Australia: Money Laundering & Property
The global problem of money laundering in the real estate sector continues with a 2017 report revealing 53,000 ’cash deposit breaches’ in the Australian market according to Paris-based Financial Action Taskforce (FATF). It is estimated that close to $1 billion USD was illicitly invested in Australian property by Chinese buyers from 2015 to 2016. Their analysis found that Australia has become a magnet for money laundering especially buyers from China, Malaysia and Papua New Guinea.
Anti-corruption organization Transparency International stated from its perspective in March 2017 that ‘Australia as having the weakest anti-money laundering (AML) laws in the Anglosphere, failing all 10 priority areas.’
In June of 2017 the FATF placed Australia on its watch list for non-compliance for reforms in combating money laundering and terror financing.
The main complaint from these oversight organizations is the lack of policy legislation by the authorities in Canberra with policy plans ‘essentially gathering dust’ 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 had made a promise to finish the legislation by years end of 2017. But the promises were similarly made in the years of 2008, 2010, 2012, and 2014 with no legislative results for enforcement.
AUSTRAC, Australia's financial crimes regulator, reported two years ago that the Australian real estate was "an established money laundering method in Australia".
The Australian Broadcast Corporation (ABC) has cited one particular case of Malaysian officials purchase of student accommodation property Dudley House in Melbourne which is said to have been purchased for a price far higher than actual value.
The OECD Working Group on Bribery in International Business Transactions has now entered the situation to urge Australia to implement reforms.
The OECD has described Australia’s situation as:
‘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.’
One recommendation is an increased participation for oversight into money laundering and property transactions by the Foreign Investment Review Board (FIRB). The OECD report states that the assistance from 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.”
Speaking to ABC Television Thomson Reuters financial crimes analyst Nathan Lynch says of the lack of regulations and enforcement for the Australian market:
"The money flows to the path of least resistance and in reality that is the property sector."
One of Australia’s most well known property developers ‘Highrise’ Harry Triguboff is quoted as saying in MB regarding Chinese buyers of Australian property:
“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.”
Previously by Kevin Murphy regarding global money laundering:
Real Estate Money Laundering In Britain with Transparency International in London, UK 2015 by Kevin Murphy: