Report: Australia world’s worst money laundering property market

By Leith van Onselen

Transparency International has released a new report, entitled Doors Wide Open: Corruption and Real Estate in Four Key Markets, which has identified Australia, Canada, the UK and the USA as the top four spots targeted by corrupt officials or criminals for real estate crime.  Australia is the worst, failing to address 10-out-of-10 loopholes.

Below are the key extracts:

The real estate market has long provided a way for individuals to secretly launder or invest stolen money and other illicitly gained funds… According to the Financial Action Task Force (FATF), real estate accounted for up to 30 per cent of criminal assets confiscated worldwide between 2011 and 2013…

In many such cases, property is purchased through anonymous shell companies or trusts without undergoing proper due diligence by the professionals involved in the deal. The ease with which such anonymous companies or trusts can acquire property and launder money is directly related to the insufficient rules and enforcement practices in attractive markets…

This assessment identifies the following 10 main problems that have enabled corrupt individuals and other criminals to easily purchase luxurious properties anonymously and hide their stolen money in Australia, Canada, the UK and the US:

  1. Inadequate coverage of anti-money laundering provision
  2. Identification of the beneficial owners of legal entities, trusts and other legal arrangements is still not the norm
  3. Foreign companies have access to the real estate market with few requirements or checks
  4. Over-reliance on due diligence checks by financial institutions leads to cash transactions going unnoticed
  5. Insufficient rules on suspicious transaction reports and weak implementation
  6. Weak or no checks on politically exposed persons and their associates
  7. Limited control over professionals who can engage in real estate transactions: no “fit and proper” test
  8. Limited understanding of and action on money laundering risks in the sector
  9. Inconsistent supervision
  10. Lack of sanctions

Australia has severe deficiencies under all 10 areas identified in the research and is therefore not in line with any of the commitments to tackle corruption and money laundering in real estate made in international forums.

In Australia, real estate agents are not subject to the provisions of the Anti-Money Laundering and CounterTerrorism Financing Act 2006. Other professionals such as lawyers and accountants who may also play a role in the sector are not covered either. This means that properties can be bought and sold without any due diligence on the parties. Currently there are no requirements for real estate agents or any professional involved in real estate deals to submit STRs, even if they suspect illegal activity is taking place, and there are no requirements or rules for verifying whether customers are PEPs or their close associates…

In Australia, Canada and the US, the current anti-money laundering framework shows a tendency to rely on financial institutions to conduct the necessary background checks on real estate transactions… there are no checks on cash transactions.

In Australia, 70 per cent of Chinese buyers pay in cash and they represent the largest proportion of foreign purchases in the country.

What a complete and utter disgrace. Legislation to implement the second tranche of anti-money laundering (AML) legislation covering real estate gate keepers has been gathering dust for nearly a decade despite explicit criticism from the global regulator, the Paris-based Financial Action Taskforce (FATF), that Australian homes are a haven for laundered funds, particularly from China, as well as similar warnings from Austrac.

In the meantime, dodgy Chinese money has piled into Australian property, in the process inflating house prices and pricing young Australians out of home ownership.

When will Australia’s politicians finally take action and end more than a decade of neglect by bringing 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?

Or will the Australian Government continue to turn a blind eye to the dirty foreign money flooding into Australian property?

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Comments

  1. GunnamattaMEMBER

    Of course the other way to see it is that Australia is the worlds best money laundering in real estate market if you are looking to sink corrupt loot into real estate

    Its gold gold gold for Australia……

    • Ummm… this being Australia – it’s more like [thin layer of gold] tungsten, tungsten, tungsten[/thin layer of gold]

    • Building Australia’s future, one billionaire at a time.

      What’s the problem? They’ll start spending locally once they have to flee the mainland. Great plan.

  2. Hence why I have a big problem with Australia caning the extradition treaty with China. Nothing to do with democracy or rule of law.

  3. proofreadersMEMBER

    “When will Australia’s politicians finally take action and end more than a decade of neglect by bringing 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?”

    Likely never as they have too much self-interest/vested interest to protect. If and when they ever act on this, as with everything else it will be too late as Straya will have already been irretrievably sold down the river. Whocoodanode?

  4. blacktwin997MEMBER

    Somebody should send this on to spineless Bill Shorten and ask what he’s going to do about it. If he you know, actually places the welfare of Australians above that of corrupt Chinese.

    • I’m sure all the state Premiers cashing those stamp duties are completely comfortable with the current arrangements. Australia’s doing just fine out of this… or was until China called the PM out on it.

  5. When will Australia’s politicians finally take action?
    After they’ve sold off all their IPs for a tidy sum.

  6. You couldn’t make this up:
    The MSM has been progressively losing influence and readership for many years and point the finger of blame at ‘alternative’ media outlets, which they claim are publishing ‘fake’ and ‘unreliable’ news and yet, when presented with a gilt-edged opportunity to add some value to the lives of the country’s citizens ….. crickets.

    If the media doesn’t hold the government to account over this, who will? Fuck em all — when the last one of them has lost their job they’ll deserve it.

