Last year, the global regulator against money laundering – the Paris-based Financial Action Task Force (FATF) – released a scathing report highlighting that Australian residential property is a haven for international money laundering, particularly from China, and 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.
FATF’s findings were then backed-up by the Australian Transaction Reports and Analysis Centre (AUSTRAC), which has warned that “laundering of illicit funds through real estate is an established money laundering method in Australia”.
In 2003, Australia agreed to implement comprehensive anti-money laundering (AML) regulations that captured accountants, lawyers, real estate agents and other non-financial businesses. However, the second tranche of the reform to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, which would have captured these non-financial gatekeepers, has remained in limbo for a decade, and has yet to be implemented by the government. All attempts to pass legislation have been placed in the ‘too hard basket’ by our policy makers and delayed indefinitely.
Now the pressure on Australia to act on AML is certain to intensify with New Zealand’s National Government flagging that it would implement the second tranche of the AML rules to include solicitors, accountants and real estate agents in the wake of the Panama Papers scandal. From Bernard Hickey at Interest.co.nz:
Prime Minister John Key has announced the Government will accelerate the introduction of stalled plans to pull trust lawyers, solicitors, accountants and real estate agents into the tough Anti-Money Laundering (AML) regime that was launched in 2013 to force banks and fund managers to ensure money they handle is legitimate.
The Government has talked for over two years about planning this second round of extending these tough new AML rules to all those lawyers setting up foreign trusts, as well as to solicitors and real estate agents, but the reforms have been stalled at the officials level since 2013…
I asked [Prime Minister] Key at his post-cabinet news conference if the Government would now accelerate the second round of the AML reforms, given that currently some trust lawyers are not subject to the more stringent AML rules relating to identifying the source and legitimacy of funds.
“I think so. I think part two of the anti-money laundering legislation does need to be brought forward on the (Parliamentary) order paper,” Key said…
Asked how soon it would happen, he said: “As soon as we rapidly can.”
As noted last year by Nathan Lynch, Head Regulatory Analyst for Australia & New Zealand at Thomson Reuters:
AUSTRAC’s surveillance efforts are… being frustrated by the fact that money launderers will often use unregulated entities as a “first point of contact” to help disguise their source of funds. If a criminal makes a suspicious cash deposit into a real estate agent or lawyer’s trust account, for example, the suspicious transaction is not required to be reported to AUSTRAC. Reporting entities, such as banks, are required to report transactions of this type within three business days of forming a suspicion. Lawyers are only required to report threshold transactions under the legacy Financial Transaction Reports Act 1988, not suspicious matters, while real estate agents have no reporting obligations.
Separately, Lynch noted that Australia’s “politicians have been conspicuously evasive on their bipartisan commitment to follow through with a second tranche [of the AML legislation]… politicians are happy to turn a blind eye”.
And just last week, the Statutory Review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 was released, which among other things called for the extension of AML to non-financial gatekeepers like real estate agents, lawyers and accountants.
Once New Zealand strengthens its AML rules, it will place greater international pressure on Australia’s authorities to follow suit, given Australia would become the South Pacific’s sole money laundering paradise.
Australia’s authorities will no longer be able to bury their collective heads in the sand and continue to ignore the money laundering elephant in the room.
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