want to sit as an equal with a bunch of intellectual nobodies?”

        The political representatives are generally left looking like the dumbest people on the panel. Primarily because most of them (especially if they’re Liberals, MT being the only exception I can think of off the top of my head) try to immediately turn everything into a political issue.

    • That comment on q and a sickens me. Detract s from intelligent conversation.bow to your overlords.

  1. Every transaction has to have an ATO number box completed, and notified to the ATO as part of the Settlement process? If you haven’t got one, then questions must be asked and answered.

    • What [?] like the one day GST numbers used to validate all those income numbers [centerlink recipients], used on mortgage broker loan origination?

      And pray tell where these government agencies will find the time or the staff to undertake such investigations, having budgets and staff constantly fighting off razor attacks in the name of Taylorism efficiency as measured by costs alone [its not like they buried their wages in the back yard imo].

      Skippy…. equilibrium will sort it out one of these days…. or so I’ve heard…

  2. (@ AUSTRAC) Well, DUH.

    So with all these suitcases of cash, are we on countdown until there is a robbery at an auction/ Real estate agent office?

    As to businesses you need only look at the proliferation of blinking “massage” signs to realise these are fronts for money laundering.

      • Por que no los dos? They’re everywhere and at saturation point. There is one directly opposite my workshop and by observation there are simply not enough *customers* to warrant keeping the lights on.

    • With banks holding less and less cash, pay runs no longer happening in cash, and ecommerce taking over everyhwere it seems like RE auctions in popular suburbs for money laundering types is about the only place less where cash in large quantities is likely to be found. Armed robbery just seems inevitable.

    • I may well be missing something here, but I think that AUSTRAC is being disingenuous. At some point the funds are being routed through an Australian bank or ADI – either through the account of the purchaser or the vendor (assuming at least one of them is in AUstralia. In which case it IS reported to AUSTRAC and they have the opportunity to investigate.

      Unless of course there is clear evidence that foreign purchasers are indeed settling property sales with cash……

  3. moderate mouse

    Tony Abbott’s all in favour of the Chinese Laundry. One man’s ‘dodgy’ money is another man’s fortune!! Dirty money, clean money….it’s all money.

    • thats right… he is open about the fact that he likes to see “his house price to increase”, increase in price is just that in increase in price no dirty or clean, just increase!

  4. Wishful thinking.. you really think with the clowns we have in charge this is going to happen? This country has lost its moral compass long ago. From the financial planners scamming their clients under the cover of providing financial advice, to the vulnerable children refugees being imprisoned, to the complete disregard of the environment, to the shameful treating of indigenous people, to the selling of our kids’ future to the highest bidder.. the list can go on and on..

    • Tassie TomMEMBER

      I’d put a date on when our “moral compass” was lost: 24th August 2001 – the day that Palapa 1 sunk and its passengers were rescued by the Tampa.

      Nearly 14 years ago, and our collective “moral compass” has only drifted further since then.

      I’d also call this date the “birth of the Bogan”. When “The Castle” was released in 1997, lower-class uncouth Aussies were “yobbos”. The key difference was that there was no innate sense of deserving and entitlement – a “yobbo” accepted their lot in live and lived within their humble means.

      Post-2001 – welcome to “Johnnie’s aspirationals”, and all the boganism that followed. (It also closely coincided with the current housing bubble’s inflation – “equity mate”).

      24th August 2001.

      • drsmithyMEMBER

        I’d put a date on when our “moral compass” was lost: 24th August 2001 – the day that Palapa 1 sunk and its passengers were rescued by the Tampa.

        March 2, 1996.

  5. Good luck commissioner
    Second commissioner Tax Neil Olesen said investigations will skew towards the top-end properties.

    “I’d be surprised if a far slab of them were not towards the top end of the market. One of the compliance activities we have in mind would be to look at significant sales over the last five to 10 years.”

    • I see far more attempts from these buyers to go for the low cost stock and play the wannabe big gangsta fish in little pond

    • Mining BoganMEMBER

      You have to understand that these people are not on the side of Australians.

      Understand that and you understand their thinking.

  6. I think it may be less of a case of ‘willful neglect’ and more of a case of ‘passive endorsement’.

  7. No one seems to remember the decades long saga which unfolded and the many moving parts which ultimately allowed not only RE but a whole cornucopia of asset prices to become distanced from reality.

    Wages viewed as the hyperinflation bogeyman abetted by tax is theft only to engage in constant lowering of credit underwriting standards and industry driven revolving debt – fee based rents.

    Skippy…. the best part was when RE owners were allowed to skim equity off short term increases in order to pull demand forward, lifestyle enhancement or my personal fav – investing in the stock market [gezz that would make all valuations a wee bit dodgy… eh {fake profit pushing price}].

  8. Sorry but until the words uttered by China´s Politburo are “Enough is enough. It’s time to end the Australian Government’s willful neglect of OUR funds being laundered through their homes.” nothing will actually change politically. Economic reality has a better chance of correcting the situation (check out the latest macro-graphs in greaterfool to see what is happening to the Arctic twin).

  9. Watch it, Abbott, aka Jesus, will fuck’n have you. You’re denying Australians their god given right to ever increasing house prices.