Australia Has The World's Worst Money-Laundering Property Market

Tyler Durden's picture

Authored by Leith van Onselen via MacroBusiness.com.au,

Transparency International has released a new report, entitled Doors Wide Open: Corruption and Real Estate in Four Key Markets, which has identified Australia, Canada, the UK and the USA as the top four spots targeted by corrupt officials or criminals for real estate crime

Australia is the worst, failing to address 10-out-of-10 loopholes.

Below are the key extracts:

The real estate market has long provided a way for individuals to secretly launder or invest stolen money and other illicitly gained funds… According to the Financial Action Task Force (FATF), real estate accounted for up to 30 per cent of criminal assets confiscated worldwide between 2011 and 2013…

 

In many such cases, property is purchased through anonymous shell companies or trusts without undergoing proper due diligence by the professionals involved in the deal. The ease with which such anonymous companies or trusts can acquire property and launder money is directly related to the insufficient rules and enforcement practices in attractive markets…

 

This assessment identifies the following 10 main problems that have enabled corrupt individuals and other criminals to easily purchase luxurious properties anonymously and hide their stolen money in Australia, Canada, the UK and the US:

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

 

Australia has severe deficiencies under all 10 areas identified in the research and is therefore not in line with any of the commitments to tackle corruption and money laundering in real estate made in international forums.

 

In Australia, real estate agents are not subject to the provisions of the Anti-Money Laundering and CounterTerrorism Financing Act 2006. Other professionals such as lawyers and accountants who may also play a role in the sector are not covered either. This means that properties can be bought and sold without any due diligence on the parties. Currently there are no requirements for real estate agents or any professional involved in real estate deals to submit STRs, even if they suspect illegal activity is taking place, and there are no requirements or rules for verifying whether customers are PEPs or their close associates…

 

In Australia, Canada and the US, the current anti-money laundering framework shows a tendency to rely on financial institutions to conduct the necessary background checks on real estate transactions… there are no checks on cash transactions.

 

In Australia, 70 per cent of Chinese buyers pay in cash and they represent the largest proportion of foreign purchases in the country.

What a complete and utter disgrace. Legislation to implement the second tranche of anti-money laundering (AML) legislation covering real estate gate keepers has been gathering dust for nearly a decade despite explicit criticism from the global regulator, the Paris-based Financial Action Taskforce (FATF), that Australian homes are a haven for laundered funds, particularly from China, as well as similar warnings from Austrac.

In the meantime, dodgy Chinese money has piled into Australian property, in the process inflating house prices and pricing young Australians out of home ownership.

When will Australia’s politicians finally take action and end more than a decade of neglect by bringing Australia’s real estate gatekeepers into the AML net – as demanded by FATF and Austrac, promised by the federal government in 2003, and intended when the AML legislation was first drafted in 2006?

Or will the Australian Government continue to turn a blind eye to the dirty foreign money flooding into Australian property?

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JackT's picture

It wouldn't be fun if there weren't loopholes.

chubbar's picture

Seems odd that the very moment in time that the system is relying on a strong property market, wa la, record money laundering that can't be stopped by the authorities. Wow, what luck.

espirit's picture

Rise up, revolt - with your pitchforks and torches.

Remember when you voluntarily gave up the real weapons? Oh, yeah.

PT's picture

What?  You mean those $1100* per week mortgages are not being taken out by Aussies earning $1100* per week?  I'm so surprised.  Or are dumb Aussies just a little sideline and not the main event?

*Been a while since I paid too much attention to Aussie property and wages so I just pulled the quickest numbers I could find plus I ignored lower interest rates in my calcs because at the moment I am in a hurry.
http://www.tradingeconomics.com/australia/wages
https://www.domain.com.au/news/median-house-price-falls-in-capital-citie...
http://www.news.com.au/finance/real-estate/buying/the-true-extent-of-aus...

Go more in depth if you wish, but I think we can all agree that there is not much money left over for food, rates, utilities, cars, children, wife losing job etc etc etc.
I've always blamed synthetic CDOs for this shit but who knows?  Money laundering works too.

As an aside, have you ever been through one of those suburbs that is just a sea of gigantic houses with no shops in sight?  Not even a corner deli.  Where do these people shop?  Where do they go to work?  How far do they have to travel?  How much shit are they in if their car breaks down?  Or is the industrial area hidden in the backstreets?  Or do they all work and shop off the internet?  Always makes me wonder.

francis_the_wonder_hamster's picture

What you just described sounds like every planned community in SoCal.  Miles of Trac Homes around superhub shopping centers.  It's straight out of centralized planning and Agenda 21.  I drive through those every single day and share your wonder.

Déjà view's picture

But...but...they are THE 5 EYES'...this can't be true...more FAKE NEWS

What do these 5 trouble makers have in common...

Huge current account deficits!

847328_3527's picture

When a Mainland Banker or Gubmint offical loots millions, he has to move it somewhere offshore, as far away from the reach of other looters. So NZ, USA, Canada, etc seem like a good choice since the politicians are evidently as corrupt there as in Mainland.

