AGED PENSION: “an economically costly inheritance preservation scheme”: a harsh generalisation!

Andrew Fisher and Alfred Deakin, the prime ministers who oversaw one of the world’s first age pension schemes, would be horrified to see what it has become: an economically costly inheritance preservation scheme. Picture: iStock

Photo: The Australian: Paying very wealthy pensioners is hardly prudent: CAAN: A harsh generalisation!

ABOUT this article from Macro Business on Adam Creighton’s ‘Paying very wealthy Pensioners is hardly Prudent’ ….

THERE are two groups of ‘Baby Boomers’ … the wealth Boomers and Boomers … who may only own the ‘family home’ ….

ALERT! If this were to come in it will erode what is left for Gens X Y and Z! Having lost out to:

-1.6 Million Visa Workers in Australia

-lowest wages growth for 60 years

When you read this sort of stuff it brings to mind the following …

blaming people and punishing them because the place where they live happens to increase in value

ignores the fact a vast majority of the people attacked in the article worked hard, paid their (full) taxes, bought and paid off a mortgage in a location they liked (30 years +), and could afford a house that suited them

does not mention they often paid a lot more interest on their mortgage for many years than current owners (17.5%); were on very modest wages and put up with a lower standard of living for a lot of those years

.the official Reserve Bank cash rate peaked at a punishing 17.5 per cent in January 1990

reverse mortgages, they are not popular for good reasons, yet another way for others to make money whilst reducing home ownership and provide opportunities for investors

Further cutting the AGED PENSION based on an assets test including the family home will:

encourage more creative accounting

-encourage more schemes that will seek to avoid the impact of yet another tax, where it has been done elsewhere houses are left unfinished and/or maintained to deliberately suppress their value

WHAT happens when the asset value declines for whatever reason?

What about this article ignoring the fact that a home is shelter, a place to live, not primarily a financial instrument

What about doing something about the housing market, like addressing the inflation of house prices including doing more than tokenism in response to foreign buyers taking a share of our domestic housing stock

addressing the demand foreign buyers have (driving demand and prices) beyond a series of levies and taxes; that evidence has failed to indicate they have influence on foreigners decision to buy as they continue to do so because they want to buy in Australia and are prepared to pay

AS for years ahead the article does not dive deep into the reality of retirement created by compulsory superannuation introduced over 30 years ago

The fact is less and less retirees will qualify for the full aged pension let alone a part pension

However another issue mentioned in passing may indicate the author is aware we could be facing an even more concerning crisis:

-for more than 7 years the vast majority of Australian workers have had little or no increases in their wages beyond the cost of living, many not even keeping up with inflation

-this has had an effect on their Super, it too has failed to grow so their retirement savings are more likely to be inadequate

-those low paid workers retiring on very modest super and don’t happen to own a home are in the future far more likely to fall below the poverty line and into homelessness; those at the biggest risk being single elderly women …. but hey who cares about them? It seems nobody …

THESE ISSUES could have more serious consequences for the Budget bottom line, and subsequent social and political ramifications than not giving the top end of town and the top tax bracket a break

INSTEAD what about addressing some real issues like:

-New Zealand … why should foreigners own our domestic housing?

-deciding owning a lot of homes is not such good thing, how many is enough, that is why should the Budget subsidise ‘an investors 3rd or 4th property?

-the Second Tranche of the AML legislation, now that would have a positive influence on the Budget bottom line and not be such an attack on those getting old

-doing something about exploitative pay day lenders, like the AML matter the reports are done, the recommendations are there, but nothing is happening … what could it be that is stopping them?


Aged Pension: “an economically costly inheritance preservation scheme”

By Unconventional Economist in Australian budget

November 12, 2019 |  comments

The Australian’s Adam Creighton has continued his war against the Aged Pension’s largesse towards wealthy retirees, labelling it “an economically costly inheritance preservation scheme”:

Last week figures emerged showing about 255,000 pensioners lived in homes worth more than $1m, costing taxpayers an estimated $6.3bn a year — enough to reduce the top marginal tax rate dramatically, for instance. The Australian National University report found almost 30,000 pensioners were in homes worth more than $2m. The biggest asset most people own is excluded from the eligibility test for the Age Pension.

No one begrudges success but the government needs to prioritise who receives scarce tax dollars. The 707 pensioners in Perth’s Dalkeith (median dwelling value $1.5m) or 429 in Sydney’s Vaucluse (median $2.7m) should be lower down the list than families struggling to buy a home facing marginal tax rates of 39c in the dollar.

These well-off people have about triple the wealth of the median household. Pensioners are allowed to have financial assets up to $864,000 before they lose the part-pension, and the array of medical and transport discounts that goes with it.

The biggest red herring is that people would have to move out of their homes if their net wealth were counted in the eligibility test for the Age Pension. That is nonsense, however rhetorically convenient. Financial products called reverse mortgages exist that allow retirees with significant equity in their homes to remain there in comfort without drawing on taxpayers…

The Henry tax review sensibly recommended starting to withdraw Age Pension payments once recipients’ principal residence exceeded $1.2m in value. The Commission of Audit suggested $750,000. Every dispassionate analysis comes to the same conclusion. It’s hard not to.

Perhaps the silliest argument against including the principal residence is that retirees can’t help it if the values rose. Oh, what a burden…

We’ve ended up with a system that taxes labour income at high rates while asset speculation is taxed lightly or not at all.

Adam Creighton is right of course. It’s ridiculous that younger Australians facing the prospect of never owning a home (or being enslaved in mortgage debt) are being called upon to pay ever-rising taxes to subsidise retirees that are far better-off financially than they will ever be.

The policy solution that MB advocates is to:

  1. Including one’s principal place of residence in the assets test for the Aged Pension at some point in the future (e.g. 1 July 2022), thus allowing current retirees and prospective retirees adequate time to make arrangements; and
  2. Significantly raising the overall pension asset test threshold as well as the base rate.

Under this solution, house-rich pensioners choosing to remain in place could continue to receive an income stream as they do now under the Aged Pension via the Pension Loans Scheme (the federal government’s official reverse mortgage scheme), but with less drain on the Budget and on younger taxpayers. But they would similarly be incentivised to move as the family home would no longer be a tax free shelter.

Poorer retirees that do not own a dwelling would also be made better-off via the increase in the overall assets test (thus allowing greater financial assets to be held without cutting-off access to the pension), as well as the increase in the base rate.

It’s a solution that would greatly improve equity and ensure that Australia’s welfare system is better targeted towards those in genuine need.

It would also ensure that the pension system evolves alongside the structural reduction in home ownership rates, by making the system more neutral towards property ownership and financial assets.

Younger people should be particularly anxious to end this inheritance protection racket, especially those who won’t inherit much at all. Picture: iStock

Photo: The Australian




CANADA: How A Little Money Laundering Can Have A Big Impact On Real Estate Prices


APRIL 24, 2019

Money laundering in Canadian real estate is a widely accepted fact of life these days, but the impact isn’t. Government and academics are still debating how much money is needed to distort a market. The truth is, not a whole lot is required to distort any asset market. This is a problem the stock market has been dealing with since the 1920s, and the reason it’s so highly regulated.

The key to understanding how laundering impacts prices, is understanding the marginal buyer. If you understand how prices are set, it doesn’t take long to see it’s not the amount of money that’s the issue. Price distortions can be the result of capital velocity, and the intention of the marginal buyer.

Squad Goal: Money Laundering

First, let’s clarify laundering. Money laundering is the process of making illegally-gained proceeds appear legit. Those proceeds can be from monstrous activity, like fentanyl trafficking. Sometimes it’s less nefarious, like earned income evading a country’s arbitrary capital controls. All of it is illegal however, and is people are trying to hide it. There’s a few ways to do it – but the all follow the same basic process.

Money laundering is usually done in three phases – placement, layering, and integration. Placement is the introduction of cash into a legitimate system. Layering is conducting multiple transactions through multiple accounts, to obfuscate a trail. Integration is working the money back into the legit system. Properly laundered money should be extremely difficult to tell from legitimate business.

One last time, the goal is clean money. Parking cash long term in assets is not typical – these aren’t investors. That said, the layering process usually involves moving cash around very quickly. Fast moving cash often leaves a wake, especially if it’s moving through real estate. To understand why, you need to understand a few concepts – marginal buyers, money laundering, and sales comps.

Marginal Buyers Be Cray, Cray

The marginal buyer is an important part of any asset market, especially fast moving ones. This is the person(s) or company that’s willing to pay the most for an asset. They are a small percent of the potential buyer pool, but the ones that actually buy the assets. The competition between marginal buyers is key to asset price escalation. Every market has one on the way up, but skill and motive determine how healthy the outcome is.

If the marginal buyer is a rational investor, they’re thinking about liquidity. They’re restrained in their bidding price, because they need to be able to make a profit. Rational consideration helps to keep a market sane. If the buyer isn’t bound by rationale or logic, things start to get sloppy.

A cannabis company making $20 million a year in revenue fetching close to the valuation of GM? An investment condo that produces negative cash flow? The buyers of these things aren’t making rational decisions. It doesn’t mean they can’t make money, but they are playing a game of greater fool. You’re hoping that the next buyer is more irrational than you – whether you know that’s the plan or not. When you have an influx of irrational money, it’s hard to figure out what’s real.

The Objective Of Money Laundering

When you buy an asset, whether a home or an oz of pink kush, you try to get the best value for your time and money. You want a deal. The seller is trying to extract the maximum price they can get from you, without driving you away. They don’t want you to get a great deal. The balance of interests go back and forth, and is a fundamental part of a functioning market. Opposing interests help balance things, plus or minus a dash of exuberance.

If you are money laundering, that’s not the case. The objective is to move as much cash, as fast as possible. This often involves large assets, and the bigger the price – the better. Especially if there’s a recurring payment component. Both the seller and the money laundering buyer want the highest acceptable price.

Sellers often feel somewhere between a genius and a lottery winner when they find this buyer. Competition between interests align, and there’s minimal friction preventing prices from going higher. The seller assumes their master negotiation skills prevailed. The money laundering buyer gets to move more money than they were asking for. The buyer seems “irrational,” but that’s just the market. Real estate agents without a clue, begin to rationalize and normalize this behavior. There’s no more land is a popular explanation.

Understanding How Real Estate Prices Are Born

We all know how prices are born. When a homeowner finds a selling agent they love, they go into a quiet backroom, make a few strokes, and boom! The multiple listing service spits out the comparables, a.k.a. your comps. Comps are a fancy way of saying what has sold around you, like the neighbor’s house. These numbers are then used to establish a baseline price, which a selling agent tries to push higher.

No comps in your neighborhood? No problem, we’ll use the neighborhood next door. Eventually, the arbitrary line disappears that separates the pricing in neighborhoods. This is when you hear dumb things, like “Shaughnessy Heights adjacent.” This spreads like a virus, from one neighborhood to the next.

Vancouver Real Estate Prices Overheating

A time-lapse of real estate sales in the City of Vancouver. Herd behavior can be observed in clusters, as people pay over or under the list price – based on whether other people are doing it.

Source: Better Dwelling. 

