Booming housing market increasingly a target for drug money launderers, say police

The government is considering regulations to force real estate agents to do more to authenticate funds used to buy properties. Photo: Robert Shakespeare Justice Minister Michael Keenan Photo: Brendan Esposito

The rampant real estate market has presented a golden opportunity for criminals to launder millions of dollars in drug money in Australia over the past 12 months, according to police.

Evidence of criminal cash entering the already inflated local housing market has emerged as the federal government considers imposing tighter regulations to prevent properties being bought with the proceeds of crime.

New measures being weighed up by Justice Minister Michael Keenan and the anti-money laundering agency Austrac are expected to include requirements on real estate agents to do more to authenticate the source of funds being used to buy properties and the identities of buyers.

The real estate industry is expected to push back at any move to put the onus of proof on agents, with the Real Estate Institute of NSW warning on Friday that the government – which it claims has not yet consulted with it – would be creating a “legal minefield”.

Gem dealers are also in the sights of authorities, amid concern that corrupt money, particularly from China, is being laundered through the purchase of rare pink diamonds in Australia.

A report by the NSW Crime Commission found criminal gangs have exploited the property market as surging prices increased demand for funds into Australia.

“This has provided greater opportunities for organised crime syndicates to launder millions of dollars,” the Commission found.

The flow of money out of Australia to settle drug transactions and the use of so-called “remittance agents”, who facilitate the movements, have entangled legitimate offshore investors in money laundering schemes.

The Commission used the example of an “individual of significant wealth” based overseas who recently bought into the Sydney real estate market.

The man transferred his own funds outside the mainstream banking sector to take advantage of better exchange rates offered by remittance agents. But the funds stayed in his country and a deal brokered between agents meant the money that purchased his new home was drug money made in Australia but used to settle a debt overseas.

“The Commission suspected that the funds deposited into the Australian bank accounts were proceeds of drug sales. The deposits were characterised as cash, with most below the reporting limit, and were made by various individuals within Australia. The owner of the funds was implicated unwittingly in money laundering through the transfer of funds for a legitimate property transaction in Australia,” the Commission found.

“It is likely that this is not an isolated incident and that the transfer of legitimate off-shore funds to Australia presents a very low risk opportunity for organised crime to launder drug proceeds within Australia.”

Federal authorities are considering extending anti-money laundering requirements that already cover banking, remittance and gaming to real estate agents, lawyers, accountants and precious stones dealers.

Consideration of stricter rules follows a scathing report by the Paris-based Financial Action Task Force last year as the money pouring into Australian property and gems from China set new records.

Under current rules, foreigners can plough millions in cash into new homes and gems without having to identify themselves or the source of their funds.

The Coalition has sought to crack down on buyers who break foreign investment rules in the purchase of existing houses, with Treasurer Scott Morrison announcing another eight forced sales, bringing to 27 the number of homes to be sold since the Abbott government announced new restrictions.

REINSW president John Cunningham said the industry is aware of the money laundering problem but he said any new red tape should be imposed at the legal stage of the sale.

“Putting the onus on us to be responsible for checking identification and the source of funds is barking up the wrong tree because foremost we are responsible to the seller to sell a home when instructed,” he said.

A spokesman for Mr Keenan said $20 million had been given to Austrac to establish a new national intelligence team and the Attorney-General’s Department is finalising the review of the Anti-Money Laundering and Counter-Terrorism Financing Act.

“The review process involved extensive consultation with industry and government and included discussions about the potential extension of the AML/CTF Act to services that pose high money laundering and terrorism risks, including services provided by precious stone dealers, lawyers, accountants and real estate agents,” she said.

“The AML/CTF regime has always been a critical tool to disrupt criminal activity, providing the vital framework to allow our agencies to follow the money trail to crack down on serious and organised crime groups and those seeking to fund terrorist activity.”

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