Foreign investors who were granted immunity from prosecution after illegally buying Australian real estate could face charges of money laundering and have funds from the sale of their homes seized as the proceeds of crime following a major policy blunder by the Abbott government.

Fairfax Media can reveal that federal police and prosecutors are not bound by Treasurer Joe Hockey's promise of an "amnesty" for foreign purchasers who come forward to confess to breaking ownership laws by November 30.

Police and prosecutors are not bound by Treasurer Joe Hockey's promise of an "amnesty" for foreign purchasers who come forward to confess to breaking ownership laws. Credit:James Alcock

The blunder has thrown into doubt the viability and fairness of the government's amnesty policy, which has so far seen five foreigners admit to illegally buying homes worth between $152,000 and $1.86 million.

A spokeswoman for Mr Hockey has conceded the government did not arrange for foreign investors to receive full immunity. "There is no concession for crimes under other legislation (such as the Anti-Money Laundering and Counter-Terrorism Financing Act 2006)," she said.