Poisoning The Comp System

Smarter real estate agents can already spot the problem here. Let’s look at an example, say you’re shopping for a home in Anyplace, BC. You’re watching the homes in the neighborhood climb at an average of 5% from last year. You find a place you’re ready to put on offer on, do some research, and come up with an offer. All of a sudden, a money launderer shows up, and offers the owner 10% over ask for a “quick close.” You’re not too worried, your agent told you the place a few doors down is going to be on the market next week.

Unfortunately, the new place now uses the home owned by the money launder as a comp. Now the ask is 10% more than you were expecting, because the marginal buyer set the price down the street. Someone else bites, and buys it before it “goes too high.” Now the money launderer’s buy was just validated in the system. But wait – there’s more.

Remember, the goal of laundering isn’t to buy a house, it’s to clean the money. They list the home again, let’s say another 10 points higher than bought. Bonus points if they can turn it into a wash trade, and sell it to another associated launderer. A regular family shopping down the street uses your washing machine as a comp for their buy. Behavior typically only seen in the frothiest of asset bubbles, can surface quickly. Exuberant buyers, both illicit and legit, compete and drive prices higher.

Driving Exuberance In Canadian Real Estate

An index of exuberance Canadian real estate buyers are demonstrating, in relation to pricing fundamentals. Once above the critical threshold is breached, buyers are no longer using fundementals. Instead they resort to market momentum, and the possiblity of reward is justification enough.CanadaCritical Values1984 Q31985 Q31986 Q31987 Q31988 Q31989 Q31990 Q31991 Q31992 Q31993 Q31994 Q31995 Q31996 Q31997 Q31998 Q31999 Q32000 Q32001 Q32002 Q32003 Q32004 Q32005 Q32006 Q32007 Q32008 Q32009 Q32010 Q32011 Q32012 Q32013 Q32014 Q32015 Q32016 Q32017 Q32018 Q3-3-2-1012345Index

QuarterCanadaCritical Values
1984 Q3-2.141-0.064
1984 Q4-2.0530.072
1985 Q1-2.0920.132
1985 Q2-2.1540.19
1985 Q3-2.1070.283
1985 Q4-2.1680.304
1986 Q1-2.170.348
1986 Q2-2.2420.394
1986 Q3-2.2740.405
1986 Q4-2.30.448
1987 Q1-2.2290.489
1987 Q2-2.1020.51
1987 Q3-2.1210.519
1987 Q4-2.2250.551
1988 Q1-2.3050.584
1988 Q2-1.9060.59
1988 Q3-1.740.61
1988 Q4-1.7760.621
1989 Q1-1.4080.665
1989 Q2-0.80.699
1989 Q3-1.4830.712
1989 Q4-1.2040.716
1990 Q1-0.9460.739
1990 Q2-0.8520.762
1990 Q3-1.4250.819
1990 Q4-1.5380.836
1991 Q1-1.5430.855
1991 Q2-1.3870.871
1991 Q3-1.140.89
1991 Q4-1.1080.899
1992 Q1-1.2240.899
1992 Q2-1.1510.901
1992 Q3-1.2160.929
1992 Q4-1.2340.942
1993 Q1-1.2330.954
1993 Q2-1.2710.96
1993 Q3-1.2690.971
1993 Q4-1.3140.971
1994 Q1-1.3290.974
1994 Q2-1.3270.981
1994 Q3-1.3520.981
1994 Q4-1.3610.991
1995 Q1-1.3981.015
1995 Q2-1.4421.018
1995 Q3-1.4591.025
1995 Q4-1.4751.03
1996 Q1-1.4891.03
1996 Q2-1.51.059
1996 Q3-1.5111.066
1996 Q4-1.4261.071
1997 Q1-1.5111.071
1997 Q2-1.5591.076
1997 Q3-1.5841.076
1997 Q4-1.5691.076
1998 Q1-1.6021.079
1998 Q2-1.6081.084
1998 Q3-1.6211.087
1998 Q4-1.6261.092
1999 Q1-1.6681.099
1999 Q2-1.671.099
1999 Q3-1.6981.107
1999 Q4-1.6831.111
2000 Q1-1.7011.116
2000 Q2-1.5191.124
2000 Q3-1.5341.133
2000 Q4-1.5831.153
2001 Q1-1.4971.153
2001 Q2-1.5291.157
2001 Q3-1.4391.157
2001 Q4-1.0991.16
2002 Q1-0.1961.16
2002 Q2-0.1641.16
2002 Q30.0711.16
2002 Q40.8831.163
2003 Q11.1911.164
2003 Q21.6961.164
2003 Q32.0611.164
2003 Q41.8511.17
2004 Q12.4041.17
2004 Q23.0561.17
2004 Q32.7421.189
2004 Q42.141.193
2005 Q12.6151.193
2005 Q22.9911.193
2005 Q32.8291.205
2005 Q42.8971.206
2006 Q13.5761.206
2006 Q24.3111.206
2006 Q34.3181.206
2006 Q43.661.206
2007 Q13.7861.209
2007 Q24.7811.222
2007 Q34.3591.222
2007 Q42.9511.222
2008 Q12.8981.222
2008 Q22.551.222
2008 Q30.9761.222
2008 Q40.3031.226
2009 Q1-0.0351.228
2009 Q20.6121.23
2009 Q30.8671.23
2009 Q40.8231.23
2010 Q11.1291.239
2010 Q21.1661.239
2010 Q30.6441.239
2010 Q40.4511.239
2011 Q10.7841.239
2011 Q21.0091.24
2011 Q30.8571.243
2011 Q40.6491.257
2012 Q10.9221.268
2012 Q21.2011.268
2012 Q30.931.271
2012 Q40.6941.271
2013 Q10.7831.271
2013 Q21.1311.272
2013 Q30.9721.272
2013 Q40.9431.272
2014 Q11.0571.272
2014 Q21.3041.272
2014 Q31.1681.272
2014 Q41.0971.275
2015 Q11.3341.28
2015 Q21.61.28
2015 Q31.5171.28
2015 Q41.5311.28
2016 Q11.8771.28
2016 Q22.4681.28
2016 Q32.451.28
2016 Q42.2081.28
2017 Q12.9621.28
2017 Q23.3061.28
2017 Q32.2111.286
2017 Q41.7081.286
2018 Q11.8261.286
2018 Q21.9221.286
2018 Q31.4881.286

Source: Federal Reserve Bank of Dallas, Better Dwelling.

Now in this example, just a few sales would have helped to push the comps up to 21% higher. There would also be hundreds of sales validating the price movements in between. Each time the launder injects capital, they inject a new marginal buyer. The whole time, Boomers are stoking the coals on this fire, explaining this is “earned equity.” If you want your own, you need to work as hard as they did. Standing by as each irrational player enters the market is exhausting work. Boomers also had to save uphill for a down payment… both ways, in the snow or something.

“It Wasn’t That Much Money”

Still think a small amount of money can’t influence prices? Clearly you’re not familiar with another asset class – stocks. CNBC host Jim Cramer once ranted that his fund could manipulate stock prices with as little as $5 million. Nav Singh Sarao, spoofing just $170 million worth of orders, set off events that led to the DJIA losing $1 trillion in just a few minutes. Note: the orders were spoofed – meaning he only had a fraction of the money. More formally, academics determined traders can use less than $500,000 to raise a stock price 1%, by targeting the bottom half of the liquidity spectrum.

Smack That Ask: It’s Not What You Pay, It’s What You Think People Will Pay

An example of Dynamic Layering, the spoofing technique used by Nav Singh Sarao. The lower dots are bids placed, that only sometimes execute as a trade. Free markets can’t effectively determine if participants are executing trades in good faith – required for natural price balance.

How A Little Money Laundering Can Have A Big Impact On Real Estate Prices - Nav Sarao

Source: US Department of Justice. 

Each of the situations are different, but have two common things – influence and intent. While not that much money, each example precipitated events that had a big impact. The actual trades weren’t so important, so much as influencing volatility. Setting the marginal buyer definitely counts as an event that influences market direction.

Each one of these events are also easily mistaken for an accident, which conceals intent. Fat finger, trade algo gone wild, and/or eager market buyer. Each one of these situations could have been caused by regular, everyday occurrences. Now it’s unlikely that money laundering is focusing on systematic trading of homes to inflate prices. It could however, be one of the times an unintentional destabilization of a market is just a side effect.

Velocity may also be playing a large roll here. When cash goes into one house, it’s eventually sold. That cash likely gets pumped through multiple transactions for the purposes of layering. That means more houses are being bought with the money, and profits. More sophisticated operations also have combine layering with an integration platform. Bonus points if the integration platform is registered with FINTRAC. That way the integration platform is also in charge of submitting suspicious transaction reports.

Combine this with an opaque comp system with closed data, and it’s really hard to catch. The chances of buyers being able to do their own due diligence on a property buy is virtually nil. Closed systems also mean no wide scale analysis of the transaction. There’s very little way for anyone outside of regulators to actually be able to determine it.

Where’s The Money At?

While Canadian cities are debating whether dirty money impacts prices, the rest of the world made up its mind. Transparency International UK found a significant correlation between shell companies, and elevated prices. London for instance, has 87,000 homes owned by anonymous companies. According to Christoph Trautvetter of Netzwerk Steuergerechtigkeit, the estimated impact from dirty money in London is 20% of the price increases.

London, UK Average Home Sale Price

The average sale price of a London, UK home. The estimate removes the 20% of annual gains attributed to the influence of money laundering. The number also assumes no laundering was done prior to 2008. LOL.Avg. priceEst Avg. w/o money launderingJan 2008May 2008Sep 2008Jan 2009May 2009Sep 2009Jan 2010May 2010Sep 2010Jan 2011May 2011Sep 2011Jan 2012May 2012Sep 2012Jan 2013May 2013Sep 2013Jan 2014May 2014Sep 2014Jan 2015May 2015Sep 2015Jan 2016May 2016Sep 2016Jan 2017May 2017Sep 2017Jan 2018May 2018Sep 2018Jan 2019200,000250,000300,000350,000400,000450,000500,000UK Pounds

