Federal parliament complicit in property money laundering

By Leith van Onselen

Last week we got confirmation that dodgy Chinese money continues to pile into Australian property:

Australian financial intelligence officials last year investigated more than $3.3 billion of suspect transfers by Chinese investors — including $1bn invested in property…

The figures lay bare the scale of Chinese investment in the Australian property market as well as the concerns of officials in Beijing and Australia about investors rorting foreign ownership regulations…

Austrac’s own reporting… found that the most property-­related fund transfers from China reported to the agency were linked to Victoria, followed by NSW …sources say rorting is rife, with foreign buyers using a variety of scams to get their money out of China…

At their most basic, the scams involve using a network of friends and family members to transfer multiples of $US50,000 into Australia, where it is collected and used by a trusted agent to buy property.

More sophisticated scams ­involve buying homes through a web of incorporated companies or through Chinese permanent residents. Neither entity is ­restricted by conditions on property purchases.

Today there’s more confirmation, with reports emerging that there has been a huge surge in foreign buyers paying cash for off-the-plan apartments. From The AFR:

The proportion of foreign investors paying cash to settle new Melbourne apartment acquisitions has surged to more than 35 per cent…

Nick Holuigue, a partner in law firm Maddocks’s development practice, said there had been an “unusually high percentage of cash buyers”…

Evan Cathcart, a director at Three Sixty Property Group, which sells apartments and townhouses off-the-plan into China (including Ikebana) said there had been a “huge surge in cash buyers in the past 12 months or so”…

A Melbourne-based Chinese estate agent who asked not to be named said it was quite possible that Chinese buyers were paying 100 per cent cash for new apartments.

“While there are capital controls, there are tons of ways to get around it. My partners having used these channels to transfer cash across for Melbourne purchases. If these buyers have enough connections on the Chinese side, it can be done,” he said.

Under Australia’s existing Anti-Money Laundering (AML) regime [the first tranche implemented in 2006], only financial institutions are required to report suspicious transactions to Austrac.

The Turnbull Government recently deferred indefinitely the promised second tranche implementation of AML rules for real estate gate-keepers, which have been in limbo since the federal government first promised to bring them into the regulatory net in 2003. This deferral came despite explicit criticism from the global regulator, the Paris-based Financial Action Taskforce, that Australian homes are a haven for laundered funds, particularly from China, as well as similar warnings from Austrac.

The end result is that realtors, lawyers, accountants and other real estate gate keepers are currently exempted from AML requirements. And this exemption has provided an easy avenue for foreign buyers to launder funds through Australian property.

Perversely, if somebody wants to set up an account to place a $100 bet at Sportsbet, or invest $1,000 into a managed fund, then they must provide sufficient identification under the AML Act. But if they want to launder millions of dollars through an Australian home, few questions are asked. It makes no sense.

Clearly, the Australian Government is tacitly complicit with the dirty foreign money flooding into Australian property. The Coalition has already shown its hand in deferring the implementation of the second tranche. But where are Labor and The Greens on this issue? Why won’t they lobby to end a decade of neglect and bring Australia’s real estate gatekeepers into the AML net – as demanded by FATF and Austrac, promised by the federal government in 2003, and intended when the AML legislation was first drafted in 2006?

Will our politicians please stand up?

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Unconventional Economist
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Comments

  1. It’s only criminal money laundering if Parliament says it is criminal money laundering. and they haven’t. So they are blameless!

    • There are several members of my direct family who have been politicians in local state and federal level. I was speaking to one of them over Christmas and was asking what laws govern the laws which they make. Can politicians for example simply pass a law which allows them slaughter all men who refuse to cut their hair short so long as it does not breach the constitution ?

      We have no bill of rights, or in fact any other legislation which governs how our laws are made – and the Oath and Affirmation are made to the Queen or King and her heirs (the Commonwealth) – absolutely zero obligation towards the actual people or citizens of Australia.

      .

      Can anyone point me in the direction of the laws which govern the means under which the laws are regulated ?

      Nothing in the constitution – just read it.

  2. reusachtigeMEMBER

    No one gives a sh1t! It’s great that the Chinamen are increasing the value of our property so we can all prosper!!

  3. I think Labor may not curb foreign money.

    ALP will put in negative gearing reforms to save the budget – which may bring house prices down (?) but if prices go down “too much” the ALP may turn a blind eye to foreigners buying Aussie houses illegally.

  4. lol, just tune into channel 7 tonight, they are promoting a whole segment on how to make your property attractive to foreign buyers! “make sure you are ready for the Chinese new year investor influx”

    We are a pathetic bunch.

    • Step 1: Vendor will pinky swear not to raise FIRB attention for the sale of their existing dwelling. This couldn’t happen without local enablers selling out!

  5. So glad the Chinese have implemented some capital controls. Until we see heads roll in China (including CCP members), at best those controls are just a facade for more soft takeovers.

    • Must be a fair bit if they’re buying entire apartments with cash.

      Even if the money is legal, the purchase is illegal. Foreigners cant buy existing property unless they have FIRB approval so its illegal in Australia. And it violates Chinese law as they are not allowed to take that much money out of the country.

      Agents and lawyers who facilitate these transactions should be prosecuted for aiding and abetting a crime.

    • Of course money from UK US and others… but Chinese is illegal as China has and has had for years, a 50K per annum max transfer out of country.
      Jan 2017 chinese laws have tightened this. Every cash buyer from China here is illegal as their country will not allow that amount of money out.

      • Good point I’ve made plenty of times before. By definition one cent greater than the USD 50k from China for a property transaction is laundered money. What say you Terry Tao & China Bob ? Still defending this as legal? As you know I “haven’t spent much time in China”.

  6. I’ve been to other countries and Australia really is the lucky country. More foreign capital into Australia means on the whole, every citizen becomes wealthier. Just look at what Australia is today, compared to 20 years ago. The government is allowing this for a certain time, ensuring lots of wealthy foreigners invest in Australia, just like every other rich country. Once they’ve loaded up on milking the foreigners with various property, settlement taxes, they will begin cracking down with fat penalties and land taxes on un-rented homes. Of course, the only losers in this game are first home owners. The winners are those who have multiple investment properties.

    • Just look at what Australia is today, compared to 20 years ago.
      More corrupt, more crowded, more shitholic. Need I go on?

  7. The report was last year – just see how things have changed – I know of a high profile Sydney agency who have halved their employees…with at 8 others with sales staff on 2 days a week – doesn’t add up does it compared to BS we are reading in real estate owned newspapers due to REA and domain.