Déjà view's picture

Worldwide 4/5 rank dead last concerning current account balance...

https://www.cia.gov/library/publications/the-world-factbook/rankorder/21...

i.e. living well beyond their means at expense of...

JRobby's picture

Right on it!

A glimpse at the history of Australia may provide a hint.

But this is going on worldwide. Harder in some places than others.

Theft of taxpayer dollars and laundering of questionable gains and stolen $$$ is huge. Society crumbling. 

Zero Point's picture

Why don't Chinese "businessmen" just invest in Australia the way they have traditionally? By giving money to corrupt Australian politicians.

The best Sun's picture

Not changing soon.

Our current treasurer has balls deep

ties to the real estate/money laundering complex

as indicated by his pre-politics career as the

National Policy and Research Manager for the Property Council of Australia.

Parlimentarians are mostly early adopters in real estate investment too.

Must be a coincidence.

PT's picture

Oh, and another question.  Is it really, "secretly laundered money that was stolen or otherwise illicitly gained" or is it just legitimate profits the Chinese make from manufacturing and selling shit to the rest of the world that is being driven into the property market?  Or does the "illegal" part only kick in when they try to hide it from the Chinese govt?  Just asking.

"According to the Financial Action Task Force (FATF), real estate accounted for up to 30 per cent of criminal assets confiscated worldwide between 2011 and 2013…"  Well, that still leaves up to 70% to be the result of legitimate transactions and that 70% will still drive prices ...

Just wondering.

JackT's picture

It's legit if it's not cash. Only criminals use cash.

Nexus789's picture

In Australia the politicans own a combined property portfolio of around $330million. You can see where their interests are and why the bubble is continually pumped up and laws ignored and not enforced. 

land_of_the_few's picture

You sure you didn't miss a zero or two there? Seems almost reasonable by other countries' standards, if it's accurate... Hey, what do I know..... :D

BurningFuld's picture

Some people just don't like paying taxes. Or being caught defrauding corporations or banks. Or reporting money from illegal drug sales. What's wrong with that?

MD's picture

It is politically impossible to pass any laws that depress property values, in seemingly every major first world country. As long as a majority of people own their homes, this problem will only get worse.

PT's picture

How do these guys make their money?  Since 1994!
https://www.propertyclub.com.au/
(They've had at least one name change since then.)
Go to one of their meetings, listen to what their volunteer has to say, and see if you can identify the type of financing they use, as defined by this guy:
https://en.wikipedia.org/wiki/Hyman_Minsky

Quite a system they have.  I can not say it doesn't work since they've been around since 1994.  But I would not recommend them either.  You'd have to see how their long term members are getting along or if they have any.

Something tells me they are not the only ones.

Re "As long as a majority of people own their homes ..." :  You're right.  They got theirs.  Now they are not paying any attention.  They keep blaming their kids for not working hard enough, or for wanting too much too soon.  I try to explain the basics to them - weekly wage vs weekly mortgage repayments, prices of cheapest houses in cheapest suburbs and don't forget these dumps will come with massive repair bills - but it is water off a duck's back.  Actually, even the kids aren't listening.  They spent a minimum of ten years learning maths and it is all for nothing.  They won't even apply it to the biggest purchase of their life even if it enslaves them.  Hundreds of years of science and they still rely on magic.

notRobot's picture

^^^^^^ this! + e^upvotes

uhland62's picture

Some people forget that many people have mortgages, to pay the house off; or they may have funded a business with a loan on the house.

When you reduce house values, many people will be overcommitted and the banks foreclose, on the people's roof over the head and/or business. I remember people wanted to change the flight path in Adelaide, but it emerged that many tradies lived under the new proposed path. Their houses would lose 20+% in value; businesses had been financed by the equity in the house. With these risks of foreclosure the plans were cancelled. The banks would have made losses, too, so no wonder where the dice fell. 

MD's picture

Mortgages entail risk. Banks should understand that when they make the loan. It's insane that central banks must keep bubbles inflated, to avoid having banks experience the consequences of their poor lending choices.

Is-Be's picture

The banks were forced to loosen lending rules when middle class wages were decimated in the war between labour and capital. Capital won and the velocity of money collapsed.

Henry Ford understood this phenomenon, bit instead of lending his workers the means to buy his products he increased their wages.

From a Banker's point of view, Henry was naïve

Now, in order to keep the pressure on house prices aliens are allowed in. The object of the exercise is not to provide shelter for our children.No. No. Heaven forbid. The object of the exercise is to keep the banks afloat.

Post script. It is a psychological and moral failing. The model making left brain has usurped the wholistic right brain. I would prescribe a session of DMT.

JBilyj's picture

Do investigations - commodere properties that don't pass the legal test, and institute a foreign tax like Vancouver BC did. 

 

AUD's picture

Not saying this report is necessarily wrong but Leith Van Onselen & macrobusiness.com are a bunch of dumb cunts.

