US cracks down on realty dirty money as Straya washes furiously – MacroBusiness (blog)


By Leith van Onselen

In March this year, Transparency International ranked Australia as having the weakest anti-money laundering (AML) laws in the Anglosphere, failing all 10 priority areas. By comparison, the US failed nine out of 10 priority areas, ranking second worst in the Anglosphere.

However, unlike Australia, the US are taking action to tighten their AML laws, according to CNBC:

The Treasury Department said that 30 percent of high-end real estate deals that were subject under a new watchdog program involved people who had been targeted by the government for “suspicious activity” and potential money laundering.

Treasury this week expanded and extended a program targeting luxury real estate deals in New York, Miami, Los Angeles and other big markets to prevent the use of real estate for money-laundering by overseas buyers. The program was designed to prevent buyers from using shell company’s or LLC’s to hide the identities of the real buyers.

…the program was extended in February and is now being expanded to close loopholes. It also added the city and county of Honolulu.

Real estate experts say the expanded program could put pressure on high-end real estate markets…

The most important part of this week’s rule was closing a massive loophole involving wire transfers. Brokers say that ever since the rules were first imposed in 2016, buyers could easily avoid them by using wire transfers. Now, wire transfers will also be subject to the rule — closing the loophole.

Now compare this reform program to Australia, where money launderers continue to roam free.

In 2015, the global regulator of money laundering – the Paris-based Financial Action Taskforce (FATF) – released its mutual evaluation report, which found Australian homes are a haven for laundered funds, particularly from China. In June this year, FATF also placed Australia on a watch list for failing to comply with money laundering and terrorism financing reforms.

Legislation to implement the second tranche of AML legislation covering real estate gate keepers has been gathering dust in Canberra for a decade.

Accordingly, realtors, lawyers, accountants and other real estate gate keepers are currently exempted from AML requirements. And this exemption has provided an easy avenue for foreign buyers to launder funds through Australian property.

Sure, the Australian Government is currently undertaking yet another consultation on implementing the second tranche of AML legislation, and has promised to finalise the new rules by the end of this year. However, the Government set similar deadlines 2008, 2010, 2012 and 2014, all of which failed to deliver legislation.

Moreover, The AFR reported last month that any reforms would likely exclude real estate agents, thus leaving the door ajar for laundering through property [my emphasis]:

George Brandis, federal attorney-general, is expected to make an “imminent” announcement about boosting powers and resources of Austrac, the government agency that combats money laundering, according to a department spokesman.

But it is expected to fall short of extending existing laws to cover real estate agents

Under existing law, real estate agents and other businesses involved in buying and selling real estate do not need to identify where the money comes from or who is paying.

The law does not require real estate agents, lawyers, accountants or any other person involved in the deal to identify the beneficial owner of the deal. A beneficial owner enjoys the benefits of ownership though title is in another name, such as a company…

Real estate agents report unprecedented numbers of overseas’ buyers of residential and commercial property in Melbourne and Sydney paying cash…

An estimated 70 per cent of Chinese buyers pay in cash, according to Transparency International, an international non-government organisation targeting corruption.

By failing to ratify the second tranche AML rules, as promised more than a decade ago, the Australia’s Government remains tacitly complicit with the dirty foreign money flooding into Australia’s homes and robbing young Australians of a housing future.

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