China comes after our money launderers

By Leith van Onselen

From The AFR’s Karen Maley comes a report that China’s authorities are stepping-up action to prevent money from being illegally transferred out of the country:

On Tuesday, the People’s Bank of China, announced changes that will make it more expensive for investors to hedge against further drops in the Chinese yuan against the US dollar.

At the same time, China’s largest banks are stepping up their checks on large foreign-exchange conversions by corporate clients, while China’s financial regulators are targeting illegal money-transfer agents who help wealthy Chinese transfer funds out of the country…

And Chinese officials are cracking down on underground banks that help Chinese nationals to shift money out of the country…

Already-affluent Chinese investors, worried by the oversupply problems in the Chinese property market, the country’s volatile sharemarket and Beijing’s crackdown on corruption, have been sending large amounts of money offshore.

Earlier this year, the Paris-based Financial Action Task Force (FATF) on money laundering warned that Australian residential property is a haven for international money laundering, particularly from China – a view supported by the Australian Transaction Reports and Analysis Centre (AUSTRAC).

We also know that foreign buyers – especially from China – are active in Australian real estate, particularly in Melbourne and Sydney:

ScreenHunter_8437 Jul. 21 13.03

If China’s authorities are successful is stemming the tide of illegal money transfers, then it would obviously reduce the amount of overseas funds flowing into Australian property, thereby reducing price pressures and potentially exacerbating the inevitable housing downturn.

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Comments

  1. “At the same time, China’s largest banks are stepping up their checks on large foreign-exchange conversions by corporate clients, while China’s financial regulators are targeting illegal money-transfer agents who help wealthy Chinese transfer funds out of the country…
    And Chinese officials are cracking down on underground banks that help Chinese nationals to shift money out of the country…”
    Where is the evidence of this?

  2. This is real news – I always thought the real brakes will come on when the Chinese Government actually freak out about capital flight and stop it in its tracks – I would not discount them trying to totally clamp it or even introduce capital controls

  3. I suspect things may get Ugly. Those laundering money out of China might be doing in relatives names but threatening a family member still in China might be a way of getting it back.

      • They could save money by including those short selling stockbrokers too – although they maybe one and the same!

      • China’s mobile execution vans transport the prisoner straight from the courtroom to the morgue, greatly reducing costs and improving efficiency. A couple of those parked outside stock exchanges might do the trick.

  4. TailorTrashMEMBER

    Just hand over our realestate sales records for the last 5 years to the Chinese police ……I’m sure they would be able to make good of them ……cos looks like our government agencies have had no use or interest in them ……..imagine all that money moved out of China now embedded in dog box apartments and over priced crumbling brick veneer rubbish houses in Sydney and Melbourne ………that should cause some fun if the government of China want the money back ………

  5. With the Jellis Craig CEO saying (bragging) on Melbourne breakfast radio yesterday that at least 50% of existing home sales in Mellbourne’s leafy eastern suburbs are going to Chinese buyers, that would be a good place for the Chinese authorities to start. Audit the books. Of course he said all the sales are above board, just people moving in from the outer suburbs, but he would say that, wouldn’t he. Of course, when questioned, these same agents say it is not their responsibility to vet the bona fides of prospective buyers so how on earth can they vouch on one hand for the legitimate but look the other way when it is convenient. They will be judged to have been on the wrong side of history, as will the sucessive governments that have been either complicit or asleep at the wheel.

    Scumbags, the lot of them.

    • My anecdotal evidence would agree with that, we are looking for a new rental property in the ringwood +5km area. I always ask the agent if the landlord is local or oversea’s, most the time its oversea’s.

      This begs the next question, what happens when you have a rental shortage in this area, prices are high so people arnt buying and foreigners are forced to sell the IP ?? I have a feeling this is going to get very interesting very soon.

      • @tonydd – There’s always a possibility that they’re not paying tax but I think any real estate agency would be wary of dealing with someone that dodgy. Otherwise:

        https://www.ato.gov.au/Individuals/International-tax-for-individuals/Investing-in-Australia/

        Foreign residents are taxed in Australia on income earned from their Australian investments.

        For interest, unfranked dividends and royalties, tax is generally withheld in Australia at the time of payment. But if you receive rental income from Australian properties or capital gains from selling Australian assets, you must declare these amounts in an Australian tax return.

      • Why ‘or’?

        One definitely seems true, based on experience.
        Still time to prove two correct or otherwise.

  6. wasabinatorMEMBER

    This is par for the course for Aus these days: even the policing of dodgy property sales needs to be off-shored.

  7. I tell you what.

    I’ve seen way too many McLarens in Melbourne CBD the last year.
    All driven by very young asian guys. Probably just coincidence.

  8. It remains somewhat of a scare country if you’re not allowed to privately swap YOUR yuan balance in China for someone else’s AUD balance in Australia – which is the essence of any money transfer.

  9. It’s all going to go nowhere.

    Aus will just make it easier to buy PR/ citizenship. This will be the flipside of the supposed crackdown.

    • “Aus will just make it easier to buy PR/ citizenship.”

      And that will prevent China from going after the money launders in what way?

  10. How interesting.
    Move over FIRB – you’re a lightweight, just there to stave off the dumb Aussie who’d think it actually does something.

    • * – Except for those foreigners who have already lost money due to the AUD drop and those who will lose more in the future as it continues to drop. But other than that it’s more popular than ever.

    • Any Chinese who bought a million dollar property at $1.10 have already lost half its value.

      Anyone buying now stands to lose that again.

      Awesome work.

  11. The number of hire cars (rego HC….) on the streets on Sydney are about to plunge. These have become a lot more noticeable in recent months.