Labor must stop money laundering into Aussie housing market


In 2018, Global News Canada reported that Chinese organised crime had laundered around $5 billion through Vancouver property between 2012 and 2016, which partly explained Vancouver’s explosive price growth.

An expert panel report later concluded that the cost of buying a home in British Columbia increased by as much as 5% in 2018 due to more than $5 billion in illicit money from organised crime laundered through residential property.

A new report published by the Organized Crime and Corruption Reporting Project (OCCRP) explains how a man accused of paying bribes in one of China’s biggest-ever military corruption scandals allegedly funneled CA$32 million into luxury Vancouver real estate:

Before moving from China to Canada in 2006, Chen Runkai told immigration officials that he made at most 41,000 Canadian dollars a year. His wife, he said, was employed as a clerk.

Despite their modest incomes, a series of money transfers poured CA$114 million into the Chen family’s Canadian bank accounts a few years later.

Chen, it turns out, is wanted for arrest by the Chinese government on charges of bribery for his alleged role in a major corruption scandal involving a senior military official, OCCRP and the Toronto Star have learned. Now, he’s fighting to stay in Canada, where his family has two mansions in Vancouver overlooking the Pacific.

He is the owner of a Tudor-style home with mountain and ocean views he purchased in 2016 for CA$15.6 million. It sits a few doors down from another mansion his daughter purchased in 2012 for about CA$14 million — without a mortgage — when she was 25, while listing her occupation as “student”…

The Chen family’s investments in Canada add to mounting concerns about illicit overseas money flowing into the country’s overheated real estate markets, helping push already sky-high housing costs out of reach for many Canadians…

The real estate sector, in particular, is “vulnerable to exploitation by criminals looking to launder illicit (proceeds of crime),” the federal government submission reads, by providing a secure, legitimate investment and a location to live and conduct “further criminal business”…

“It is one of the most infuriating and awful reasons for housing prices to go up – the idea that limited housing supply is just sitting there as a safety deposit box for the funds of drug dealers and crooks and kleptocrats,” [James Cohen, executive director of Transparency International Canada] said.


Reports like this immediately leads me to wonder about the pervasiveness of money laundering into Australia’s housing market?

The Australian anti-money laundering (AML) circus has been dragging on for 16 years and dates back to when I worked at the Australian Treasury in the early 2000s.

To cut a long story short, Australia signed a global agreement with the Financial Action Taskforce (FATF) to implement ‘tranche 2’ global AML rules pertaining to non-financial assets (mainly property). These rules, which would apply to real estate gatekeepers like agents, lawyers and accountants, have been vigorously opposed by vested interests.


As a result, the agreed AML rules have continuously been postponed by the federal government despite stakeholder consultations taking place in 2008, 2010, 2012, 2014, and 2017. Every single time, under both Liberal and Labor administrations, the AML rules were placed into the ‘too hard’ basket.

The end result is that Australian property has become the global haven for dirty money, as explained late last year by the head of Transparency International Australia, Serena Lillywhite.

Ms Lillywhite told the Senate committee examining money laundering that “Australia has become the destination of choice for illicit financial flows … which too often end up in the property market” before asking “how much evidence of money laundering in Australia will it take before the law is changed and enforcement ramped up?”.


The very next day, officials from financial crimes regulator Austrac, the Australian Federal Police and the Australian Criminal Intelligence Commission told the Senate inquiry that billions of dollars were being laundered through Australia’s housing market.

The big question for the new Albanese Labor Government is: will it finally implement the global AML rules pertaining to property as promised by Australia 16 years ago? Or will it continue to allow Australian housing to remain a magnet for illicit foreign funds?

Enough is enough. The money laundering farce has dragged on for too long. It is time for action.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.