  7. Write to your local member. I did. He is Malcolm Turnbull.

    Dear Malcolm Turnbull,

    I never received a reply to my query dated 2 February 2017 below.

    Today I learned more worrying information about the state of affairs in the context of money laundering through real estate assets.

    From the report by Transparency International (my emphasis):

    Australia has severe deficiencies under all 10 areas identified in the research and is therefore not in line with any of the commitments to tackle corruption and money laundering in real estate made in international forums. In Australia, real estate agents are not subject to the provisions of the Anti-Money Laundering and Counter Terrorism Financing Act 2006. Other professionals such as lawyers and accountants who may also play a role in the sector are not covered either. This means that properties can be bought and sold without any due diligence on the parties. Currently there are no requirements for real estate agents or any professional involved in real estate deals to submit STRs, even if they suspect illegal activity is taking place, and there are no requirements or rules for verifying whether customers are PEPs or their close associates.

    The areas identified in the research are the following:

    Inadequate coverage of anti-money laundering provisions
    Identification of the beneficial owners of legal entities, trusts and other legal arrangements is still not the norm
    Foreign companies have access to the real estate market with few requirements or checks
    Over-reliance on due diligence checks by financial institutions leads to cash transactions going unnoticed
    Insufficient rules on suspicious transaction reports and weak implementation
    Weak or no checks on politically exposed persons and their associates
    Limited control over professionals who can engage in real estate transactions: no “fit and proper” test
    Limited understanding of and action on money laundering risks in the sector
    Inconsistent supervision
    Lack of sanctions

    In Australia, 70 per cent of Chinese buyers pay in cash and they represent the largest proportion of foreign purchases in the country.

    I reiterate my query. May I get a response, please?

    Are you aware of these issues?
    If so, what is the Government you lead doing to implement the second tranche of the reform to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006?

  8. US$700 billion fled from China in 2016, and properties purchased by proxy do not recorded as a foreign purchase.

    Do the math…

  9. Jake GittesMEMBER

    Cue government response:
    –We don’t accept that at all
    –Australia has the highest standards
    –The relevant authorities have been tracking

    It’s what they always say when an international org criticizes anything by the government.

    Strayan corruption is in its conformity and preservation of the status quo

    • Once again you are correct. I recall debating hot money with my Uncle (very liberal, doesn’t believe in climate change etc..). His attitude was that it didn’t matter where the money was coming from, since capital inflows were good for Australia as a whole.

      It’s hard to argue with that isn’t it?

      • blacktwin997MEMBER

        Your uncle sounds like he needs to encounter some of the users of imported Chinese ice. Cash proceeds from which are recycled into our housing market.

      • My Uncle is actually a great guy, but for him money has never been an issue. He was part of and ran a successful advertising agency for many years and did really well, made it look easy. I admire that because he grew up without a father figure to guide him through any of it, just a very humble mother who I don’t think was an entrepreneur of any sort.

        However when it comes to political debates it’s fair to say he and I don’t always agree, but we do have good discussions.

        He recently helped his daughters joint buy a home in Port Melbourne that only cost about $1M… (a simple abode too!). Sometimes people can’t see further than their own nose on certain issues. Still love the bastard, just don’t agree with him.

  10. Forget foreign cash for a minute. The industry is structurally corrupt. It allows rampant underquoting, routinely does not report auction outcomes accurately, withholds sale prices, generally lacks transparency on transactions and data, conducts most of its sales through a process more akin to betting on horses, has no regulation requiring surveys to be provided by vendors etc etc.

    So its hard to expect any other outcome when faced with a tide of dodgy overseas cash. So its no surprise that we have the FIRB and its farcical inability to capture, measure, regulate, or report on anything at all.

    We really need to be demanding much more of our leaders.

    • +1 dealing with real estate agents in general my god. I’ve stopped being nice with them now. I just call out their BS, their not my friends strictly a road block to making a deal with a vendor it’s best you call them out on their BS.

  11. surflessMEMBER

    The number of government ministers been caught out with corrupt travel expensives when traveling to their next investment property purchase is breath taking. So I would say, under less it’s 18c or equality in marriage this is never going to be on the politicians radar, since they are part of the problem.

  12. Does this mean that Australian institutions are the most heroic in the developed world? Not so much in the sense that they are not afraid of anyone, but rather that they are not ashamed of anything.

  13. And now you know how and why the extradition treaty with China was squashed. A conga line of arse licking suckholes from the 18 year old real estate agent to the Prime Minister-all Australian Nationals.

  14. We urgently need an extradition treaty with China, India, Korea, Thailand, Malaysia, Indonesia, Philippines, Nepal, Bangladesh, Lebanon, Etc along the lines of this..

    We co-prosecute with that foreign country the illegal criminal syndicates washing and laundering money stolen by their corrupt citizens into Australian residential property for a 50/50 split of the recovery.
    And if some of these countries have the death penalty for corruption & fraud in looting & theft then washing it into Australia as known safe haven : so be it.
    They knew what they were doing when they stole tens billions from their home country and laundered it here.