Nathan Lynch, author of The Lucky Laundry: How the Aussie economy got hooked on the world’s dirtiest cash, has given an interview to Nikkei Asia where he labelled Australia a “major international hub” for laundering illicit funds, especially into the nation’s property market:
“Basically, what we’ve seen is the way that those representatives of the housing market – the lobbyists and all that – have just choked policy at Canberra, to the point where we have sat for 16, 17 years on these money laundering laws when we know that it’s literally a matter of national security because you’ve got the terrorism financing aspect”.
“We’ve got no oversight of that in gatekeeper professions. And then you also have the foreign influence aspect, which is a huge issue with the China relationship”…
The anti-money laundering circus has been running for nearly 17 years and dates back to when I worked at the Australian Treasury in the early 2000s.
In a nutshell, 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 were to apply to real estate gatekeepers like agents, lawyers and accountants, and have been vigorously opposed by these groups ever since.
Their lobbying has paid off with the globally agreed AML rules continuously postponed by the federal government following stakeholder consultations in 2008, 2010, 2012, 2014, and 2017.
After every single consultation, under both Liberal and Labor administrations, the AML rules were put into the ‘too hard’ basket and delayed into the ‘never-never’.
As noted by Lynch:
“The gatekeepers in that chain do not have to do anything. They don’t have to do any KYC [know your client], they don’t have to ask any questions, they don’t have to form any suspicions, because we have intentionally left them outside anti-money laundering range. So if there are breakdowns in KYC, it’s because lawyers don’t have to do any KYC in Australia. It’s remarkable.”
Nobody in Canberra is willing to implement ‘tranche 2’ because it risks upsetting the nation’s $10 trillion property market:
“No one, politically, is willing to touch anything that threatens to undermine house prices because, as we saw in the 2019 general election [with negative gearing], it’s political suicide to do that”.
However, the issue could come back to bite Australia if it becomes ‘graylisted” by the FATF as punishment for not implementing ‘tranche 2’:
“Pakistan was graylisted by the Financial Action Task Force. It cost their economy $38 billion, and [had] a huge impact on a whole lot of government programs, to get back in. Now, why would Australia risk those sorts of penalties?”
The big question for the Albanese Labor Government is: will it finally implement the global AML rules pertaining to property as promised by Australia nearly 17 years ago? Or will it continue to allow Australian housing to remain a magnet for illicit foreign funds?
I suspect the latter. Australia will only implement the full suite of AML rules under the duress of global powers.
