Property: AUSTRAC’s money laundering blind spot

By Leith van Onselen

Last week, I published an article entitled “Amid CBA scandal, real estate money laundering ignored”, which questioned why Australia’s biggest money laundering honeypot – Australian property – continues to be ignored by Australia’s politicians and the media.

Over the weekend, The AFR belatedly confronted the issue [my emphasis]:

Stolen identities and illicit bank accounts used in the CBA scam to transfer money out of Australia are also the hallmarks of a sophisticated global network used to launder huge amounts into residential and commercial real estate…

George Brandis, federal attorney-general, is expected to make an “imminent” announcement about boosting powers and resources of Austrac, the government agency that combats money laundering, according to a department spokesman.

But it is expected to fall short of extending existing laws to cover real estate agents

“I believe the case for reform is compelling,” said Malcolm Shackell, a forensic crime specialist and partner with global consultancy PwC. “Australia is under pressure from international agencies to broaden the scope of its regulations to cover industries outside of financial services, including real estate agents, jewellers, accountants and, potentially, conveyancing lawyers”.

The government has to balance tighter controls with rising costs for business, he added.

Under existing law, real estate agents and other businesses involved in buying and selling real estate do not need to identify where the money comes from or who is paying.

The law does not require real estate agents, lawyers, accountants or any other person involved in the deal to identify the beneficial owner of the deal. A beneficial owner enjoys the benefits of ownership though title is in another name, such as a company…

Real estate agents report unprecedented numbers of overseas’ buyers of residential and commercial property in Melbourne and Sydney paying cash…

An estimated 70 per cent of Chinese buyers pay in cash, according to Transparency International, an international non-government organisation targeting corruption.

None of this is new information.

In 2015, the global regulator of money laundering – the Paris-based Financial Action Taskforce (FATF) – released its mutual evaluation report which found Australian homes are a haven for laundered funds, particularly from China.

Then in March this year, Transparency International ranked Australia as having the weakest anti-money laundering (AML) laws in the Anglosphere, failing all 10 priority areas.

And in June, FATF placed Australia on a watch list for failing to comply with money laundering and terrorism financing reforms.

Legislation to implement the second tranche of anti-money laundering (AML) legislation covering real estate gate keepers has been gathering dust in Canberra for a decade.

Accordingly, 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.

The Australian Government is currently undertaking yet another consultation on implementing the second tranche of AML legislation, and has promised to finalise the new rules by the end of this year. However, the Government set similar deadlines 2008, 2010, 2012 and 2014, all of which failed to deliver legislation. And judging by the above article, the federal government is yet again likely to fail to extend AML requirements to real estate gatekeepers.

As I noted last week, it seems lobbying pressure from industry rent-seekers is largely to blame for the lack of political action. Just consider “Highrise” Harry Triguboff’s comments in July in The AFR regarding Chinese buyers:

“The problem with Australians is they are very slow. They ask their lawyer, they ask their financial adviser, they ask their family, they ask everybody. The Chinese don’t ask anybody, they come off the plane, buy their unit and go.”

In other words, we can’t have proper checks because that would slow down sales.

By failing to ratify the second tranche AML rules, as promised more than a decade ago, the Australia’s Government is tacitly complicit with the dirty foreign money flooding into Australia’s homes and robbing young Australians of a housing future.

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  1. The scale of the problem is mind-boggling. According to Morgan Stanley, Mainland Chinese account for 20% of commercial real-estate transactions per year. For residential real-estate, they bought $24 billion in 2016.

    If the 70% of transactions are in cash, indicate that they are used to launder money, then the scale of the problem is in the order of ten to twenty billion a year!

    No wonder Australia just refused an extradition treaty to China.

  2. Money laundering is legal here when it comes to Chinese buying property in Sydney and Melbourne
    No wonder the premiers brag on how strong their economies are in Vic and NSW
    Take money laundering out and se what you will be left with
    Stamp duties are the new mining
    Well done Australia for this genius approach that no other country (including the most corrupt ones) would morally accept

  3. I think it’s a nice grey for the government now as they know when they finally sell, 10% of proceeds will go to state gov coffers for non resident sells.

    • Slower internet? I wish I had slow internet. After 5 weeks of waiting the NBN tech was supposed to come and install the interface box at my place today. Last Friday I rang my so-called iinternet “service” (hahahahah) provider to confirm the appointment and eventually discovered that no NBN tech was scheduled to arrive because some anonymous person had cancelled the appointment without contacting me a week earlier, and I’ve now been placed at the back of the queue, which means I’m weeks away. It’ll be something like 2 months from my initial request for an NBN connection before anything eventuates.

      I dunno how those useless bastards call themselves a service provider when they are plainly unable to provide the most basic of services. What a fucking joke. Off to the Telecommunications Ombudsman again today, for the second time in 6 months.

  4. If some poor tradie forgets to change his address, our regulatory agencies burrow up their arse quicker than you can say “ASIC”, but when it comes to things like this, they’re suddenly incompetent?

    I call corruption.

    • I call it screwing their own people to get laundered money to pay for the false boom in Vic and NSW while other states struggle
      I call it liberals evil plan to attract criminals with people who votes for them having to pay for their stupidity
      I call it corruption too where the elephant in the room is ignored and the hardworking get slaughtered for little mistakes they do while the big crimes are committed in daylight to boost the false economy
      One day we are all going to pay for this stupidity, dearly

      • The liberals receive big money from Chinese property developers. They are being paid to ignore the issue.

        The big corruption is at the cabinet level
        – We have a foreign minister in hock to Chinese money via the Julie Bishop Glorious Foundation.
        – Our Trade minister, Andrew Robb resigned and went in to a $800,000 consulting position at the Chinese company he had just sold the Port of Darwin to.
        – Our previous small business minister was being paid $75,000 a year by the Franchise lobby while in office.

        Nothing is done about this.

  5. I’m a mortgage broker, it should be noted that we are the only professional in the property purchase/transaction bound by the AML (anti money laundering) guidelines. To keep current we must do a annual refresher test as well.

    Have been forever perplexed as to why real estate agents are NOT bound by the AML whatsoever. It was (i think) advised by austrac about a decade ago but the body representing real estate agents has yet to make it legally binding.

    As one member commented several days ago…our nation is inexplicably allowing for foreign, laundered funds to pump up a bubble that is pricing locals out of their own city. Appalling.

  6. The most profound thing to me is how much Australians don’t care or want it. Either because muh money or because muh racism. What a shite bunch of people. Then again same thing is going on in all major once anglo countries. So I shouldn’t be racist. Anglos are now the biggest girly men. It’s amazing how they went from top dog to biggest cucks in only my lifetime.

  7. What a C$$K!
    Did I miss something? Does that leave him 319 days to pull in the big bucks & cover his tracks?