PeriodAvg. priceEst Avg. w/o money laundering
Jan 2008298,596292,408
Feb 2008295,700290,716
Mar 2008293,605289,580
Apr 2008294,346291,238
May 2008295,163292,676
Jun 2008290,100289,272
Jul 2008290,261291,348
Aug 2008281,721284,907
Sep 2008276,487280,872
Oct 2008266,999273,311
Nov 2008258,647266,447
Dec 2008253,881262,704
Jan 2009253,093256,760
Feb 2009249,847254,652
Mar 2009247,264253,015
Apr 2009245,351252,456
May 2009249,991256,843
Jun 2009253,596260,152
Jul 2009259,793266,882
Aug 2009262,076269,014
Sep 2009267,501273,570
Oct 2009268,780274,769
Nov 2009266,837273,197
Dec 2009270,118276,145
Jan 2010279,724278,374
Feb 2010278,753278,221
Mar 2010280,472280,200
Apr 2010281,981282,608
May 2010281,762282,956
Jun 2010284,541285,548
Jul 2010292,772293,985
Aug 2010290,646292,475
Sep 2010290,093292,053
Oct 2010286,131288,960
Nov 2010282,290285,854
Dec 2010285,353288,605
Jan 2011287,983284,949
Feb 2011285,227283,391
Mar 2011287,092285,490
Apr 2011293,993292,239
May 2011284,722285,334
Jun 2011285,906286,644
Jul 2011295,843296,452
Aug 2011294,903295,902
Sep 2011295,358296,294
Oct 2011292,267293,917
Nov 2011291,036292,939
Dec 2011292,284294,213
Jan 2012294,360289,997
Feb 2012292,381289,077
Mar 2012290,379288,105
Apr 2012299,065296,273
May 2012304,081300,854
Jun 2012306,823303,420
Jul 2012308,962306,969
Aug 2012310,043308,055
Sep 2012308,469306,816
Oct 2012310,281308,409
Nov 2012308,540307,034
Dec 2012313,744311,494
Jan 2013311,364303,399
Feb 2013313,550305,821
Mar 2013312,289305,496
Apr 2013320,921313,594
May 2013322,324315,294
Jun 2013324,518317,419
Jul 2013332,988326,066
Aug 2013335,743328,483
Sep 2013340,494332,298
Oct 2013340,045332,077
Nov 2013343,749335,063
Dec 2013352,028341,901
Jan 2014355,830338,061
Feb 2014357,876340,408
Mar 2014361,400343,930
Apr 2014375,337356,133
May 2014382,705362,545
Jun 2014387,182366,454
Jul 2014398,737377,571
Aug 2014404,754382,498
Sep 2014403,670381,623
Oct 2014402,300380,714
Nov 2014400,803379,553
Dec 2014402,898381,427
Jan 2015402,847373,797
Feb 2015404,773376,094
Mar 2015404,706376,900
Apr 2015410,445382,782
May 2015415,817387,639
Jun 2015419,474390,905
Jul 2015431,644402,500
Aug 2015436,152406,235
Sep 2015439,729408,894
Oct 2015440,484409,622
Nov 2015445,485413,404
Dec 2015450,053417,140
Jan 2016457,466414,341
Feb 2016457,759415,479
Mar 2016464,647421,559
Apr 2016461,068420,551
May 2016467,485426,173
Jun 2016468,120427,171
Jul 2016475,530435,238
Aug 2016471,957432,914
Sep 2016471,767432,727
Oct 2016471,008432,331
Nov 2016470,854432,237
Dec 2016472,374433,691
Jan 2017475,619427,494
Feb 2017476,717429,245
Mar 2017475,442429,394
Apr 2017479,790434,213
May 2017480,902435,958
Jun 2017480,152435,954
Jul 2017488,527444,754
Aug 2017487,085444,016
Sep 2017483,833441,581
Oct 2017481,762440,227
Nov 2017476,290436,230
Dec 2017476,848436,977
Jan 2018479,772430,481
Feb 2018477,860430,068
Mar 2018472,327427,143
Apr 2018477,106432,270
May 2018478,480434,201
Jun 2018480,165435,964
Jul 2018484,906442,117
Aug 2018480,374439,121
Sep 2018476,397436,152
Oct 2018481,412439,971
Nov 2018473,872434,458
Dec 2018472,907434,088
Jan 2019469,186422,882
Feb 2019459,800417,065

Source: HM Land Registry (UK), Better Dwelling.

There’s a similar setup brewing in Canada, politicians are just a little less willing to look into it. Transparency International Canada found 50,000+ Greater Toronto homes bought by companies without known beneficial ownership. Even worse, $20 billion of the funds used were not subject to any anti-money laundering checks. In Vancouver, local politicians are still claiming money laundering is over exaggerated. Meanwhile, in European Parliament, Vancouver is literally being used as an example of opaque ownership distorting home prices.

Money Laundering Through Commodities Is Old News, The Velocity Is New

Laundering money through real estate is far from new, but the velocity and volume is. Traditionally, launderers would buy, hold, and sometimes even rent the places out. The lack of scrutiny in real estate transactions, has always made it a prime landing spot. Every city has a few well known families connected to local mobs, that just happen to be in real estate. The impact to home prices are minimal when the volume is low and slow.

Treating real estate like a global commodity market makes it fast and high volume. The real estate industry in Canada encourages foreign capital. In fact, Canadian banks openly helped clients with “placement,” obfuscating deposit trails. The faster you can place, the faster prices rise, and the more they welcome foreign capital – the easier the wash.

This has always been an issue stock markets have had to deal with. Equity is issued, artificial volume inflates prices, and launderers liquidate to unsuspecting victims. Equity markets have increased ownership transparency on larger exchanges, making it more difficult. However, it’s still common, especially on European and Asian stock exchanges. Treating real estate like a stock market encourages the same type of laundering, without the transparency.

Fun fact: The now defunct Vancouver Stock Exchange was popular with money launderers. It was so popular, Forbes called Vancouver the “Scam Capital of The World” in 1989. The Coordinated Law Enforcement Unit in British Columbia warned the government of organized crime on the exchange as early as 1974. Those warnings were largely ignored. Are you also sensing a pattern here?

Money laundering is not the sole reason for much higher prices, but it fans the flames. Low interest rates and easy lending allow regular families to provide liquidity. If a launderer can’t get clean cash, they don’t transact. There’s no appeal without house horny buyers overbidding comps, or rapidly flipping.

Money laundering investors however, can influence the direction of the market. A real estate market is only as good as its last comp, set by the marginal buyer. If that marginal buyer was laundering money, they have motivation to overpay. Regular households buying into this, provide comp validation, and liquidity. Most households never consider where their liquidity is going to come from.




Australia shamed again on property money laundering


A lack of reporting requirements mean no-one knows how big the problem really is …

In the lead-up to the May 2019 Election Shadow treasurer, Chris Bowen, committed Labor to implementing the second tranche of AML rules …



Australia shamed again on property money laundering

By Unconventional Economist in Australian Property

November 11, 2019 | 11 comments

The Australian Banking Association and the Greens are calling on the federal government to tighten anti-money laundering laws.

The Paris-based Financial Action Taskforce has complained for some time that Australia’s anti-money laundering laws do not require real estate agents, accountants and lawyers to report suspicious transactions; it is expected to repeat these complaints when it issues its latest report before the end of 2019.

AUSTRAC has estimated that there were $1 billion worth of in suspicious transactions in the Australian property market from China in the 2016 fiscal year. From The AFR:

The Financial Action Taskforce, which sits under the G7 major world economies, is due to release its latest report before Christmas and those who have seen an early draft say it will make for uncomfortable reading in Canberra.

“We’re going to get another kicking,” said one person familiar with the process…

It is understood the government is due to receive a submission from the Department of Home Affairs by Christmas, which would outline options to toughen Australia’s anti-money laundering regime…

“The exemption for lawyers, accountants and real estate agents is a gaping hole in Australia’s anti-money laundering laws,” said Greens Senator Peter Whish-Wilson.

“We’ve had 13 years of inaction, from both Liberal and Labor governments, on the fabled Tranche II”…

“In particular, investors are using real estate as a safe haven and to clean up money coming out of China,” he said…

“The ABA recommends progressing the Tranche II reforms as a priority. It is vital that Australia closes the current gaps in the Australian money laundering/terrorism financing regime,” its submission said.

The funniest part above is the statement that “the government is due to receive a submission from the Department of Home Affairs by Christmas, which would outline options to toughen Australia’s anti-money laundering regime”.

The federal government conducted similar consultations on the anti-money laundering second tranche in 2008, 2010, 2012, 2014, and 2017 – all of which failed to deliver legislation as promised. And now the government appears to be stonewalling once again.

The whole situation is a complete farce, with the federal government complicit in the dirty money washing through Australia’s homes.


Photo: Spiritual Issues Australia Real Estate …




Stash pad: How criminals are laundering their dirty cash in Australian real estate

Following this program in February 2018 … the Morrison Government exempted (excluded) the Real Estate Gatekeepers … the lawyers, accountants, conveyancers, and real estate agents from the Second Tranche of the Anti-Money Laundering Legislation … in October 2018 …


Background Briefing

Stash pad: How criminals are laundering their dirty cash in Australian real estate

Sunday 18 February 2018 8 


International experts are warning that Australia is one of the most attractive destinations to launder money through real estate.

Criminals from all over the world are looking at mansions in the suburbs of Melbourne and Sydney to park their cash.

Reporter Connie Agius investigates the gaps in our money laundering laws and why they haven’t been closed.


ARTICLE:NAB working with AUSTRAC on money laundering and counter terrorism funding issues – Having secured a record $700m fine from CBA, financial intelligence agency AUSTRAC is now working with NAB on “a number of issues”.

ARTICLE:CBA to pay record $700m fine over money laundering breaches – The Commonwealth Bank agrees to pay a record $700 million fine for breaches of anti-money laundering and counter-terrorism financing laws.

ARTICLE:How $1m of your money helped trap the world’s most wanted money launderer – How Australian taxpayer dollars and a fake drug cartel helped bring down the world’s most wanted money launderer.



Alice Brennan: You can’t have organised crime without money laundering. Just ask Saul Goodman from a Breaking Bad:

[Excerpt from Breaking Bad]

International experts say Australia is one of the most attractive destinations for money laundering. I’m Alice Brennan, and today on Background Briefing we’re delving into why, why are criminals from all over the world looking into mansions in the suburbs of Melbourne or Sydney and thinking to themselves, hmm, that’s where I want to park my cash. Where are the gaps in our laws and why haven’t they been closed yet? After all, they’ve been on the books for over a decade now. And yes, we also investigate the merits of disguising your illegally obtained cash in businesses like cafes and nail salons.

[Excerpt from Breaking Bad]

Connie Agius has the story.

Connie Agius: Australian real estate. It’s in high demand. Families, developers, investors, everyone wants a piece of it. Even organised crime groups. Australia is one of the most attractive places in the world to launder money through real estate.

Real estate agents, accountants and lawyers handle large sums of cash with little scrutiny because they aren’t covered by federal anti-money laundering laws.

Serena Lillywhite: There’s no time to waste to ensure that real estate agents, accountants and lawyers are covered by the same requirements to report suspicious transactions to Australia’s financial regulator.

Connie Agius: International crime syndicates love it.

Scott Cook: Organised crime is about money. Money laundering facilitates organised crime.

Connie Agius: In this Background Briefing, we’ll investigate how and why Australia’s laws fall short.

It’s 6pm, and a black Mazda parks outside Auburn RSL. Two brothers are inside the car. Ten minutes later, another car pulls up next to them. The driver talks to the brothers, grabs a backpack and passes it to the men. They all drive away.

The brothers have no idea they’re under police surveillance. The police officers stop and search their car and open the backpack. Inside are two vacuum-sealed plastic bags with rolls of cash: $250,000. The brothers are collecting cash for an international money laundering network. Police say they have no idea how many professional syndicates like this are operating in Australia.

Detective Superintendent Scott Cook was the Commander of the Organised Crime Squad for the New South Wales Police Force from 2014 until this year. He says these illegal transactions happen all the time.

Scott Cook: Most people in the street would not even notice that it’s happening. I think that’s highlighted by the fact that a transaction for $250,000 happens in western Sydney and no one notices. That’s how subtle it is.

Connie Agius: The service the brothers are providing outside Auburn RSL is the first step of many to clean illegal money and get it into the legitimate market. If police hadn’t intercepted the cash, it would have been sent overseas.

