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It might just be, according to last week’s Transparency International (TI) report: Doors Wide Open: Corruption and Real Estate in Four Key Markets.
Along with the UK, the USA and Canada, Australia’s real estate market was identified as a money laundering hotspot. 10 weaknesses were identified as making it easier for property to be bought so to hide stolen money:
Of the four countries analysed, Australia was the worst, deficient in all 10 areas.
Australia performed this poorly because of inadequate legislation and weak implementation of existing rules. Real estate agents, lawyers and accountants are not subject to the provisions of the Anti-Money Laundering and Counter Terrorism Financing Act 2006. This means that properties can be bought and sold without any due diligence from these parties. Customer due diligence on real estate transactions is left to financial institutions. This creates an environment where large cash transactions can go unnoticed.
TI reports that, in Australia, Chinese buyers often pay in cash. These transactions represent an increased risk of money laundering. According to Global Financial Integrity, between 2004 and 2013, China1 led the world with USD1.39 trillion in illicit outflows. In 2013, China had the largest such outflows of any country: nearly USD260 billion.
The TI report concludes that Australia has failed to meet its international commitment to tackle corruption and money laundering as a member of the Financial Action Task Force (‘FATF’), the global regulator against money laundering.
Australia’s failings in this sector are not new, and these concerns have been previously raised by the FATF2 and the Australian Transaction Reports and Analysis Centre (Austrac).
Not all the news is bad. There are some encouraging signs3 including:
But the deficiencies discussed above and Australia’s poor score on the Corruptions Perceptions Index show that we’re still behind where we should be. Why?
1. Followed by Russia and Mexico at USD1.0 trillion and USD528 billion respectively.
2. See top of page 7 under ‘Risk and General Situation’.
3. See section 7 – Developments in Australia.
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