Australia is one of the world’s worst money laundering property markets

01 April 2017 12:17 pm

Australian real estate agents with offshore sales offices and websites targeting foreigners are attracting money launderers.

That’s one of the findings in a new Transparency International report Doors wide open: corruption and real estate in four key markets.

The report found money laundering through real estate is particularly rife in Australia, the US, UK and Canada. In all four countres, foreign buyers don’t have to provide information on who the real owners are.

In Australia, while no risk assessment has been conducted in the past six years, the government has looked at but done nothing about the high risks of money laundering in the real estate sector. In Australia and the US, professionals involved in real estate closings are not subject to anti money laundering obligations, and therefore are not monitored by competent authorities or self-regulated bodies.

“In Australia, real estate agents are not subject to the provisions of the Anti-Money Laundering and CounterTerrorism Financing Act 2006,” says Transparency International.

“Other professionals such as lawyers and accountants who may also play a role in the sector are not covered either. This means that properties can be bought and sold without any due diligence on the parties. Currently there are no requirements for real estate agents or any professional involved in real estate deals to submit STRs, even if they suspect illegal activity is taking place, and there are no requirements or rules for verifying whether customers are PEPs or their close associates. Of the countries analysed, only Australia has a check on foreigners wishing to purchase residential properties, but there is no requirement to disclose the identity of individuals (or beneficial owners) behind foreign companies purchasing property.

“In Australia, Canada and the US, the current anti-money laundering framework shows a tendency to rely on financial institutions to conduct the necessary background checks on real estate transactions… there are no checks on cash transactions.

“In Australia, 70 per cent of Chinese buyers pay in cash and they represent the largest proportion of foreign purchases in the country.

Austrac, an Australian government body that monitors cash flows, reported a 300 percent increase in suspicious transactions in the past two years with $4 billion coming from China alone.

China's crackdown on corruption has several cases where corrupt officials have laundered money and pumped black cash into Australian real estate. One example is the way Chinese prosecutors last year accused Li Huorong, the head of a company called China Development Bank, of taking bribes and using the funds to purchases two properties in Sydney. That’s worth $6 million.

The problem is a lot of property is being sold to Chinese buyers online and it’s harder to control money laundering when it’s done online.

Examples include Woobuyers which targets Chinese buyers.
“We help you reach cashed up Chinese property buyers,” the website promises.

Add to that the findings from the Paris-based Financial Action Task Force showing that Australia is seen as an attractive destination for foreign proceeds, particularly corruption-related proceeds flowing into real estate.

Foreign buyers have been blamed for pushing up property prices which are now out of control in Australia, pricing young people out of home ownership.

This is a disgrace. These sorts of concerns have been around for years and the Australian government has done nothing about it. If they’re serious about tackling housing affordability, they need to bring in laws cracking down on money laundering in real estate.