Scott Cook: That money is then diverted either electronically through bank accounts, into businesses. And sometimes they transfer it into what’s trade based money laundering. For example buying 100 iPads and then selling them in China in order to get the value transferred from Australia to China, and so that transfer of value is what is really occurring, but there are many methods.

Connie Agius: That money would have been returned to the criminal in the form of normal-looking transactions. Squeaky clean.

The New South Wales Crime Commission says services like this are about moving large amounts of money quickly, and distancing the criminal from the process.

These two men were involved in a syndicate that laundered at least $19 million for Australian organised crime figures before they were caught and convicted.

Journalist [archival]: An expert on monetary laundering laws expects heads to roll at the Commonwealth Bank after allegations the bank allowed itself to be used for unlawful transactions.

Connie Agius: The conviction is one of 53,000 alleged breaches of Australia’s Anti-Money Laundering and Counter-Terrorism Financing Act in a case brought against the Commonwealth Bank of Australia at the end of 2017.

Journalist [archival]: The corporate regulator ASIC has lashed out at the Commonwealth Bank for not telling it about tens of thousands of alleged breaches of anti-money laundering laws…

Journalist [archival]: Also staggering is the claim that CBA did not monitor its customers, even after it became aware of suspected money laundering.

David Chaikin, University of Sydney Business School [archival]: They’re very serious allegations because it’s the first time in Australian history that a financial institution has been accused of facilitating money laundering.

Connie Agius: Organised crime needs money laundering. These groups look for opportunities to clean their money without attracting police attention. And that comes at a cost.

Scott Cook: There’s all these other societal costs that people don’t see directly and this is the thing about organised crime, it’s largely not seen. It’s infiltration of industry, it’s the infiltration of institutions in this country, it’s not seen. Together with money and money laundering, the infiltration of legitimate businesses, for example, is the way organised crime works.

Connie Agius: The United Nations Office on Drugs and Crime says up to US$2 trillion is laundered around the world every year.

Australia’s financial regulator, AUSTRAC, says it’s difficult to know how much is laundered in Australia and the loss to our economy. An estimate in 2004 put the loss from money laundering at $4.5 billion. That means you pay more tax, less money goes towards your local hospital, you can’t afford to buy your first home, and ultimately money laundering fuels more crime on our streets.

Superintendent Krissy Barrett is the national coordinator for money laundering at the Australian Federal Police. She plays a key role in their organised crime and cyber portfolio.

Krissy Barrett: The AML/CTF Act regulates financial and remittance services, gambling industry, and it regulates bullion industry as well.

Connie Agius: The law she’s referring to is Australia’s Anti-Money Laundering and Counter-Terrorism Financing Act, which authorities call the AML/CTF Act.

Krissy Barrett: It captures most of the industries that are providing services around opening or transacting accounts, accepting international fund transfer instructions to move money offshore, or exchanging money for gaming chips or tokens or anything where you are changing the value of cash into another commodity.

Connie Agius: The law targets some big players; banks, casinos, and precious metal dealers.

Krissy Barrett: They have obligations about knowing their client, knowing their customer, conducting ongoing customer due diligence, they have record keeping obligations, they have obligations to report suspicious matters in a timely manner, the threshold transactions.

Connie Agius: These obligations are like circuit breakers. A circuit breaker stops electricity when the energy supply might damage the wiring in your house. A transaction report is designed to trigger an investigation to determine whether proceeds from crime are entering Australia’s financial system.

But is the current Australian legislation working? Not all the time, according to John Chevis. He spent 12 years working on fraud, corruption and terrorist financing cases for the Australian Federal Police and is now an adviser on money laundering to the United Nations. He says the allegations against the Commonwealth Bank aren’t isolated.

John Chevis: There’s a range of cases that have been examined recently where individuals have been charged with money laundering offences, and the reconstruction of those individuals’ movements show that they had been conducting smurfing transactions or structured transactions, depositing amounts of cash into bank accounts at just below the reporting threshold of AU$10,000.

Connie Agius: One of those cases was heard in Western Australia. A money laundering syndicate based in Hong Kong used cash collectors here to deposit proceeds from crime into Commonwealth and Westpac bank accounts. Each transaction was under the reporting threshold of $10,000. This syndicate moved at least $29 million in 10 months.

John Chevis: We’ve had instances shown in court cases where people have been banking literally hundreds of thousands of dollars in cash a day just by walking around the banks in the CBD in Sydney and depositing $9,000 at a time without showing any form of identification.

Connie Agius: There are penalties under civil and criminal law for banks if this can be proven. But John Chevis says the civil penalties aren’t always enough to ensure banks follow the rules.

John Chevis: The Anti-Money Laundering and Counter-Terrorism Financing Act puts obligations on banks to conduct customer due diligence. Now, those penalties for failures in that regard are civil penalties, so no one can go to jail if they don’t do it properly. The risk with those sorts of civil penalties is that the decision to comply with the law perhaps then becomes then a business decision.

Connie Agius: And he says the criminal penalties are never applied.

John Chevis: The criminal code places obligations on all of us, including banks, to not deal in proceeds of crime. But they’ve not been applied against banks, and in many respects banks have been a bit of a protected species when it comes to handling the proceeds of crime.

Connie Agius: Lawyers, accountants and real estate agents can conduct transactions worth thousands of dollars on behalf of clients.

They’re called professional facilitators, and they’re currently not covered under Australia’s Anti-Money Laundering and Counter-Terrorism Financing Act. That means they don’t have to report suspicious transactions to Australia’s financial regulator, AUSTRAC.

We spoke to an investigator from the New South Wales Crime Commission, who can’t be named because of ongoing operations. She’s worked with state, federal and international law enforcement to investigate key figures in organised crime groups and confiscate the money and assets they’ve made from breaking the law. She’s seen criminals use professional facilitators to launder their money.

Investigator: We do have evidence that shows that professional facilitators are often very much aware of who they’re dealing with, why they’re dealing with those individuals, and that at the very minimum they are reckless to the fact that they’re dealing with the proceeds of crime or setting up structures to enable someone else to deal with the proceeds of crime.

Connie Agius: Detective Superintendent Scott Cook says it’s becoming more obvious that organised crime figures are using professional facilitators to launder their money.

Scott Cook: And so we’re seeing more and more facilitators being misused. We’ve seen examples where one individual had 30 companies, none of them produced any profit, none of them paid any tax, but they had millions of dollars going through. Now, that’s money laundering. Those companies were set up and established by an accountant who is not required under the current legislation to report.

Connie Agius: The Australian government is currently considering expanding the anti-money-laundering legislation to cover real estate agents, lawyers, accountants, as well as conveyancers, luxury good dealers and trust or company service providers.

But here’s the thing; the laws have been under consideration since 2007. John Chevis says 11 years later, consecutive governments have failed to introduce what’s referred to as the ‘second tranche’.

John Chevis: It was delayed and then it was delayed again because of the global financial crisis, and it’s been delayed ever since, really I suspect because of some fairly powerful interests who would prefer not to have to bear the regulatory burden of being covered by the Act.

Connie Agius: Those powerful interests include lobby groups for professional facilitators. In a submission to the government, the Law Council opposed the extension of the anti-money laundering legislation to include lawyers. The submission claimed potential new reporting obligations could stop them doing their jobs. And the extra costs could put small practitioners out of business.

John Chevis: Clearly for the law abiding entities amongst these professions it comes with a cost. Having to have in place the anti-money laundering and counter-terrorism financing policies and processes doesn’t come free. And for law firms in particular I think there’s a large push-back in terms of the…and I probably should be careful how I couch this…perhaps represent clients that don’t have a legal source of income.

Connie Agius: Konrad de Kerloy is the Chair of the Law Council’s Anti-Money Laundering Working Group.

Konrad de Kerloy: There is no evidence of a systemic issue within the legal profession of money laundering. When we’ve actually asked to be shown the evidence, the evidence seems to point to a tiny, tiny, percentage of lawyers who the authorities have identified may be involved in money laundering. Now, we would be having a completely different conversation if the evidence demonstrated a large number of lawyers were systemically involved in money laundering and terror financing. If that’s not the case, we again plead with the government to allow us to work with them to find a sensible middle ground where we can deal with the risks but within an existing regulatory framework which does not overburden lawyers with regulatory cost.

Connie Agius: Another group involved in the consulting process is the accounting body, CPA Australia. The head of policy, Paul Drum, says they’re supportive of the anti-money laundering legislation, but concerned about compliance costs.

Paul Drum: CPA Australia is supportive of the Anti-Money Laundering and Counter-Terrorism Financing Regime, it’s just how it’s going to be applied that we’re concerned about. So we’ve said those that call themselves accountants and are outside the profession, it should apply to them. We’ve said for those who are in the profession, that perhaps the government needs to look at how those compliance obligations should be tailored. The compliance obligations for major financial institutions as it applies now shouldn’t be imposed holus bolus on small accounting firms if there’s no risk.

Connie Agius: Hi. My name’s Connie Agius. I’m here to see Malcolm Gunning.

Malcolm Gunning is the president of the Real Estate Institute of Australia.

He says the institute recognises the issue of money laundering in real estate, but the burden of further regulation must be shared with other professional facilitators.

Malcolm Gunning: We’ve been working with the Attorney General on this very Act to make sure that if it’s to be brought in or extended that it’s practical and it doesn’t really impede the way we transact property in Australia, which is very fair and an open arrangement. What we have to do is look at who is in the chain of consultants when it comes to transacting real estate. The real estate is at the forefront, but the advisors really are the lawyers and the accountants.

Connie Agius: But that is why they’re looking at a group of professional facilitators, so there are multiple triggers in the system and they’re all checking each other, so to speak. Is there not merit in that though?

Paul Drum: There is, but I suppose it’s the practical side. Now, as far as the sale of a property is concerned, because I’m assuming that the vendor or the seller has spoken to an accountant, taken advice from a lawyer, but when it comes to the purchases, it’s difficult, particularly from residential real estate where someone fronts up to an auction, registers, bids, signs a contract and buys. And that’s as simple as that. Currently, what we need to do is identify the person, and that’s showing a driver’s license.

Connie Agius: But isn’t that a reflection of how easy it can be to launder money? If it’s that easy?

Paul Drum: It probably is to a certain extent. Except if the regulations come in, do it when the contract is exchanged.

Connie Agius: Serena Lillywhite is the CEO of Transparency International, an NGO fighting against corruption. She says it’s taking too long to include professional facilitators in Australia’s anti-money laundering laws.

Serena Lillywhite: Transparency International released a report called ‘Doors Wide Open’, which looked at corruption in the real estate sector and it looks specifically at Canada, the United Kingdom, the USA and Australia. It actually assessed Australia as being the most attractive destination to launder money through the property market. So, this report really highlights the vulnerability of the Australian real estate market to launder money, and in our view there’s no time to waste to ensure that real estate agents, accountants and lawyers are covered by the same requirements to report suspicious transaction to Australia’s financial regulator.

Connie Agius: She says there have been allegations that politically-linked people are laundering money in Australia’s property market.

Serena Lillywhite: In recent years there’s been suggestions of money laundering through the property market by investors from a range of countries, which include Papua New Guinea, Malaysia, China, Russia and South Sudan who are all investing in real estate in our capital cities and on the Gold Coast.

