On Wednesday I reported testimony from the head of Transparency International Australia (TIA), Serena Lillywhite, to the Senate committee examining money laundering.
Ms Lillywhite claimed “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 following day, Australia’s financial crimes regulators took the stand and acknowledged that billions is being laundered through Australia’s housing market:
Representatives from financial crimes regulator, Austrac, the Australian Federal Police and the Australian Criminal Intelligence Commission told a Senate hearing into Australia’s money-laundering laws that criminals are using lawyers, accountants and real estate agents to launder tens of billions of dollars in ill-gotten gains through the property market each year.
Austrac estimates that in 2020 alone, Chinese interests laundered $1 billion through Australian real estate. The head of the AFP’s asset confiscation taskforce, Stefan Jerga, told the inquiry there were times when prospective homeowners would be competing against money launderers at auctions.
“Without any histrionics … of course, there are examples of there not being a level playing field when you have a well-financed organised crime [gang] using real estate to launder money. Yes, there will be instances,” he said.
The AFP told the inquiry that of the $187 million in assets it seized in the 2021 financial year, $116 million was in real estate assets. AFP Deputy Commissioner Ian McCartney said the AFP was supportive of expanding the anti-money laundering regime to take in real estate agents, accountants and lawyers, saying there was evidence where individuals in the three ‘gatekeeper’ professions had been knowingly involved in money laundering.
As usual, the Real Estate Institute of Australia (REIA) is lobbying against changes, claiming there is little evidence of money laundering through property:
REIA president, Adrian Kelly, [said] he had not seen any evidence that Australian real estate was particularly vulnerable to money laundering.
“To suggest that money laundering is pushing house prices up, I’m not sure that’s something that could be substantiated,” Mr Kelly said. He added the REIA was supportive of providing information to agencies to assist in their investigations but the industry was wary of the cost impost of being formally brought within the money-laundering laws given many agencies were small businesses.
As I noted on Wednesday, this circus has been going on for most of my professional life.
When I worked at the Australian Treasury between 2003 and 2006, the global anti-money laundering (AML) regulator, 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 already conducted stakeholder consultations on AML in 2008, 2010, 2012, 2014, and 2017. And each time, under both Labor and Liberal governments, the rules were put into the ‘too hard’ basket and postponed.
The whole farce shows the corruptive hold that the property industry has over our political system. Every time the Tranche 2 AML legislation has been put forward, vested interests negatively impacted by the reforms have shut the process down.
In the property narco state of Australia, always bet on corruption winning every time.
