Let’s recall last year’s report from the global regulator, the Paris-based Financial Action Taskforce (FATF), which warned that Australian residential property is a haven for international money laundering, particularly from China, and recommended that Australia implement counter-measures to ensure that real estate agents, lawyers and accountants facilitating real estate transactions are captured by the regulatory net.
FATF’s findings were then backed-up by the Australian Transaction Reports and Analysis Centre (AUSTRAC), which warned that “laundering of illicit funds through real estate is an established money laundering method in Australia”.
And in May this year, the Statutory Review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 was released, which among other things called for the extension of anti-money laundering (AML) rules to non-financial gatekeepers like real estate agents, lawyers and accountants.
Let’s also recall that the Turnbull Government has deferred indefinitely the implementation of the second tranche AML rules for real estate gate-keepers, despite the Australian Government in 2003 promising FATF that they would be brought under the regulatory net.
Today, The Australian reports that Macquarie University’s John Langdale believes that government agencies such as AUSTRAC and the Australian Taxation Office (ATO) have become increasingly alarmed by the influx of money from the Pearl River Delta region of southern China:
“There’s a whole lot of dodgy stuff going on,” Dr Langdale said of the Pearl River Delta, a region dubbed “the world’s factory”…
“Most of that business,” he said, “is in facilitating wealthy and politically connected Chinese people to send money offshore, usually through shell companies in Hong Kong, towards the British Virgin Islands, the Cayman Islands and other offshore markets.”
He said the Australian Taxation Office and Austrac, Australia’s financial intelligence agency, “have a concern about the thousand Australian people who are clients of Mossack Fonseca in Hong Kong”…
Dr Langdale, who has briefed Austrac three times this year, said: “The Australian authorities are very concerned about this flood of money coming out, because they have little idea what is legal and what is illegal.
“Our biggest problem is establishing its provenance. Following the money trail is vital, but often falls between many systemic cracks.”
Most, he said, seemed to be money seeking a “safe haven”, brought out by wealthy people “nervous about their future, and possibly wanting their children to gain foreign passports. And Australia is a capital-short country”.
As noted last year by Nathan Lynch, Head Regulatory Analyst for Australia & New Zealand at Thomson Reuters:
AUSTRAC’s surveillance efforts are… being frustrated by the fact that money launderers will often use unregulated entities as a “first point of contact” to help disguise their source of funds. If a criminal makes a suspicious cash deposit into a real estate agent or lawyer’s trust account, for example, the suspicious transaction is not required to be reported to AUSTRAC. Reporting entities, such as banks, are required to report transactions of this type within three business days of forming a suspicion. Lawyers are only required to report threshold transactions under the legacy Financial Transaction Reports Act 1988, not suspicious matters, while real estate agents have no reporting obligations.
Separately, Lynch noted that Australia’s “politicians have been conspicuously evasive on their bipartisan commitment to follow through with a second tranche [of the AML legislation]… politicians are happy to turn a blind eye”.
By failing to ratify the second tranche AML rules, as promised in 2003, the Australia’s Government is tacitly complicit with the dirty foreign money flooding into Australia’s homes.