Connie Agius: I put this to the president of the Real Estate Institute of Australia, Malcolm Gunning.

What measures are in place, as it stands, to stop that from happening?

Malcolm Gunning: None. None at this stage. It’s checked during that exchange settlement period. So if this happens, I would have thought there is quite strong advice given to those people who want to launder money, so they’ve got quite a sophisticated arrangement, whether it’s a group of companies linking all the way back to other parts of the world. So it’s fairly sophisticated. So, that, at this stage, it’s not picked up.

Connie Agius: So I go back to the other point, if that is part of the Anti-Money Laundering and Counter-Terrorism Financing Act, is it not another reason to include not only real estate agents but also lawyers, accountants and those involved in the entire process under the Act?

Malcolm Gunning: I agree with that, and the institute agrees with that, Connie, it’s just a matter of where the compliance starts and finishes.

Connie Agius: But even if professions like lawyers, accountants and real estate agents are brought under the legislation, there’s another issue. AUSTRAC is the federal agency responsible for analysing and communicating financial intelligence to partner agencies like the Australian Federal Police. When there’s a suspicious transaction, it’s reported to this agency. If the law is extended to professional facilitators, the agency’s workload will explode.

John Chevis says it’s already struggling to keep up.

John Chevis: We have incidents where we know single individuals have been reported multiple times to AUSTRAC and no action has been taken for many, many years. We have situations where if AUSTRAC were able to take action, and if banks were of a mind to perhaps restrict or refuse business to individuals that they know are criminals, then we would potentially have a much better and a much more efficient anti-money laundering system.

Connie Agius: John Chevis says the federal government needs to allocate more resources to AUSTRAC.

John Chevis: If that reporting obligation only turns into a report that goes to AUSTRAC and gets filed along with the 80,000 other reports made every year to AUSTRAC, filed in this case with an entity that is potentially overwhelmed by the volume of information it has and underfunded, then the law is effectively not working as it should.

Connie Agius: AUSTRAC declined Background Briefing‘s request for an interview, but in a statement pointed out that the government announced an extra $43 million in additional funding in December last year.

James Hoth Mai: Thank you very much. Yes, the SPLA is ready to defend, to meet any challenge that may come to us.

Connie Agius: That’s a former army chief from South Sudan. General James Hoth Mai was in charge of Sudan People’s Liberation Army from 2009 to 2014

James Hoth Mai: We are an army that is capable of meeting any challenges. We are 100% sure that we will defend the people of South Sudan and other marginalised areas.

Connie Agius: Debra LaPrevotte first noticed General Hoth Mai when she was investigating corruption in South Sudan. She’s a former FBI agent.

Debra LaPrevotte: The United States recovered $680 million that was stolen by Sani Abacha, the former president of Nigeria, while he was president, and similar cases, whether it’s the countries of the Arab Spring, Yemen, Tunisia, Egypt, Bangladesh.

Connie Agius: She retired in 2015 after two decades of service, and now works for The Sentry, an anti-corruption watchdog set up by George Clooney and activist John Prendergast.

Debra LaPrevotte: My job was to find out how did the money leave those other countries, what was the mechanism, what was the crime. Was it procurement fraud, was it embezzled, was it bribery and kickbacks, and then actually figure out how did the money leave the country, where did it go?

Connie Agius: As she followed the money trail from South Sudan, it led her to Australia.

Debra LaPrevotte: As we were investigating, we looked at how did the money leave South Sudan and where did it go? What we found is that a number of the political elites that were in power in the last 10 years were offshoring a great deal of wealth in Uganda, Kenya and Australia.

Connie Agius: Former agent LaPrevotte uncovered evidence that political elites invested their money in Australia’s real estate market. As you’ll remember, the real estate industry isn’t covered by Australia’s anti-money laundering laws. That means there’s no requirement to perform due diligence on house purchases when they involve what is called a ‘politically exposed person’. That’s someone who holds an important position in a government or international organisation, people like General Hoth Mai.

Debra LaPrevotte: I went to Australia and I talked to people and followed up on leads for properties, bank accounts, vehicles, any assets that we heard were being offshored and maintained in Australia.

Connie Agius: The Sentry released a report linking a property they found in Melbourne to General James Hoth Mai. It was purchased with funds transferred from overseas to the bank accounts of a company controlled by a relative in Australia. The General is said to have visited Australia in 2014 to inspect the property

Debra LaPrevotte: During our investigation we found out that he had purchased a property in Australia valued at $1.5 million, and that a number of his family were living in Australia and driving BMWs and luxury vehicles.

Connie Agius: That property sits on a one-acre block in the suburb of Narre Warren, 40 kilometres from Melbourne’s CBD. It has four spacious bedrooms, a state-of-the-art kitchen, large home theatre, sauna, and an outdoor pool that overlooks a reserve.

Debra LaPrevotte: We are not coming out and accusing people of money laundering, but what we’re saying is that we have probable cause to believe that based off their salary and based off their legitimate income and based off the investigation that we’re conducting, a number of people that are within President Kiir’s inner circle are living way beyond their means. And in some cases, just having unexplained wealth is grounds for an investigation.

Connie AgiusBackground Briefing tried to contact the General and his family, but we haven’t had any luck. We also contacted an associate of the family, but he says they’re no longer in touch.

Debra LaPrevotte: Our investigation in South Sudan indicated that the average high ranking general within South Sudan makes on average $45,000-$65,000 per year. Based off of that income, how is it that a former army officer and then later the chief of staff could afford a $1.5 million home?

Connie Agius: And that’s the million-dollar question.

The Criminal Assets Confiscation Taskforce, led by the Australian Federal Police, has commenced proceedings to restrain the property under the Proceeds of Crime Act. But could that have been avoided if the real estate industry had been covered by Australia’s anti-money laundering legislation? Let’s imagine for a moment that real estate did come under the federal law.

John Chevis: Through all of that, the real estate agent should then have been able to identify that that was a suspicious transaction because the source of wealth was unexplained

Connie Agius: John Chevis says this is because there’s a disparity between the General’s salary and the cost of the property.

John Chevis: Then both report that transaction as a suspicious matter to AUSTRAC, which is Australia’s anti-money laundering regulator, and also have senior management consulted about whether to continue with that transaction.

Connie Agius: Under the proposed new laws, the real estate agent would also need to trace where the money came from.

John Chevis: Those obligations come from a mix of the Anti-Money Laundering and Counter-Terrorism Financing Act and the anti-money laundering and counter-terrorism financing rules that Australia has in place currently, but real estate agents are not covered currently.

Connie Agius: Should they be?

John Chevis: In my opinion, yes they should. Having them covered would potentially, depending on how the laws were framed and how the processes around the laws were put in place, and by ‘processes’ we’ll be talking about the sorts of processes that AUSTRAC can undertake. If real estate agents were covered there would be a potential that those sorts of transactions conducted by the Sudanese general would be identified.

Connie Agius: The Financial Action Task Force is an international body that sets standards for combating money laundering and terrorist financing. It says the gap in Australia’s laws is a deficiency. It claims most professional facilitators don’t understand the money laundering risks, and don’t have the right measures in place.

Malcolm Gunning from the Real Estate Institute of Australia says it’s about education.

Malcolm Gunning: Real estate agents are not as well educated, their qualification is at best diploma. They’re not tertiary. Their level of understanding of law would not be as competent as the other consultants. And we’ve suggested to the attorney general, that if this does come in, what we need to do is put in place not just for the real estate agents, but also the lawyers and the accountants, a very strong education program.

Connie Agius: You might be wondering why you’re hearing the sound of a coffee machine in a money laundering story. Well, I really like coffee. But aside from that, cafes are cash intensive business, just like restaurants, gyms, mechanics and wineries.

The investigator we spoke to earlier from the New South Wales Crime Commission, says she’s seen a number of money laundering cases involving businesses like these.

Investigator: One of the reasons why cash intensive businesses are favoured is because you can hide additional cash flows within the business much more easily than you could in an organisation where the majority of your business is based on electronic payments.

Connie Agius: This is another gap in state and federal money laundering legislation. One recent case involves a man called Peter.

Investigator: Peter and his associates ran a cocaine importation network importing marketable quantities of cocaine from Los Angeles to Australia. He was also involved with criminal groups of a variety of descriptions and fraud offenses.

Connie Agius: He needed to launder the hundreds of thousands that he was making from drug trafficking. So he got his wife to set up a cafe.

Investigator: He paid for the fit-out costs in cash. An amount of this cash was actually structured into his wife’s business account and then used to purchase goods from locations that would not take large volumes of cash. He then stopped paying the cash into the accounts.

Connie Agius: The drug money is mixed with the company’s legitimate earnings to give the impression that not only is business good, but legal. Cash intensive businesses are difficult to spot unless the owner or an associate is linked to a crime like drug trafficking.

Investigator: What we then see is that Peter started funding the ongoing running costs of the business in cash. For example, they didn’t purchase coffee or chocolate or milk or anything like that. All of that seems to have been paid for in cash.

Connie Agius: Peter used the drug money to pay for the cafe’s expenses because he needed to flush the dirty money into the legitimate economy. A close look at the books also showed Peter was buying high end luxury goods through the business account. It’s another form of money laundering because these items retain value and the item can be traded between people.

Investigator: Peter’s wife had expensive tastes. So in addition to running the standard business expenses through her business accounts, she also purchased large quantities of goods from Burberry, Hermes, Chanel and Louis Vuitton. Peter and his wife had a one-week holiday in the year before he was arrested in which they spent $132,000. In addition if we exclude that particular trip from their expenditure, they spent at least $110,000 on designer goods in the space of two years.

Connie Agius: A key facet of organised crime is making the source of money look legitimate. To do that, Peter also moved his drug money through a mechanic shop, another cash intensive business. He used a technique known as round robin.

Investigator: Peter wanted to get a mortgage. Because Peter didn’t have an apparently licit source of income, he had to establish one.

Connie Agius: So he used his friend.

Investigator: His friend owned a company. We believe he said to his friend, ‘If I give you this much, will you put me on the books and pay me a salary?’ This is a salary that he declared his tax on, he paid his tax, he did everything that you’re supposed to do.

Connie Agius: Police conducted extensive physical and electronic surveillance. Peter went to the gym, had coffee with friends, attended numerous brothels, but didn’t go to work. However, the company’s books show he was paid more than $5,000 a month for being a manager.

Investigator: Why it’s a round robin is because the proceeds from crime that Peter was dealing with went to his friend. His friend probably took a small commission and paid that money back to Peter in the form of a salary.

Connie Agius: His goal now was to launder that cash in real estate. He used his fake salary to obtain a loan.

Investigator: He takes those payslips to a bank or to a financial institution and uses them as evidence to show that he has sufficient income to repay any loan that he seeks.

Connie Agius: He takes out a loan and what does he do?

Investigator: He purchases a house for a particular amount, he then knocks it down, he rebuilds it.

Connie Agius: All of this was paid in cash.

Investigator: He then sells the property for nearly three times what he paid for it. By the time the property is then sold and particularly in the manner in which he sold it, which I can’t discuss, he effectively laundered the funds.

Connie Agius: And the cycle of money laundering goes on and on.

Australia is often referred to as the lucky country, but it also makes for a very attractive place to launder money. This is why experts like Serena Lillywhite from Transparency International are calling for our laws to be strengthened, to protect our interests.

