In 2006, Australia and the Paris-based Financial Action Taskforce (FATF) agreed to introduce “Tranche 2” anti-money laundering (AML) legislation targeting non-financial assets (particularly property).
Ever since, vested interests in the real estate, legal, and accounting professions opposed this AML legislation, resulting in the continuous postponement of its implementation.
Stakeholder discussions in 2008, 2010, 2012, 2014, and 2017 resulted in the Australian government delaying the adoption of these global AML regulations, which were deemed “too harsh” by both the Labor and Coalition governments.
As a result, Australia is currently one of just five countries (out of 177) that have failed to meet its international commitment to strengthen anti-money laundering laws.
This has made Australian property a honeypot for laundering funds, particularly from China.
The head of Transparency International Australia, Serena Lillywhite, encapsulated the issue in 2020 with the following:
Australia’s property market has become a destination of choice for those wanting to launder dirty money or simply stash their cash.
Our weak anti-money laundering laws mean there is no requirement for the gatekeepers — the lawyers, accountants and real estate agents — to ask questions about the source of the money and to report suspicious transactions to the regulator.
Large sums of illicit funds can be concealed and integrated into the legitimate economy through the real estate sector…
Australia can’t have special loopholes for criminals to exploit, and can’t make it so easy for corrupt leaders and business moguls to siphon away funds stolen from the community into offshore bank accounts, or splurge on McMansions and super yachts.
In 2021, Lillywhite told a Senate committee examining money laundering that “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?”.
Representatives from financial crimes regulator, Austrac, the Australian Federal Police and the Australian Criminal Intelligence Commission also told the Senate committee that criminals were using lawyers, accountants, and real estate agents to launder tens of billions of dollars in ill-gotten gains through the property market each year.
The plot thickened this week with a Guardian Australia investigation revealing that convicted criminals and unlicensed agents are operating in the Australian real estate sector across a number of states.
The revelations come as the federal government is once again seeking to have the sector brought under the long-awaited Tranch 2 AML laws.
The Australian Federal Police (AFP) claims that the sector has become an “attractive destination for criminals to both store value and enjoy the fruits of their illicit activities”.
The AFP told the Guardian that criminal groups were using real estate agents to give crime proceeds an “appearance of legitimacy” through housing purchases.
“The real property market can be exploited by money launderers in a number of ways, including utilising complex ownership structures to obfuscate true ownership, concealing illicit money flows as rental income, and investing illicit cash into property improvement activities”, an AFP spokesperson said.
“Criminal groups may use professional facilitators – such as real estate agents, accountants and solicitors – to give illegal cash the appearance of legitimacy through the purchase of assets, such as property”.
Meanwhile, the Real Estate Institute of Australia claims that they are not responsible for policing money laundering.
“It shouldn’t be on real estates agents. This currently doubles up with lawyers – the burden of reporting is much higher than the benefit”, REIA chief executive Leanne Pilkington said.
The money laundering circus has dragged on for too long following 17 years of stonewalling. It’s time for the global Tranche 2 rules to be implemented in full.
Australian homes cannot be allowed to serve as a shelter for illicit funds.
