Criminal gangs using dirty cash to buy homes will find it harder from July 1 because the real estate industry and others have been drafted into the fight against money laundering.
So-called Tranche 2 laws mean real estate agents, conveyancers, lawyers, accountants, gem dealers and precious metal brokers must verify their customers in a similar way that banks and casinos do, bringing Australia in line with the rest of the world.
They’ll need to know who the customers are and where the money is coming from.
“We’re looking forward to the laws making it much harder for organised crime gangs and criminals to exploit our economy, to launder money and also fund terrorism,” said Clancy Moore of Transparency International Australia, which has been pushing for the laws for more than a decade.
Clancy Moore says lawyers and agents will have to report “when they think something’s a bit fishy” in a transaction. (Four Corners: Craig Hansen)
While the start of the laws is not expected to substantially lower the overall price of property in Australia, it will have an impact.
“When a bunch of Russian crooks rock up to an auction in the Gold Coast with a bag of money and buy the house, that is obviously going to push prices up,”
Mr Moore said.
More than $1 billion a year washing through market
Money laundering describes the “washing” of cash so that money made by criminal means ends up looking like legitimate profits.
Laws against it often use the acronym AML/CTF, which stands for Anti-Money Laundering and Counter-Terrorism Financing.
Money laundering describes the “washing” of cash. (Supplied: Queensland Police Service)
In a 2015 brief, financial crimes regulator AUSTRAC described its attempts to control criminal misuse in unflattering terms.
“Compared to other methods, money laundering through real estate — both residential and commercial — can be relatively uncomplicated, requiring little planning or expertise. Large sums of illicit funds can be concealed and integrated into the legitimate economy through real estate.”
AUSTRAC estimates that, in 2020 alone, criminals linked to China laundered $1 billion through Australian real estate.
For most, a simple check
Australia’s largest property franchise, Ray White Group, has more than 12,000 agents.
Shaun Doyle is the agency compliance manager and has visited every state and territory twice in the past year, trying to bring agents up to speed.
“This is one of the most substantial changes to the industry, just because the complexity and the seriousness of it,” Mr Doyle said.
“But when an agent understands their requirements, it’s pretty straightforward.
“When they’re meeting a customer at the living room table, that’s when they need start the process. They need to understand who they’re talking to.“
Shaun Doyle has visited all 12,000 agents in the group to prepare them for the new laws. (ABC News: Wayne Hammond)
Most buyers and sellers will have been in contact with banks, who already require verification of identity.
This is generally done by the 100 points system, where customers can present a combination of documents, for example, a valid passport or birth certificate is worth 70 points, licences and bills slightly less, to prove they are who they say they are.
Extra part of the process
Ray White Mt Gravatt operations manager Michelle Romero will be verifying buyers and sellers for a team of sales staff who complete about 200 residential sales a year.
Michelle Romero says the changes will be an additional layer of service. (ABC News: Craig Andrews)
“I’ve been in the industry 35 years,” Mrs Romero says, “and we take each transaction as it comes. So it is a change, but it’s just an additional layer to the service that we offer now.”
Real estate industry groups fought the imposition of the laws for years. One of the issues for the broader industry is that larger groups have the resources to prepare for the new laws. Smaller agencies may only just be realising the deadline is here.
“AUSTRAC have got lots of information and resources for standalone agents to access, but I would much prefer to be a part of a large network that is supporting us through this change,”
Ms Romero said.
The extra work is for good reason, she adds.
“We’re just one industry in a group of many who are now part of making sure property transactions are more transparent and that our industry isn’t used to fund criminal and illegal activity,” she said.
Others see more problems.
Industries now ‘gatekeepers’ for illicit cash
Western Sydney lawyer Renee Roumanos completes transactions and teaches conveyancing, the legal process of transferring the ownership of a property asset.
“Honestly, our industry is not ready,” she said.
“All of a sudden, we have become gatekeepers to AML”.
Renee Roumanos says the July 1 deadline will be a shock.
(ABC News: John Gunn)
She predicts “awkward conversations” as agents start to enquire about where buyers have got the money from, and wants the public to understand that it’s not about being nosy.
What it means in practice is that if a buyer has come into their money in a way beyond obvious wages, such as a gift or a bonus, it will now need to be documented.
“It’s not just asking the client ‘Where is your money from?’. It’s also about proving it and understanding the story behind it, and if something feels ‘off’, we must report on our clients,”
Ms Roumanos said.
Staff who will undertake verification must register with AUSTRAC and complete training.
Ms Roumanos has had to register and train not just herself but every member of her business.
“It’s going to make conveyancing more difficult and more complex, adding layers of additional regulatory compliance requirements on that,” she said.
Cracking down on criminals warping the market
For most agents and buyers, the new provisions will be a form to fill in.
It is for an important reason: it forces the flagging of suspicious transactions and it makes breaking the laws a crime.
As has been seen in scandals surrounding Australia’s largest and highly-regulated casinos, Crown and Star Entertainment, criminal elements will always attempt to launder money.
The Tranche 2 laws are an attempt to make it more difficult.
“Money laundering is a serious crime,” Mr Moore said.
“Criminals and organised crime gangs, unfortunately, use these services to launder the proceeds of crime that fund child exploitation and the drug trade.
“Reducing the risk of these services being used for money laundering will benefit society and our economy as well.”