Serena Lillywhite: In our view, a really fundamental and important development would be for the Australian government to establish a public register of beneficial ownership, to ensure that real estate agents and others are subject to the anti-money laundering laws and also have a much better understanding of exactly who the real owners or the beneficiaries are of any deals that are being done. In other words, much more needs to be done in terms of knowing your customer.

Connie Agius: But Australia doesn’t live in a bubble; crime is transnational, it crosses borders and boundaries. Serena Lillywhite says money laundering will only be stopped if the solution is global.

Serena Lillywhite: We need to make sure that the standards and practices around the world are better harmonised, so that there can be more efficient cross-referencing of databases and the exchange of information. And we need to improve governance to actually stop money laundering.

Connie AgiusBackground Briefing‘s sound engineer this week is Mark Don, our sound producer is Leila Shunnar, production by Brendan King and our series producer Jess O’Callaghan.

Our executive producer is Alice Brennan. And I’m Connie Agius.


ReporterConnie AgiusProducerBrendan King / Jess O’CallaghanSupervising ProducerLeila ShunnarSound EngineerMark DonExecutive ProducerAlice Brennan




Laundered Chinese money gushes into Australian property

Sevag Chalabian, outside his Sydney home, declined to comment on the $11 million payment. Sam Mooy

THE GUSH is maintained by the exclusion of the Real Estate Gatekeepers from the Anti-Money Laundering Laws … that exemption happened in October 2018 …

HOW can the Morronson Government offer to open the housing market to First Home Buyers with a 5% deposit when they are competing against these foreign Money Laundering bidders flush with black money?

ALL Australian Home Owners and/or buyers are having to compete with these money launderers …. as our Real Estate becomes our Biggest EXPORT!

HOW good’s money laundering?

Laundered Chinese money gushes into Australian property

By Unconventional Economist in Australian Property

November 6, 2019 | 15 comments

Earlier this year, billionaire Huang Xiangmo’s permanent residency was cancelled for reasons including character grounds.

Today, The AFR has published a detailed investigative report on how Huang Xiangmo laundered money through Australian real estate to buy political influence:

Huang Xiangmo, the Chinese billionaire at the centre of a NSW corruption inquiry and tax office investigation, used a Sydney property deal to funnel $11 million to a notorious political fixer…

The money was transferred just a month after it became public that ASIO had warned the major political parties about accepting donations from Mr Huang and followed a year of intense scrutiny around his efforts to ensure Canberra took a more favourable line towards Beijing…

“On the surface it has many of the hallmarks of money laundering,” [Mr Fehon, the forensic investigator from McGrathNicol] said…

This follow’s Monday’s AFR report on a large money laundering racket by Chinese:

A Sydney real estate agent has admitted the ultimate buyer of four trophy homes was not a 32-year-old Chinese-born Australian, Zhang Bo, as shown on the title deeds…

Mr Zhang owns six properties in Sydney’s Mosman worth $37 million, but lives in none of them… Only one of the six houses held in his name appeared to be permanently occupied

The agent who sold four of these harbourside houses, Richard Simeon, confirmed all were bought by different people, even though three of them are held through one company and all are linked to Mr Zhang…

*Five of the six properties were settled without the need for a mortgage…

When asked on Sunday to provide context around his earlier comments, Mr Simeon said he had sold a huge number of properties to Chinese families in recent years. “I don’t know which people they are,” he said before hanging up once again.

Remember, the 2015 Mutual Evaluation report from the Financial Action Taskforce (FATF) stated that Australian property was a prime destination for Chinese laundered funds, and urged Australia to bring real estate gatekeepers within the anti-money laundering (AML) regulatory net:

Australia remains at significant risk of an inflow of illicit funds from persons in foreign countries who find Australia a suitable place to hold and invest funds, including real estate…

*China; Hong Kong, China; Macao, China; Singapore and the United Arab Emirates were seen as major source, destination, and/or transit jurisdictions 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. China and other countries within the Asia Pacific region were also seen as likely sources of corruption proceeds that are laundered in Australia…

AML/CTF policies need to better address ML risks associated with… laundering in the real estate sector, particularly through bringing all DNFBPs within the AML/CTF regime.

Indeed, Australia has the weakest real estate AML rules in the world, therefore, has left the door wide open for illegal money to gush through Australian homes:

*This corrupt system is not only inflating the cost of housing, but also poisoning our political institutions as well.




Toothless ATO exposed as illegal foreign property buyers run riot

A map of the top postcodes.

WHO do you reckon made the ATO toothless?

HAVE you heard that the Morrison Government exempted (excluded, cleared, spared) the Real Estate Gatekeepers from the Second Tranche of the Anti-Money Laundering Laws in October 2018?

SHARE this with all your family, friends, social media contacts …

More information about this threat to the Australian Society and our Economy can be found by SEARCH of CAAN’s Website:

Toothless ATO exposed as illegal foreign property buyers run riot

By Unconventional Economist in Australian Property

November 4, 2019 | 11 comments

Back in December, a parliamentary committee into Managing Compliance with Foreign Investment Obligations for Residential Real Estate lambasted the Australian Tax Office (ATO) for failing miserably to enforce the rules precluding foreign nationals from purchasing established homes:

Despite at least 877 breaches of the country’s foreign ownership laws being uncovered in Victoria, the Australian Taxation Office has failed to land a single criminal prosecution since tough new laws came into effect more than three years ago…

Labor MP Julian Hill, the deputy chairman of the Public Accounts and Audits Committee, said it was “astonishing that there had been no prosecutions”…

fortnight earlier, the parliamentary committee also revealed that not one intermediary facilitating illegal foreign sales (e.g. real estate agents, developers or conveyancers) had been prosecuted by the ATO.

Worse, in the case of the 316 forced disposals, the illegal foreign investors were allowed to keep the capital gains on the properties.

So, there was zero downside from breaching the laws.

Today, a Sydney real estate agent has been exposed for selling several trophy homes for cash to anonymous Chinese buyers:

A Sydney real estate agent has admitted the ultimate buyer of four trophy homes was not a 32-year-old Chinese-born Australian, Zhang Bo, as shown on the title deeds…

Mr Zhang owns six properties in Sydney’s Mosman worth $37 million, but lives in none of them… Only one of the six houses held in his name appeared to be permanently occupied…

The agent who sold four of these harbourside houses, Richard Simeon, confirmed all were bought by different people, even though three of them are held through one company and all are linked to Mr Zhang…

Five of the six properties were settled without the need for a mortgage

When asked on Sunday to provide context around his earlier comments, Mr Simeon said he had sold a huge number of properties to Chinese families in recent years. “I don’t know which people they are,” he said before hanging up once again.

There are two key problems here.

First, Australia has refused to implement global anti-money laundering (AML) rules pertaining to real estate gate keepers (e.g. real estate agents, accountants, conveyancers, etc).

This has left Australia with the weakest property AML rules in the world, and has opened the way for illegal money to gush through Australian real estate:

Second, despite having the ability to financially penalise illegal investment in established housing by foreign nationals, as well as third parties that knowingly assist foreigners to illegally purchase Australian homes, the ATO has failed to prosecute.

It is astonishing that the ATO can vigorously pursue small businesses and individuals for minor avoidance or errors in tax returns, but turn a blind eye to illegal foreign buyers scooping-up Australian homes, along with their enabling real estate agents.

When combined with its soft touch on AML rules, it is clear the Australian Government has little interest in actually policing illegal foreign buyers of real estate, and is complicit with the dirty money flooding into Australia’s homes and robbing young Australians of a housing future.




Imagine what the AFP would find with proper money laundering laws?

Imagine what the AFP would find with proper money laundering laws?

By Unconventional Economist in Australian Property

November 1, 2019 | 7 comments

The Australian Federal Police (AFP) has uncovered a cache of Australian property laundered by Chinese funds after receiving a request from the Chinese Government:

A mansion in Melbourne’s east, newly constructed units and more than 3,000 acres of Tasmanian farmland are among $17.3 million in property seized by authorities as part of an investigation into alleged money laundering by Chinese nationals.

The Australian Federal Police (AFP) this morning said it had seized six properties in Melbourne’s east — including a new mansion in Mont Albert, three units and a townhouse in Box Hill North and a commercial property in Blackburn — and more than 3,000 acres of farmland at Musselroe Bay on Tasmania’s north-east coast on Tuesday.

AFP Detective Superintendent Kate Ferry said the operation followed a 2017 request from the Chinese Ministry of Public Security for help to identify two Chinese nationals suspected of laundering proceeds of crime in Australia.

“Chinese authorities believe the money was raised in China through real estate and bank loan fraud,” Detective Superintendent Ferry said.

“What the AFP alleges is that the two Chinese nationals moved about $23 million of alleged proceeds of crime from China since late 2012.

The AFP further alleged the proceeds of crime were used to purchase or develop the properties in Melbourne and Tasmania.

Now imagine what the AFP and the Australian Transaction Reports and Analysis Centre (AUSTRAC) would find if Australia had proper anti-money laundering (AML) laws?

Remember, 13 years ago the Australian Government agreed to implement global “Tranche 2” AML rules for real estate gatekeepers – encompassing real estate agents, accountants and lawyers – in a bid to prevent illegal funds from flowing into property.

However, these reforms have been continually postponed amid fierce lobbying by shadowy “vested interests” negatively impacted by the reforms. This has led to Australia having the weakest AML rules in the world pertaining to property:

Australia’s intransigence comes despite regular reports suggesting that money laundering through Australian property is rife.

For example 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 2017, FATF also placed Australia on a watch list for failing to comply with money laundering and terrorism financing reforms.

Transparency International similarly ranked Australia as having the weakest anti-money laundering (AML) laws in the Anglosphere, failing all 10 priority areas.

Whereas the OECD Working Group on Bribery in International Business Transactions claimed the entire ecosystem for the buying and selling property using cross-border fund flows is beyond the reach of Australian regulators.

It’s a sad state of affairs when the Chinese Government does a better job policing Australian money laundering than our own government.


Calls for CROWN CASINO Inquiry after leaked video of BRICKS OF CASH in JUNKET ROOM

ARE THE BRICKS OF $50 AND $100 NOTES laundered through CROWN CASINO(S) laundered in Australian Real Estate … Cough … cough …



-with our housing; businesses, mines, power, transport, healthcare, utilities … the list goes on;

-our dairy farms, cattle stations, food crops, grain growing, wine growing, WATER… ffs! … FOREIGN OWNED!!


HOW is it good enough that the Federal Government has referred these allegations to the Australian Commission for Law Enforcement Integrity (ACLEI)

WHY NOT A ROYAL COMMISSION? WHY was Wilkie voted down by both Labor and the Coalition if it were not for Political Donations?

INDEED why not a stop to Political Donations and Public Funding of Elections instead?

AND Labor had an AML Policy before the May 2019 Election … it SHOULD be brought back!!

Shadow treasurer, Chris Bowen, committed Labor to implementing the second tranche of AML rules and criticised the Coalition’s lack of sufficient action on the issue, as well as its decision to reduce funding for the Australian Securities & Investments Commission (ASIC) and the Australian Federal Police.