PT's picture

Not saying you are wrong but please give us one or two bits of evidence to support your concerns.  There is nothing quite as pleasurable as driving home a crass summary with some hard, in-your-face evidence.  It's the difference between your assertion being forgotten and your assertion being copied and repeated by all who read it.

uhland62's picture

Transparency International is as credible as the Soros organisations. It is an NGO and like all NGOs they are only accountable to their donors. 

Transparency International is located in Berlin, but when the corruption between the Kohl-Regime, Mitterrand, Leuna/Minol and elf Aquitaine occurred, where my family lost our land in Berlin, they did zilch. They congratulated me on living in a less corrupt country, Australia.

It was on their doorstep but you don't bite the hand that feeds you. They might have even had a backhander from the 300 million DM kickbacks found in a Geneva bank account. Transparency International is just a propaganda vehicle, making you believe someone does something against Colluding Class corruption. (The land lost was Prenzlauer Promenade 191, Berlin). Democracy does not equate with justice. 

notRobot's picture

Your story sounds like one that should be told more widely. Sounds awful. I had my own experience in Berlin. Grateful for further details...

Is-Be's picture

I thought that conflict of interest carried legal weight. Politicians who are exposed to the property market are therefore obliged to stand aside when making property laws.

Silly me.

imbubbajones's picture

Why should it be the responsibility of the agents to determine the legitimacy of the funds being used for the purchase?

I'm an accountant but if there was a new client coming to me after immigrating from China, am I going to audit his foreign affairs and sources of income before taking him on as a client (assuming his money is in a bank account)? even if I did, assuming he's smart, I wouldn't be able to find anything unless I was able to track all of his payments to/from his vendors and customers.

Shouldn't / isn't that the responsibility of the nations in which these people conduct their affairs.

To put that responsibility on real estate salespeople is naive and disingenuous. Further, when they're talking about "cash" sales, they really mean purchases with no mortgages (in Canada at least). FINTRAC makes it dangerous for agents to deal with real cash unless they are willfully complicit in the laundering with purchases of real estate.

chosen's picture

Just ban all sales of homes to foreigners.

Flibbertigibbet's picture

WRONG WRONG WRONG WRONG WRONG!!!

It's Austrina Province.

farmerbraun's picture

Actually, it's pronounced - Strylier.

StackingSilver's picture

I believe you mean 'Straya.

I'm smart enough to not want a mort gage (which is latin for DEATH GRIP), and why bother when the median house price is now over $1M AUD?

I'll keep stacking and wait for everything to fall in a heap.

whensteamedapumpkinwillfart's picture

hehehe Australias government is pretty well trained at screwing over its constituants. They are happy for the influx of money as it offsets the mining slow down, now that all the ghost cities are built.

They will just swindle it offf them once the money gets here. The prime minister is (ex) goldman guy.

 

They will take anyones money. They're not racis.

chosen's picture

Fucking idiots.  Foreigners should be banned from buying homes, retroactively twenty years.  Home buyers must live in their homes for two years, or title goes to the state and the house is auctioned off.  Cops can stop by every couple of months to see who is actually living in the homes, if anybody.  Get the fucking chinks out.  They can buy commercial real estate if they want.  Hopefully they will get screwed like the Japs got screwed some years ago when the US commercial real estate market collapsed.  That was really funny.

sinbad2's picture

I've been saying exactly the same thing about Americans for years, we let them in and they buy homes, and invest, we should deport them all, or send them to Macquarie island.

dojufitz's picture

As an Aussie....

I'm depressed........this country sucks balls.......

I'm wanting to drop out of society & you can't even buy a small house in the middle of no where for $50,000......GFUA!!

Jultorsk's picture

Agreed, it's not cheap to go Galt here :(

Lucky country indeed. It's like the old quip about welfare state. It means the state is faring well, not you.

JRobby's picture

Bankster Empire through financialization and bubbles.

Anopheles's picture

Try Canada.   You can't get a small house in (near) the middle of nowhere for less than $100,000.... 

TheSilentMajority's picture

The moral of the story:

Money laundering is bad, unless it is done through real estate.

sinbad2's picture

Transparency International is hardly transparent, it's a child of the World Bank(USA) and key people are ex US intelligence. Head office is in Germany, like many shady American ethics organizations. They have been caught taking bribes in the past and they are hardly a reliable source.

The report is part of US covert actions to discredit China, and a way of forcing other countries to stop doing business with China, read the Wiki, it has CIA stamped all over it.

https://en.wikipedia.org/wiki/Transparency_International

pcrs's picture

Title is wrong

Australia Has The World's BEST Money-Laundering Property Market
Houses Depreciate's picture

Keep in mind this is all BORROWED CASH.

Anopheles's picture

It's not borrowed cash.   Smuggled, misdirected, illegally aquired, yes, but not borrowed. 

pcrs's picture

I recently understood that in China 80% of people own their house outright. So there is no mortgage on it.

Anopheles's picture

They want real estate agents to be able to do money laundering investigations? 

So, how exactly is a real estate agent going find that type of information?  Is the government going to open up police databases to them? Will the governemnt give real estate agents access to tax records?   Are the banks going to open up their records to lawyers and real estate agents? 

More useless noise from a moronic progressive with his head up his ass.