Max Opray, Schwartz Media’s morning editor, has done a terrific job summarising real estate corruption exposed by the Pandora Papers document leak, which show an array of Australian properties that have been secretly purchased by hidden overseas entities with links to corruption.
In a nutshell:
- Four large-scale farms in Tasmania were bought by two Australian companies funded by a Canadian, who in turn sourced the money from a oil company connected to money laundering in Nigeria, according to the ABC.
- A Sri Lankan power couple has been linked to alleged misappropriation of government funds used anonymous offshore trusts to buy two Sydney luxury apartments.
- Chinese steel baron Du Shuanghua, who has been implicated in a bribery scandal to secure a Rio Tinto contract, used a Singapore company to buy hundreds of millions of dollars worth of commercial real estate in Sydney, according to The AFR.
- Experts have called for the Morrison Government to follow through on plans it proposed years ago to implement a register of ultimate beneficial owners (UBOs) behind companies.
- Treasurer Josh Frydenberg told Four Corners the federal government is working to consolidate Australia’s business registers, which will “enable the development of a beneficial ownership register”.
- Labor Senator Deborah O’Neill responded to the Pandora Papers leak by calling for long-delayed reforms to enforce stricter requirements on accountants to report suspicious transactions.
None of this is surprising given the federal government has refused to implement global anti-money laundering (AML) laws pertaining to real estate gatekeepers, thus making Australia a haven for money laundering criminals.
As noted by Transparency International Australia (TIA) in last month’s submission to the Senate Inquiry into the adequacy and efficiency of Australia’s AML-CTF regime:
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…
The AUSTRAC said in a 2015 report that the laundering of illicit funds through real estate was “an established money laundering method in Australia”…
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…
To support the AML/CTF regime, Australia needs to also implement a publicly accessible centralised beneficial ownership register…
Australia needs to keep up with global developments to prevent it becoming even more of a hotspot for the world’s dirty money…
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 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 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.
So don’t expect anything to change. Shadowy “vested interests” negatively impacted by reforms will push back and will get their way. In the property narco state of Australia, corruption wins every time.
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