CALLS for CROWN CASINO Inquiry after leaked video of BRICKS OF CASH in JUNKET ROOM

Whistleblower alleges gamblers able to launder millions of dollars through casino with impunity

Ben Doherty @bendohertycorro

Tue 15 Oct 2019 

Video 0:53 Whistleblower alleges Crown casino being used to launder money – video

Video footage showing dozens of “bricks” of $50 and $100 notes – hundreds of thousands of dollars worth – being casually handed over from a shopping bag in a high-rollers’ room at Melbourne’s Crown Casino have sparked renewed calls for a royal commission into alleged criminality at the casino.

*The footage, shot on Crown’s own security cameras, shows an unknown man handing over hundreds of thousands of dollars in Australian currency inside the Suncity junket room at Crown.

*He pulls the money, wrapped in elastic bands, from a freezer shopping bag, and waits, and appears to speak with friends and casino staff while it is exchanged for high-value casino chips.

*Suncity is a Macau-based gambling tour operator that flies in wealthy Chinese gamblers to Australian casinos. It has a dedicated gaming room at Crown.

The footage was leaked by three Victorian state gambling inspectors turned whistleblowers and released publicly by the independent member for Clark, Andrew Wilkie, who has repeatedly called for a royal commission into the casino.

“People probably think that everything that goes on is squeaky clean … ,” one of the whistleblowers says on the footage, his voice obscured. “But in fact it’s fucked.

“You see people coming in with bags of money, cash, it’s a junkets room, it’s specially designed for people that come in from overseas, the Suncity room at Crown.”

The Suncity room faced closure by the Victorian Commission for Gaming and Liquor Regulation in 2017 over alleged ties to organised crime, but remains open. The whistleblower said high-rollers in the casino were never challenged by casino staff.

“Anybody can walk in with any amount of money and launder it … Nobody really cares.

“They get to do what they want. They can bring anybody into the casino, they can bring in as much money as they like, nothing is ever said.”

The whistleblower said a reduced presence of Victoria police inside the casino meant suspected criminals were able to allegedly launder money with impunity.

Wilkie has called for a royal commission into Crown, arguing the footage follows earlier allegations of money laundering, machine tampering, drug running and domestic violence at the casino. Crown has also been accused of breaking immigration laws to illegally bring people into Australia to gamble.

“For many years we’ve been told of shocking crimes occurring at Crown and now we have new footage that supports these claims,” Wilkie said.

“The inspectors who have provided these videos say countless millions of dollars are regularly laundered inside Crown. Crown can no longer claim this isn’t happening. This leaked version was filmed using Crown’s own security cameras.”

 Read more

*Wilkie said Crown’s alleged misconduct could only occur, and continue to occur, if the casino was confident it had political cover and if numerous agencies fail to do their jobs.

*“This crisis at Crown is multinational, multi-jurisdictional and multi-agency. This is a demonstration of catastrophic failure on the part of the major parties, the Victorian Commission for Gambling and Liquor Regulation, Victoria police, the Australian federal police, Border Force and the Australian Transaction Reports and Analysis Centre (Austrac).”

*Wilkie attempted to establish a royal commission into Crown in July this year but was voted down by both Labor and the Coalition. The motion put to parliament Tuesday was also defeated in the lower house.

The footage shows a man, whose face is obscured, carrying a shopping freezer bag, unloading “bricks” of $50 and $100 notes, bound together with elastic bands. A casino employee is shown to accept the money and it is counted by machine.

The cashier makes calculations on a calculator and is shown to give the man a series of high-value casino chips. The man leans casually on the counter and appears to talk to friends and casino staff while the transaction is processed.

At points in the footage, the security camera swings around to reveal other transactions occurring and zooms in to focus on money and chips on the counter.

“It’s so much money, where would it come from?” the whistleblower said. “And in an Aldi bag; if it was legit, why wasn’t it in the bank?

The whistleblower claims that the same gambler returned to the same room a number of weeks later to deposit even more money.

*The whistleblower alleges that cash deposited with the casino in sums as large as these is either put into a bank account or exchanged for large-value chips, which are later cashed in: “Therefore the money is cleaned up.*

“It’s happening every week. There’s been reports put in on it, but it’s still going on.”

Wilkie also revealed an interview with a Crown casino limousine driver who alleged high-rollers are flown into Australia on private jets, bypassing customs checks and driven straight to the casino. High-rollers are allegedly able to access illegal drugs, offered prostitutes and, essentially, anything else they ask for.

“Whatever gets asked for, the answer is ‘yes’. No questions asked. There is no ‘no’ at Crown. Whatever a VIP asks for, you’re expected to do it. Legal, illegal. It doesn’t matter.”

Crown, the driver alleges, is willing to cover up illegal activity because it is good for business.

“They don’t worry about crime. They want people to come in, drink too much, take whatever drugs they want and lose their money.”

A spokesman for Crown Casino said there was no basis to the allegations, and said it had a strong history of compliance with its legal and regulatory requirements.

“Crown has a comprehensive anti-money laundering (AML) and counter-terrorism financing (CTF) program, which has been and continues to be subject to ongoing regulatory supervision by Austrac.

“Crown provides a range of information in a proactive manner in accordance with its regulatory obligations, including the reporting of all transactions over $10,000, international funds transfer instructions and the reporting of suspicious transactions of any value.

Last year, the sixth review of Crown’s licence recommended that Crown undertake “a robust review (with external assistance)” of relevant controls to ensure anti-money laundering risks were addressed.

The casino spokesman said Crown would continue to work with the Victorian Commission for Gambling and Liquor Regulation in responding to the recommendations from the sixth review.

The attorney general Christian Porter said the federal government had referred allegations involving Crown and federal agencies to the Australian Commission for Law Enforcement Integrity.

*Porter said ACLEI was the most suitable agency for any investigation, with powers similar to those of a royal commission, including the ability to hold hearings and compel evidence.

Porter said ACLEI will also make other authorities aware if it uncovers illegal activities unrelated to federal agencies during its investigation.

“It must give the evidence to the relevant state or federal police agency, or prosecutorial authority,” he said.

Australian Associated Press contributed to this report






CROWN CASINO WHISTLEBLOWER Alleges Gambling Giant skirting Money-Laundering Laws

Need anymore proof?


It’s bleeding obvious who is subverting virtually every aspect of Australian civil laws and standards …


Crown Casino whistleblower alleges gambling giant skirting money-laundering laws

By state political reporter Richard Willingham

15 OCTOBER 2019

VIDEO: CCTV shows high rollers handing over cash (ABC News)RELATED STORY: Suburban money dealers targeted by AUSTRAC for funding criminals and human traffickers

In a private room in Melbourne’s Crown Casino, a man wearing tracksuit pants and runners approaches a counter with a rectangular blue cooler bag.

Key points:

  • The CCTV footage shows a punter exchanging hundreds of thousands of dollars for gambling chips
  • The whistleblower claims foreign high rollers avoid customs inspections and exchange a huge amount of cash with no trace
  • Crown Casino denied the allegations, saying it had a strong history of compliance with its obligations

Calmly, he unzips the bag to reveal its contents: dozens of thick, neatly stacked bundles of Australian $50 and $100 notes.

*The bricks of cash are casually exchanged for gaming chips for the punter, who is inside a special junket room at the Southbank casino for the SunCity group.

*His bag contains hundreds of thousands of dollars.

*Crown Casino is obliged to report all transactions over $10,000 to the country’s anti-money laundering authority, AUSTRAC.

These types of transactions are not uncommon, as CCTV footage from a whistleblower obtained by the ABC show.

But leaked reports from the Victorian Gambling watchdog in 2017 detailed concerns from inspectors about these types of transactions and the lack of record-keeping by the gambling giant.

One whistleblower says foreign high-rollers often fly to Australia on private jets, avoiding customs inspections, and exchanging huge amounts of cash with no trace.

“I think this is just the tip of the iceberg about what is going on at Crown. I think Crown are a law unto themselves,” the whistleblower said.

Money is coming in illegally.

“You don’t know where [the cash] has come from, you don’t know if it’s the result of drug trafficking, of prostitution or child exploitation. You just don’t know.”

CCTV footage showing a man exchanging cash for gambling chips.

PHOTO: The CCTV footage shows a man exchanging cash for gambling chips. (ABC News)

‘No basis for allegations’: Crown

*SunCity is a Macau-based junket operator that flies in wealthy Chinese gamblers to casinos in Australia.

It has a dedicated gaming room within Crown’s Melbourne casino.

Inspectors for the Victorian Commission for Gambling and Liquor Regulation (VCGLR) raised serious concerns in reports about these transactions in the junket operator rooms because there was “a lack of recording of such transactions within Crown systems”.

It also says that staff on the floor, when questioned about the large transactions, replied that it was a matter between the junket operator and their punters.

A Crown spokesperson said there was no basis to these allegations.

The word 'Crown' is spelled out in large white letters on the side of a building.

PHOTO: Crown said the business had a “strong history” of compliance with its obligations. (ABC News)

“Crown has a comprehensive Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) program, which has been and continues to be subject to ongoing regulatory supervision by AUSTRAC,” the spokesperson said.

“Crown provides a range of information in a proactive manner in accordance with its regulatory obligations, including the reporting of all transactions over $10,000, international funds transfer instructions and the reporting of suspicious transactions of any value.

“Crown has a strong history of compliance with and commitment to its AML/CTF obligations and we work closely with law enforcement and regulatory agencies in support of that commitment.”

*The casino is also limited from disclosing which agencies it shares information with.

The commission reports also described how in one case, the VCGLR instructed Crown to cease business with a junket operator, but it was rejected.

The VCGLR said as one of many regulators, it worked with other agencies including Victoria Police and AUSTRAC.

“If the VCGLR becomes aware of matters that fall outside of its remit, such as money laundering and criminal activity, the VCGLR has systems in place to ensure that these matters are referred to the relevant agency in a timely matter,” a spokeswoman said.

She encouraged anyone with information about alleged breaches by the casino to make a complaint.

A tough year

An exterior shot of Crown Casino in Melbourne.

PHOTO: The whistleblower has taken his concerns to independent MP Andrew Wilkie. (ABC News: Jane Cowan)

This year, Crown Casino was in the spotlight following an expose in the Nine newspapers alleging Crown was doing business with several junket operators who had links to Asian crime gangs.

AUSTRAC and the Australian Criminal Intelligence Commission are currently examining risks in the casinos.

Crown has denied any wrongdoing and hit out at Nine’s reporting, labelling it a “deceitful campaign”.

Last year, the sixth review of Crown’s licence recommended that Crown undertake “a robust review (with external assistance)” of relevant controls to ensure that anti-money laundering risks are addressed.

*The whistleblower has also taken his concerns to federal independent MP Andrew Wilkie, who will attempt to set up a royal commission into the matter.

*“There’s now huge questions for politicians to answer because there’s no way Crown would be being involved in criminal activity on that scale unless it felt it had top cover,” Mr Wilkie said.

Any reasonable person looking at that footage would straight away draw the conclusion that there was money laundering going on and that Crown must be somehow covering it up and that at least the Victorian gambling regulator is not looking into this properly.”

In 2017, the ABC reported allegations that Crown Casino was not complying with requirements to report major transactions to AUSTRAC.

Other allegations included that the casino had tampered with poker machine buttons illegally.

