Australia leaves door wide open for property money laundering

By Leith van Onselen

To be sure, the CBA money laundering scandal is a big deal. 53,000 cash deposit breaches is disturbing no matter which way you cut it.

But there is one money laundering honey pot that continues to be ignored by policy makers, which should garner far more outrage from the public: Australian property.

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.

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 absolutely no sense.

The Australian Government is currently undertaking yet another consultation on implementing the second tranche of AML legislation, and had 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 now it looks like it will fail yet again.

Now, the OECD Working Group on Bribery in International Business Transactions has joined the conga-line urging Australia to implement the second tranche of AML legislation covering real estate. From The AFR:

The OECD has followed the lead of the FATF and highlighted the fact that under Australian law, real estate agents, accountants and auditors, members of the legal profession, and other Designated Non-Financial Business Professionals (DNFBPs) are not subject to Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) obligations.

In other words, the entire ecosystem for the buying and selling of property using cross-border fund flows is beyond the reach of regulators…

Until the government takes action the sole gatekeeper for determining the integrity of real estate transactions involving foreigners is the Australian banking system. That clearly worries the OECD.

It does not believe the major financial institutions provide sufficiently robust protection against Australia being used as a place for laundering corrupt funds…

Professor Sharman, who is the Patrick Sheehy Professor of International Relations at the University of Cambridge, this year published The Despot’s Guide to Wealth Management (Cornell University Press).

The book argues that “the vested interests of banks, lawyers, and even law enforcement often favour turning a blind eye to foreign corruption proceeds”…

The OECD suggests there could be a greater role for the Foreign Investment Review Board in policing against corrupt money being laundered through real estate.

It says FIRB “could potentially play a greater role in detecting and reporting suspicious transactions in the real estate sector, and leverage available information from the Australian Taxation Office, AUSTRAC and the Australian Federal Police to act on suspicious transactions relating to foreign investments.”

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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Unconventional Economist
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  1. Unfortunately outrage is currently being trumped by the popping of champagne corks over house price appreciation. With that comes all the equity mate goodies and the average homeowner won’t give that up for anything, despite scratching their head wondering why the cost of living is killing them.

  2. Remember that some of that laundered money also ends up in politician’s pockets. Sino Sam and Julia Bishop’s dirty money all came from Chinese property developers.

    • Wontok:[to clerk at counter] Excuse me, sir.
      Clerk: Yee-e-e-es?
      Wontok: I’d like to buy all this land [gestures expansively at the entire area] for some needy uh… children. Is this enough dirty-dirty money?
      [The clerk puts on a rubber glove and feels around in the basket.]
      Clerk: Why, it most certainly is! [He picks up a phone and dials.]
      Clerk: [on phone] Ms. Bishop? Something quite glorious has happened! Ah-noo-o-o. Ah-noo-o-o. Ah-yee-e-e-esss!

      • I cannot find the source but here it is.

        When asked Mother Theresa ( what is her opinion on the subject that most of money donated to their charity comes from illegitimate/illegal sources. Her answer was ” God does not discriminate where the donation comes from, it will be used for a good cause. May be this is their way of seeking forgiveness”

        Catholics: Perform all sins through the week, attend Church service on Sunday, confess and you have a clear slate for next week. Yipee.

    • If you had watched the videos put out by Sam Dastiari you would have
      realised that he is the only Pollie who speaks out about ridiculously priced housing n Sydney.
      The fact that he received a couple of thousand from a Chinese donor is only an excuse for other Pollies
      to complain about him and get him removed That way their real estate investments will keep rising
      and there is little we can do about it.
      Calling him “Sino Sam” is silly. “Sino Malcolm” or “Sino Nick” would make more sense.

  3. Ditto for all of those massage/rub and tug shops that have spring up like wildfire. All of them doing the same thing. Reusa’s empire.

  4. Australia’s economy would nosedive without this money. No way it will get addressed.

    Beggars can’t be choosers.

    • So the sponsoring of genocide runs in the family, then? Who could have guessed?

      For those who don’t know, Meriton is one if the major sponsors of the ‘non-profit organisation’ that finances the illegal settlements in Palestine. The key work being illegal.

      • Doesn’t genocide usually involve some mass graves and whatnot? The illegal settlements might be displacing people but that is not genocide in itself. There isnt a white Aussie out there who hasn’t displaced or benefitted from displacing an original inhabitant.

    • i can’t access the afr but i can only assume some of the juicy details from that article translated into mandarin, printed on a flyer and distributed throughout the meriton slums of Mascot, Alexandria and Parramatta would be the best xmas present anyone could ever give me

  5. In other words, we can’t have proper checks because that would slow down sales.
    I used to fume but now I smile with grim acceptance when the semi literate Chinese /Indian man at ‘Australia’ HA HA HA HA Post’ asked for my ID drivers liscence to see that it’s really me collecting the tiny birthday parcel from my my dear mother!!
    It’s that simple.