Saturday, 8 April 2017

Along with the UK, the USA and Canada, Australia’s real estate market was identified as a money laundering hotspot. 10 weaknesses were identified as making it easier for property to be bought so to hide stolen money:

  • Inadequate anti-money laundering provisions
  • Identification of the beneficial owners of legal entities, trusts and other legal arrangements is still not the norm
  • Foreign companies have access to the real estate market with few requirements or checks
  • Over-reliance on due diligence checks by financial institutions leads to cash transactions going unnoticed
  • Insufficient rules on suspicious transaction reports and weak implementation
  • Lack of proper checks on politically exposed persons and their associates
  • Limited control over professionals who can engage in real estate transactions: no “fit and proper” test
  • Limited understanding of, and action on, money laundering risks in the sector
  • Inconsistent supervision
  • Lack of sanctions

Of the four countries analysed, Australia was the worst, deficient in all 10 areas.

Australia performed this poorly because of inadequate legislation and weak implementation of existing rules. Real estate agents, lawyers and accountants are not subject to the provisions of the Anti-Money Laundering and Counter Terrorism Financing Act 2006. This means that properties can be bought and sold without any due diligence from these parties. Customer due diligence on real estate transactions is left to financial institutions. This creates an environment where large cash transactions can go unnoticed.

TI reports that, in Australia, Chinese buyers often pay in cash. These transactions represent an increased risk of money laundering. According to Global Financial Integrity, between 2004 and 2013, China1 led the world with USD1.39 trillion in illicit outflows. In 2013, China had the largest such outflows of any country: nearly USD260 billion.

The TI report concludes that Australia has failed to meet its international commitment to tackle corruption and money laundering as a member of the Financial Action Task Force (‘FATF’), the global regulator against money laundering.

Australia’s failings in this sector are not new, and these concerns have been previously raised by the FATF2 and the Australian Transaction Reports and Analysis Centre (Austrac).

Not all the news is bad. There are some encouraging signs3 including:

But the deficiencies discussed above and Australia’s poor score on the Corruptions Perceptions Index show that we’re still behind where we should be. Why?


1. Followed by Russia and Mexico at USD1.0 trillion and USD528 billion respectively.
2. See top of page 7 under ‘Risk and General Situation’.
3. See section 7 – Developments in Australia.