‘Hot money’ from China adding to housing affordability problem

Australia’s failure to pass tougher laws on potential money laundering through real estate agents, lawyers and accountants could continue to inflate the housing market defeating macroprudential attempts to cool the market, anti-money laundering experts say.

Instead of introducing the comprehensive “tranche 2” laws which had bipartisan political support since 2006 and will assuage concerns about Australia’s laundering risks as highlighted in a highly critical report from the international Financial Action Task Force a few years ago, the government passed a “phase 1.5” step which excludes the policing intermediaries like real estate agents.

An Australian Criminal Intelligence Commission report last year says the most common professions exploited by organised crime include lawyers, accountants, financial and tax advisers, registered migration agents, stockbrokers, real estate agents and customs brokers. Many of these professionals operate in the lucrative and vulnerable housing market.

“Anti-money laundering experts have warned that failing to crack down on illicit funds flows, including ‘hot money’ from China, has added significantly to Australia’s housing affordability problem,” Thomson Reuters head of financial crime intelligence Nathan Lynch said.

“Unfortunately, there’s no reliable data on the extent to which this is happening, so the government really doesn’t know what impact this will have on a softening property market.

Advertisement

Suspicious transactions

“I think that’s a significant part of the reluctance to take action.”

While the proportion of actual foreign investments in Australian property remain low – disparate data collection suggests anywhere about 2 to 20 per cent of the residential real estate market – real estate agents, lawyers and accountants currently do not need to report suspicious transactions.

Chinese real estate agents such as Black Diamondz’s Monika Tu previously told The Australian Financial Review most agents no longer accept “suitcases of cash” from foreign buyers and anyone who walks into a house inspection with cash must deposit it into a bank first.

But New Zealand anti-money laundering consultant Dr Ron Pol, who has studied examples there,  says just because it has gone through a bank doesn’t mean the money is “clean”.

“Banks and lawyers often see different red-flag indicators of criminal activity,” he said.

“Red flags visible to lawyers are not always seen by banks, and vice versa. It also exposed many instances where criminals compartmentalised knowledge between banks and lawyers, helping mask their activities from both.”

Read More

LEAVE A REPLY

Please enter your comment!
Please enter your name here