Widespread money laundering is contributing to Australia’s inflated property prices, a senate inquiry has heard

Widespread money laundering is contributing to Australia’s inflated property prices, a senate inquiry has heard
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  • Australia’s inflated property prices are attracting money laundering attention, a senate committee has been told.
  • If legislation is not brought into line with the rest of the world, the country will continue to be a “destination of choice” for illicit funds, it heard.
  • The inquiry comes amid increased scrutiny of the impacts of Australia’s inflated property market.
  • Visit Business Insider Australia’s homepage for more stories.

Australia’s financial crime laws are enabling widespread money laundering in the property sector, locking Australians out of owning their own homes, a senate inquiry has been told. 

If legislation is not brought into line with the rest of the world, the country will continue to be a “destination of choice” for illicit funds. 

The statements come amid a broader investigation into the state of the inflated Australian property market, which has seen a record 21.9% annual price growth rate this year, with the median price for a house in Australia now sitting at almost $1 million. 

A committee inquiry into housing affordability and supply in Australia began hearing submissions in late 2020. 

The senate inquiry, which is currently probing the strength of Australia’s money-laundering and counter-terrorism financing laws, on Tuesday heard from anti-corruption group Transparency International Australia among other bodies with a stake in the sector. 

Overall, the inquiry was told Australia’s inability to broaden anti-money laundering and counter-terrorism finance laws to include non-financial companies is leaving the country exposed to an influx of tainted funds linked to organised crime.

The committee was also told Australia’s inflated property prices were attracting money laundering attention.

Money laundering ‘driving up property prices’ 

Police Federation of Australia chief executive Scott Weber said the real estate sector has become a lucrative way to legitimise tainted cash.

“If you have ill-gotten cash, you can go to a real estate agent, get conveyance with the lawyers and there is no punitive measure,” Weber said.

“That is a great way to launder it through a corporation, through a business and actually have it in a… sound investment, which makes it extremely difficult for law enforcement agencies to take back off them if it is done through those mechanisms.”

Transparency International Australia’s chief executive, Serena Lillywhite, said Australia had become the “destination of choice” for the flow of illicit funds, particularly for “corruption-related proceeds, which too often do end up in the property market”.

The group provided a list of 10 publicly-reported examples showing money laundering in the property market, from Sudan, China, Malaysia, Papua New Guinea, and Russia. 

Lillywhite said Australia’s weak anti-money laundering policy, flaws with the corporate registry, and the lack of a beneficial ownership register all contributed to the problem.

“Money laundering is not a faceless crime,” Lillywhite said. 

“It can reasonably be argued that it is driving up property prices in Australia and locking many Australians out of owning their own home.”

Labor senator Deborah O’Neill said money laundering was costing the economy upwards of $50 billion a year.

Increased calls for regulation

The scrutiny of Australia’s money-laundering and counter-terrorism financing (AML/CTF) laws come off the back of revelations money has been laundered through some of the country’s largest companies including Westpac and Crown Resorts. 

Australia’s AML/CTF laws are regulated by AUSTRAC.

Australia currently is not compliant with global standards set by Financial Action Task Force — a list that also includes Haiti and Madagascar.

The laws governing financial crime have not changed since they were implemented in 2006, despite significant technology changes over the past decade, including the rise of dark web transaction exchanges using cryptocurrency.

The Australian Banking Association (ABA) told the inquiry the federal government needed to adopt reforms which would broaden regulation oversight.

However the committee heard lawyers, accountants and real estate agents were opposed to being covered by the laws due to the significant regulatory burden.

“The alignment of the Australian regime to international standards will only enhance the ability of banks and Australian law enforcement agencies to detect, deter and disrupt financial crime,” the ABA said in its submission to the committee.

CPA Australia said broadening the regulation would create excessive costs for smaller businesses, with another expert, Neil Jeans telling the inquiry there was a lack of political appetite in addressing the lagging laws.

“There has been limited action to address those weaknesses,” he said.

“We know that we have been non-compliant for the longest and we have done nothing about it.”