It denied all charges but it was later fined for removing buttons from a handful of its poker machines without approval.

Victoria’s auditor-general in 2017 also attacked the VCGLR for not paying “sufficient attention” to key risks, including money laundering.


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GOVT FLIP-FLOPS again on MONEY LAUNDERING, Counter-Terror Finance Laws: October 2018

The Government had aimed to pass laws to cover these sectors by 2018, following a highly critical report from the international Financial Action Task Force (FATF)

ACIC estimates organised crime costs the Australian community A$36 billion each year

most common professions exploited by organised crime include lawyers, accountants, financial and tax advisers, registered migration agents, stockbrokers, real estate agents and customs brokers

-*the FATF will be doing a follow-up evaluation on Australia in mid-2020.*

-failing to crack down on illicit funds flows incl. ‘hot money’ from China has distorted our domestic economy; added to our housing affordability problem

unregulated nature of Australian real estate has made it attractive to park criminal funds with no reliable data on the extent to which this is happening.

-as such, the government lacks a clear idea of the impact the “tranche 2” laws will have on a softening property market

Government flip-flops again on money-laundering, counter-terror finance laws

by Nathan Lynch — 17 October 2018 — FinanceGovernment

Government flip-flops again on money-laundering, counter-terror finance laws

Money laundering (Photo by Fancycrave on Unsplash)

Ten years, no action. Laws designed to protect Australians from criminal abuse – no action. No action because of weak government and strong lobbying from real estate, lawyers and accountants. 

Nathan Lynch examines the consequences, such as *housing affordability.

*THE AUSTRALIAN government has again reneged on its international commitment to pass new money laundering laws to protect the legal, accounting, real estate and high-value goods sectors from organised crime and terrorism financing.

The government had aimed to pass laws to cover these sectors by 2018, following a highly critical report from the international Financial Action Task Force (FATF).

The report said Australia had fallen well behind in its international obligations to protect the country’s economy from criminal abuse.

*New Zealand took evasive action following the Panama Papers and will have introduced its “Phase 2” AML/CFT laws by the end of the year. Australia has been promising to introduce comprehensive “Tranche 2” laws, with support from both of the major political parties, since 2006.

*The Australian Criminal Intelligence Commission (ACIC) estimates organised crime costs the Australian community A$36 billion each year. It said in a declassified report last year that professional facilitators were increasingly being used to launder the proceeds of crime.

*“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, the report said.

*AML 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.

*The government had committed to passing a raft of money laundering laws by the end of this year. Documents released by the Department of Home Affairs under an FOI request show that it will instead pass “phase 1.5” laws as a transitional step toward implementing the full suite of proposals from the 2016 statutory review.

The “phase 1.5” legislation is expected to be introduced to parliament in the next sittings, which run through to October 25. The reforms have been drafted jointly by Home Affairs, the Attorney-General’s Department (AGD) and the Australian Transaction Reports and Analysis Centre (AUSTRAC) following extensive consultation with industry.

statutory review of Australia’s AML/CTF regime identified 84 areas where urgent reform was needed.

At the time, the government committed to tackling the legislative changes in two phases. The first phase would cover the more immediate or simpler reforms; the second phase would cover the more complex reforms that would require more consultation. This second phase included the “streamlining and simplification” of the regime and was considered to be a precursor to the “Tranche 2” laws to capture lawyers, accountants and real estate agents.

In response to an article on Thomson Reuters Regulatory Intelligence, the Department of Home Affairs confirmed that the legislation will be tabled in parliament “subject to the parliamentary schedule”.

“The government is currently preparing a bill to amend the Anti‑Money Laundering and Counter-Terrorism Financing Act 2006,” a spokesman said. “The bill will implement further recommendations of the 2016 statutory review of Australia’s AML/CTF regime.”

Transitional reforms

The reforms in the next tranche of legislation are expected to include amendments to the “tipping-off” rules and other secrecy provisions to allow more sharing of information between the government and private sector. These reforms are regarded as critical in the fight against serious organised crime.

At present, if a bank closes the accounts of a terrorist financier it generally issues a bank cheque. The bank can see where these funds are deposited but is not able to tell the recipient bank for fear of breaching the criminal “tipping off” laws.

The laws will also consolidate and simplify Australia’s existing reporting requirements for the cross‑border movement of cash and other items”, the spokesman said.

This will help law enforcement agents at airports and other borders to identify cash smuggling and the muling of other financial instruments. Organised criminals know about these loopholes and have been exploiting them for years. For instance, incoming and outgoing travellers must actively declare cash of A$10,000 or more. If it is in another form, such as a traveller’s cheque, they only have to declare it in response to a request from law enforcement.

The law reforms will expand the ability of reporting entities to rely on customer identification procedures performed by a third party in certain circumstances.

In addition, they will clarify aspects of Australia’s money laundering offences. These issues are understood to have arisen during the recent litigation against Tabcorp and Commonwealth Bank.

The phase 1.5 laws will also “align correspondent banking requirements with international best practice”, the spokesman said.

Rachel Waldren

Rachel Waldren, partner at Murray Waldren Consulting, said the proposed reforms were a step in the right direction but AML practitioners would be disappointed by the absence of DNFBPs from the reforms.

“Although it isn’t quite the ‘tranche 2’ that industry was expecting, there are some significant steps that have been outlined. It will be interesting to see how they play out in practice,” she said.

“The government appears to be putting a number of steps in place in advance of extending the legislation to new sectors.”

Tranche warfare

The full suite of “phase 2” reforms have now been pushed back to 2019 or even 2020. This phase will include an extensive simplification, streamlining and enhancement of the AML/CTF regime. The long-awaited “Tranche 2” legislation will not be passed before these reforms are completed.

The internal report from the Department of Home Affairs, which was released under a Freedom of Information (FoI) request, said the “tranche 1.5” laws had originally

scheduled to be tabled in parliament during the autumn sittings.

“The proposed legislative reform package will address matters which were initially to be included in phase 1 but, because of the complexity, deferred. The reforms will include the holistic revision of Part 11 — Secrecy and access [of the AML/CTF Act], which governs the use and dissemination of AUSTRAC financial intelligence; opportunities to strengthen and streamline the registration of remittance providers; enhance the operation of customer due diligence obligations (reliance); and enhance and simplify the cross-border reporting regime,” the FOI report stated.

Loose ends

The Attorney General’s Department (AGD) published a “project plan” in late 2016, which aimed to have all the major amendments to the AML/CTF Act implemented by the end of 2018.

That project plan is no longer available on the AGD website (but Wayback Machine provided the copy below). A review of the page’s archive history shows that it was deleted some time between March and June this year — well after the creation of the Home Affairs agency.

Neal Jeans

Neil Jeans, a financial crime consultant with Initialism, said there had been significant delays in addressing the findings of the FATF mutual evaluation and the statutory review.

*Despite these delays, Jeans said the staggered approach made sense from a regulatory perspective. Once the “legislative housekeeping” has taken place, extending the AML/CTF regime to gatekeeper professions would be a relatively simple process, he said.

The ‘phase 1.5’ laws are really designed to address the technical changes required by the FATF and the statutory review before the introduction of tranche 2. Once that has happened it’s a lot easier to simply add new designated activities to the Act to capture the DNFBPs, he said.

*Jeans said Australia had a hard deadline for the reforms as the FATF would be doing a follow-up evaluation on Australia in mid-2020.*

*“The government can’t afford to let things slip any further if it’s serious about addressing the weaknesses in Australia’s AML/CTF regime and meeting its international commitments,” he said.

*“If Australia hasn’t moved on DNFBPs by then, there could be real consequences.”

*Waldren said the delays and messaging to the industry suggested that Tranche 2 may be pushed back beyond the FATF visit in 2020.

“The lack of urgency suggests to me that this may not be before the FATF review,” she said.

Closing the gaps 

*Anti-money laundering industry experts have warned that failing to crack down on illicit funds flows has created a number of distortions in the domestic economy. This has added significantly to Australia’s housing affordability problem.*

Thomson Reuters NZ@TR_NZ

Thomson Reuters and AML/CFT expert Gary Hughes have partnered to create a comprehensive guide for complying with Phase 2 of the regime. … …NZ Law Society@nzlawsocietyThe AML/CFT regulatory regime for lawyers and conveyancers takes effect in just 10 days,-amlcft-regulation-for-lawyers-and-conveyancers-from-1-july …19:45 AM – Jun 22, 2018Twitter Ads info and privacySee Thomson Reuters NZ’s other Tweets

*The latest delays to the AML regime are also likely to become a problem for Australian businesses.

New Zealand companies faced extra scrutiny and additional costs when doing business overseas after extensive money laundering through their foreign trusts was exposed. A classified study found the foreign trusts regime was bringing in between NZ$30 million and NZ$40 million to gatekeeper professions each year. The research found that the costs to businesses, including the need to undergo enhanced due diligence when transacting abroad, greatly exceeded that revenue.*

After that research, the New Zealand government took evasive action last year to close down these loopholes. The law has already been extended to lawyers and accountants. Real estate agents will face regulation from January 1, 2019.

*The UK, Canada, Singapore, Hong Kong and Malaysia have all passed laws to capture DNFBPs.

DNFBPs around the world

Parking criminal funds 

*The unregulated nature of Australian real estate has made it attractive to park criminal funds but there is no reliable data on the extent to which this is happening. As such, the government lacks a clear idea of the impact the “tranche 2” laws will have on a softening property market.

*The statutory review of Australia’s AML/CTF regime identified 84 areas where urgent reform was needed. At the time, the government committed to tackling the legislative changes in two phases.

The first phase would cover the more immediate or simpler reforms; the second phase would cover the more complex reforms that would require more consultation. This second phase included the “streamlining and simplification” of the regime and was considered to be a precursor to the “tranche 2” laws to capture lawyers, accountants and real estate agents.

A Home Affairs spokesman said: “The government is considering options to extend AML/CTF regulation to ‘tranche 2’ entities, such as lawyers, accountants and real estate agents.”

Banking on change

*The banking sector has been pushing the government to move ahead with AML/CTF laws for DNFBPs as a matter of priority. The sector has argued that the failure to extend the regime to gatekeepers has undermined the regime’s effectiveness and placed an undue burden on banks.*

Aidan O’Shaughnessy

Aidan O’Shaughnessy, head of policy at the Australian Banking Association, told a parliamentary review that the government needed to focus on implementing all of the 84 recommendations from the statutory review.

“If you want to launder money, and there is an A$36 billion cost to the economy each year, you need to look at the professional facilitators,” he said.

*O’Shaughnessy said this failure to act was causing real harm in the Australian community.

“It is vital that Australia closes the gaps in our AML/CTF regime. These gaps were identified by the FATF. Banks are just some of the 14,000 AUSTRAC reporting entities that play a role in detecting, deterring and disrupting financial crime and threats that affect Australia’s financial system. The ABA and members will continue to work with AUSTRAC, the AGD and other stakeholders to enhance and protect the integrity of Australia’s financial system,” he said.

“If phase 1.5 and phase 2 … [aren’t] implemented, the gate is wide open.”


Nathan Lynch

Nathan Lynch is the Asia-Pacific Bureau Chief, Financial Crime and Risk at Thomson Reuters.

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Government flip-flops again on money-laundering, counter-terror finance laws