Real estate and the fight against money-laundering

Discussion in 'Australia Property' started by Nicholas Wallwork, Nov 29, 2015.

  1. Nicholas Wallwork

    Nicholas Wallwork Editor-in-Chief Staff Member Premium Member

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    Real estate and the fight against money-laundering


    Over the last few years there has been a massive increase in the number of regulations covering money-laundering and real estate investment. Historically these have not gone down too well with advisers and investors, often seen as a barrier to entry for legitimate investors, but developments in Australia have caught the eye of many regulators around the world.

    The Australian AUSTRAC body has released a report suggesting that money-laundering connected to Chinese criminal gangs is occurring through the acquisition of real estate assets. So, is real estate a popular diet for criminal gangs and do Australian regulations need overhauled?

    Government treaties

    There is no doubt that criminal gangs do try and integrate their “ill-gotten gains” through the investment arena via an array of different methods. These might include the purchase of financial assets, property or anything else of significant value which can be quickly bought and sold. Governments around the world woke up to these issues a few years ago and there are now more tax treaties and information exchange arrangements than ever before. In simple terms, the number of overseas “tax havens” is reducing at a significant rate thereby reducing the opportunities for criminal gangs to hide their assets.

    Australian government

    As we mentioned above, the Australian real estate market seems to be a favoured home for Chinese investors who have recently been infiltrated by criminal gangs looking to wash their money through the system. The property market has been a regular bone of contention for the Australian authorities with many people blaming overseas investors for regionally inflated prices. Despite the fact that in-depth reports show overseas investment is having a minimal impact upon real estate prices, this has not stopped the criticism.

    This latest report on alleged money-laundering highlights some of the weak points in the Australian regulatory system especially when compared to the likes of the UK. The Australian authorities will, as the UK government did, have to go through a period of reorganisation in relation to ongoing future money-laundering regulations. One of the main elements of this system will obviously centre round the underlying ownership of funds used to acquire real estate – with many gangs said to enlist the help of friends, family and third parties.

    The noose is tightening

    While it is obviously a concern that criminal gangs seem to have recently infiltrated the Australian real estate market, with relative ease, the worldwide situation has improved dramatically over the last decade or so. It will be interesting to see how the Australian government reacts to this recently published critical report and indeed whether international pressure will emerge to tighten current money-laundering regulations.

    Even though many people have been critical of cross government agreements with regards to financial assets and ownership of investment funds there is a need to put a clear and firm structure in place. No system will ever be fool proof but the ability to at least identify the ownership of assets and funds in the future will make life just that little bit harder for the criminal gangs.

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