By Leith van Onselen

It appears international pressure on Australia to police money laundered into Australian real estate has finally spurred some action, with the second tranche of the reform to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, which would rope in accountants, lawyers and real estate agents (among other non-financial businesses), expected to be tabled in Parliament by the end of the year, according to The AFR.

Earlier this year, the Paris-based Financial Action Task Force (FATF) applied a blowtorch to Australia’s anti-money laundering (AML) regime, releasing a scathing report highlighting that Australian residential property is a haven for international money laundering, particularly from China, and recommending that Australia implement counter-measures to ensure that real estate agents, lawyers and accountants facilitating real estate transactions are captured by the regulatory net.

Under Australia’s existing AML regime, financial institutions like banks, casinos and bullion dealers are required to report suspicious activity, whereas other gatekeepers including those involved in real estate are exempted. This had led to the perverse situation whereby if somebody wants to set up an account to place a $100 bet at Sportsbet, or invest $1,000 into a managed fund, then they must provide sufficient identification under the AML Act. But if they want to launder millions of dollars through an Australian home, few questions are asked.

It makes absolutely no sense, and is part of the reason why foreign funds have gushed into Australia’s property market, particularly in Melbourne and Sydney, helping to price-out young Australians and adding to financial stability risks:

As noted recently by Nathan Lynch, Head Regulatory Analyst for Australia & New Zealand at Thomson Reuters:

AUSTRAC’s surveillance efforts are… being frustrated by the fact that money launderers will often use unregulated entities as a “first point of contact” to help disguise their source of funds. If a criminal makes a suspicious cash deposit into a real estate agent or lawyer’s trust account, for example, the suspicious transaction is not required to be reported to AUSTRAC. Reporting entities, such as banks, are required to report transactions of this type within three business days of forming a suspicion. Lawyers are only required to report threshold transactions under the legacy Financial Transaction Reports Act 1988, not suspicious matters, while real estate agents have no reporting obligations.

Separately, Lynch has noted that “politicians have been conspicuously evasive on their bipartisan commitment to follow through with a second tranche [of the AML legislation]… politicians are happy to turn a blind eye”.

It beggars belief that the Australian Government has gone to the effort and expense of launching attacks on foreign nations and monitoring citizen’s internet use, in a forlorn attempt to thwart terrorism and boost national security, but in the meantime has turned a blind eye to the billions of dollars of corrupt money flooding Australia’s property market, including from a Chinese firm involved in international arms dealing.

Enough is enough. It’s time to end nine years of neglect and bring Australia’s real estate gatekeepers into the AML net, as was intended when the legislation was first drafted in 2006. The politico-housing complex has protected criminals for long enough.

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