Transparency International Australia (TIA) has lodged a submission to the Senate Inquiry into the adequacy and efficiency of Australia’s AML-CTF regime, which claims Australia property is a haven for money laundering:
The FATF has said Australia is seen as an “attractive destination for foreign proceeds, particularly corruption-related proceeds flowing into real estate, from the Asia-Pacific”.
Our weak AML/CTF legislation and enforcement, favourable liquidation processes and a stable banking system creates a ‘perfect storm’ for criminals. Australia’s Doors are Wide Open…
The real estate sector has continually been identified as a weak spot and a large compliance hole in Australia’s AML/CTF regime.
Large sums of illicit funds can be concealed and integrated into the legitimate economy through real estate. Criminals may be drawn to real estate as a channel to launder illicit funds due to the ability to buy real estate using cash, to disguise the ultimate beneficial ownership of real estate, the relative stability and reliability of real estate investments, and the opportunity to renovate and improve real estate, thereby increasing its value. To avoid direct involvement in ML processes, criminals may seek to buy property using a third party or family member as a legal owner, usually a ‘cleanskin’ with no prior criminal record.
They may use loans or mortgages to layer and integrate illicit funds into high-value assets such as real estate. The AUSTRAC said in a 2015 report that the laundering of illicit funds through real estate was “an established money laundering method in Australia”, with $1 billion in suspicious transactions coming from Chinese investors into Australian property in 2015-2016…
Criminality finds opportunity. Australia’s system provides opportunity through its inability to meet the FATF recommendations and to keep up with emerging ML issues and with the variety of ways that money is laundered. Systemic and large-scale breaches have occurred – undetected by the AUSTRAC in recent years…
Australia has been considering passing the second tranche of its AML/CTF Act since 2006. Australia must extend the AML/CTF legislation to cover DNFBP professions as the current rules are not enough to prevent ML/TF…
The FATF has called for Australia to ensure lawyers, accountants, real estate agents, precious stones dealers, and trust and company service providers understand their ML/TF risks, and are required to effectively implement AML/CTF obligations and risk mitigating measures in line with the FATF Standards.
The 2019 FATF visit to review the fourth-round mutual evaluation, that got cancelled, was expected to condemn Australia for becoming a laggard in the Asia-Pacific region on ML reform…
To support the AML/CTF regime, Australia needs to also implement a publicly accessible centralised beneficial ownership register…
Overall, Australia has low compliance with the FATF recommendations… Australia should not use the COVID-19 pandemic as a reason to further delay the proposed Tranche 2 reforms as the Global Financial Crisis was in 2010. As in any crisis, COVID-19 has heightened corruption risks that increase the likelihood of ML and TF…
Australia is one of only 8% of countries assessed by the FATF’s 4th Mutual Evaluation process as being totally non-compliant with all DNFBP Recommendations.72 Australia has been non-compliant with all three DNFBP recommendations for the longest period since deficiencies were identified by the FATF’s 4th Round Mutual Evaluation in 2015…
CONCLUSION
In summary, TIA calls for the widening our AML/CTF legislation. Australia needs to keep up with global developments to prevent it becoming even more of a hotspot for the world’s dirty money…
This is a critical opportunity for Australia to ensure that our AML/CTF regime makes a substantial impact, nationally and globally, in preventing illicit funds that enable transnational, and serious and organised crime.
This farce has been going on for most of my professional life. When I worked at the Australian Treasury between 2003 and 2006, the FATF developed global AML rules which Australia committed to implementing in 2006. Some of my Treasury colleagues in the International Economy Division worked directly on the issue.
Fifteen years later, we are still waiting in vain for the Tranche 2 AML rules to be applied to real estate gatekeepers (i.e. real estate agents, accountants and lawyers). Over that time, Australia has become one of the world’s worst laggards on AML and our property market has become one of the worst havens for dirty money.
The federal government already conducted stakeholder consultations on AML in 2008, 2010, 2012, 2014, and 2017. And each time the rules were put into the ‘too hard’ basket and postponed.
I don’t expect this inquiry to be any different. Shadowy “vested interests” negatively impacted by the reforms will push back and will get their way. In the property narco state of Australia, corruption wins every time.
