This article is from the Australian Property Journal archive
THE Australian Transaction Reports and Analysis Centre (AUSTRAC) has joined the chorus of global crime fighting agencies warning that international criminals are using the local commercial and residential property market to launder illegal funds.
/* Style Definitions */
table.MsoNormalTable
{mso-style-name:”Table Normal”;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-qformat:yes;
mso-style-parent:”;
mso-padding-alt:0cm 5.4pt 0cm 5.4pt;
mso-para-margin:0cm;
mso-para-margin-bottom:.0001pt;
mso-pagination:widow-orphan;
font-size:10.0pt;
font-family:”Times New Roman”,”serif”;
mso-fareast-language:EN-US;}
AUSTRAC said in a report that the laundering of illicit funds through commercial or residential real estate has become an established money laundering method in Australia because it is not complicated requiring “little planning or expertise”.
AUSTRAC added that the property sector is also unregulated unlike the banking, remittance and gaming sectors and it only has some insights into illegal movement of money when the criminals deal with banks.
“Real estate agents are not subject to the provisions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). However, real estate transactions most commonly go through a financial institution – for example, as loans, deposits or withdrawals.
“At this stage, real estate transactions intersect with the regulated AML/CTF sector. Reportable transactions which intersect with the regulated sector (banks and other financial institutions) provide authorities with some visibility of potential money laundering through real estate,”
However, AUSTRAC noted that criminals could bypass the banks because property can be purchased with cash.
Furthermore, they also have ability to disguise the ultimate beneficial ownership of real estate, by holding the property title within front/shell companies.
“As an established money laundering channel, criminals are likely to continue to launder money through real estate.
“Compared to other methods, money laundering through real estate – both residential and commercial – can be relatively uncomplicated, requiring little planning or expertise. Large sums of illicit funds can be concealed and integrated into the legitimate economy through real estate,” it said.
AUSTRAC`s report comes after the inter-governmental body, the Financial Action Task Force (FATF), found that Australia`s real estate market is a safe haven and a favoured destination for international criminals.
Earlier this month, FATF released a report which found that whilst Australia has a mature regime for combating money laundering and terrorist financing in the banking, remittance and gaming sectors, the real estate market remains unaddressed.
FATF Vice President Je-Yoon Shin said organised criminal groups out of China, Hong Kong, Macao, Singapore and the United Arab Emirates are a major source for proceeds of crime laundered into and out of Australia.
“Large amounts are suspected to be laundered out of China into the Australian real estate market,” Shin said.
FATF said lawyers, accountants, notaries, and real estate agents are facilitating the establishment of legal structures and advice to facilitate money laundering by organised crime groups.
The body called on Australian authorities to bring professionals such as real estate agents, conveyancers, accountants, lawyers, trust and company service providers up to speed with anti money laundering and counter terrorist regulations, such as the banking and gaming sectors.
“Of great concern is that Australia has not brought real estate agents within the AML/CTF regime,” the report said.
AUSTRAC agrees with assessment and said professionals in Australia have either wittingly or unknowingly, provided services to criminals to misuse legitimate financial and corporate systems for money laundering.
Whilst AUSTRAC stop short of calling for an overhaul of the AML/CTF regime, the watchdog has published a number of indicators to help professionals identify suspicious potential criminal activity.
The indicators are:
– They are cash deposited in structured amounts into home loan accounts
– Cash deposited into an account in structured amounts, then withdrawn via transfer or bank cheque to a payee that is a real estate firm, conveyancer or legal trust account
– Cash deposits used to make rental payments months in advance
– Cash used to make a significant deposit for the purchase of a property and the balance is financed by an unusual source – for example, a third party, private lender or offshore bank
– Complex transactions in which multiple properties are bought, re-sold or exchanged
– Customer appears to be acting on behalf of another person and is reluctant to identify those they represent
– Customer arranges for proceeds of sale of property to be transferred directly to an account in a high-risk jurisdiction, known to be a source of narcotics or other significant criminal activity
– Customer buys multiple properties in a short period of time
– Customer buys or sells property above or below market value while apparently unconcerned about the economic outcome of the transaction
– Customer buys property in the name of a third party, relative or minor
– Customer deposits cash to buy a property but then pulls out from the transaction and requests a refund by cheque
– Customer repays loan early, or is significantly in advance on their payments
– Deposits to buy a property have been sourced from an offshore bank
– Introduction of unknown parties at a late stage of a transaction
– Low-value property bought with subsequent improvements paid for in large cash amounts before re-selling
– Non-individual purchasers whose corporate or legal entity structures are complex for no apparent commercial or other reason
– Ownership of property is the customer’s only link to Australia
– Source of deposits to buy a property cannot be easily identified – for example, international funds transfer where the ordering and beneficiary customers are the same
– Transactions in which the parties are foreign or a non-resident for tax purposes
– Transactions where there are doubts about the validity of the documents submitted with loan applications
Australian Property Journal
