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:
- Inadequate 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
- Inconsistent supervision
- 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?