Around the globe, the use of real estate to launder money is a significant concern – with the subjective pricing, stable investment opportunities, and weak regulatory oversight of the sector creating a compelling proposition for criminals looking to conceal illicit funds.
However, reports over recent years have revealed that Australia’s hot property market is a particularly attractive haven for criminals – perhaps more so than any other country, largely due to the Government’s failure to extend AML legislation to cover real estate agents, as well as lawyers and accountants.
Australia’s property market – the money laundering capital of the world
In 2017, Transparency International released a report, entitled ‘Doors Wide Open: Corruption and Real Estate in Four Key Markets’, which revealed that Australia, Canada, the UK and the USA as the top four spots targeted by corrupt officials or criminals for real estate crime.
The assessment identified the 10 main problems that have enabled corrupt individuals to easily purchase luxurious properties anonymously and hide their stolen money, with Australia sitting at the top of the list, having failed to address all 10 issues.
These issues included:
Inaequate coverage of anti-money laundering provision
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
Weak or no 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
Lack of sanctions
The severe deficiencies across all these areas remind us that Australia continues to lag behind global standards – thus failing to uphold the commitments to tackle corruption and money laundering in real estate made in international forums.
Australia is still behind
Unfortunately, these findings stand true today, with the CEO of AUSTRAC – the Australian Government agency responsible for detecting, deterring and disrupting criminal abuse of the financial system, having again warned – in recent days, that Australian property is being used to launder illicit funds.
As these funds continue to flow into the market, house prices are being distorted for everyday Australians looking to purchase.
The need to act
Fifteen years ago, the Australian Government agreed to implement the Tranche 2 global AML rules for lawyers, accountants and real estate agents in a bid to prevent the laundering of illicit funds, especially into Australian property.
As we continue to wait for these reforms, the real estate sector, the Australian economy, and everyday citizens continue to suffer.
We can help
As the issues continue, our highly specialised team here at One AML is here to help you understand what this means, and provide expert advice on your own AML compliance.