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.