Aussie real estate a haven for dodgy money

“Australia has stepped up its enforcement of foreign bribery since 2012, when the OECD Working Group on Bribery last evaluated Australia’s implementation of the OECD Anti-Bribery Convention, with seven convictions in two cases and 19 ongoing investigations,” the OECD said.

“However, in view of the level of exports and outward investment by Australian companies in jurisdictions and sectors at high risk for corruption, Australia must continue to increase its level of enforcement.”

The OECD report highlighted that one possible means of improving detection is through an increased focus on the proceeds of crime in financial flows back into Australia, particularly those involving the residential real estate sector.

It noted that Aussie property is “very attractive to foreign investors and is at ‘significant risk’ for money laundering”, according to a number of sources, including the 2015 Financial Action Task Force (FATF) Mutual Evaluation Report of Australia.

“Several participants at the onsite from civil society and the private sector also highlighted the significant risk of laundering foreign corrupt proceeds in the Australian real estate sector, including representatives from civil society, the banking sector and an international accounting and auditing firm.”

The review team noted the views of J.C. Sharman, an Australian academic and international AML/CFT and anti-corruption expert, on the Australian AML/CFT system’s failure to counter the flow of corrupt proceeds from abroad into the Australian real estate sector.

According to the report, Professor Sharman attributes the gap to a “lack of willingness” to take action rather than a lack of capacity, stating that Australia has some of the most powerful AML/CFT laws in the world.

He provides several examples where banks or AML/CFT authorities have failed to act on suspicious payments, and information from interviews with Australian bankers that believed the Commonwealth Government did not take seriously enough the issue of inward flows of corrupt proceeds.

Under Australian law, real estate agents, accountants and auditors, members of the legal profession and other Designated Non-Financial Business Professionals (DNFBPs) are not subject to AML/CFT obligations.

However, the OECD noted that Australia is currently considering the expansion of AML/CFT reporting obligations to real estate agents, lawyers, conveyancers, accountants, high-value dealers and trust and company service providers.

“This follows a statutory review of the AML/CFT regime (completed in April 2016), which recommended a cost-benefit analysis be undertaken (completed in June 2017),” the report said.

“The government is currently considering the report, which will inform any decision about the regulation of these sectors for AML/CFT purposes.”

FIRB to play a bigger role

The OECD believes that Australia’s Foreign Investment Review Board (FIRB) could potentially play a greater role in detecting and reporting suspicious transactions in the real estate sector, and leverage available information from the ATO, AUSTRAC and AFP to act on suspicious transactions relating to foreign investments.

The report explained: “Pursuant to the applicable legislative framework, the Treasurer is empowered to prohibit a foreign purchase of Australian property if satisfied that it would be contrary to the national interest, which includes considerations such as national security, competition, impact on the economy and character of the investor.

“The FIRB routinely consults with government agencies, including ASIC, AFP and Immigration and Border Protection, about applications. The ATO also meets regularly with these agencies to ensure that a cohesive, whole of government approach, is maintained.”

[Related: Aussies blame foreigners for surging property prices]