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Politicians are coming under fire for the country’s lax approach to fighting the financing of crime. James King reports.
In February, the Australian Federal Police (AFP) smashed an alleged A$10bn ($6.5bn) global money-laundering syndicate in Sydney. Law enforcement agents seized hundreds of millions of dollars-worth of real estate, cash and luxury items and arrested nine people for multiple money-laundering and proceeds of crime offences.
The operation has underscored Australia’s status as the destination of choice for laundering illicit funds in the Asia-Pacific. Every year, untold billions are funnelled through the country’s economy, according to the AFP, with the real estate and gambling sectors uniquely exposed to this scourge.
The Australian Transaction Reports and Analysis Centre (Austrac), the national financial intelligence agency, estimates that in 2020 more than A$1bn was laundered through the real estate market by Chinese-linked criminals alone. And they are not alone: property up and down the country is being bought and sold by corrupt political actors and organised crime groups from the region, according to research from Transparency International.
“Australia is the go-to destination for illicit financial flows in Asia-Pacific,” says Clancy Moore, chief executive of Transparency International Australia. “We know that billions of dollars are being laundered into our real estate sector and other parts of the economy every year.”
The country’s role as the dark money centre of the region stems from the weakness of its anti-money laundering and countering the financing of terrorism (AML/CFT) framework.
Australia has decided that it’s more profitable to do business with gangsters than it is to refuse to do business with them
Since 2007, successive Australian governments have promised and failed to introduce reforms that would compel the so-called “gatekeeper professions” – designated non-financial business and professions – to implement AML/CFT controls. This includes real estate agents, lawyers, accountants and trust and company service providers,
Instead, attempts from across the political spectrum have stalled. Australia is one of only three jurisdictions in the world not to have introduced these measures, which form part of what is known as “Tranche 2” of the country’s AML/CFT rulebook. As things stand, these professions are not required to report suspicious activity, or verify the source of funds, when executing a real estate transaction, for example.
This failure to implement Tranche 2 reforms means that Australia’s financial intelligence and law enforcement agencies, which generally receive wide praise from the AML/CFT community, are fighting the battle against money-laundering with one arm tied behind their backs.
“A financial intelligence unit can only work within the laws that it is handed. That’s where the Australian paradox lies: other countries look at Austrac as a strong partner and a leader, but at the same time they look at the political system and they wonder how these things sit together? It doesn’t make any sense,” says Nathan Lynch, Asia-Pacific manager for regulatory intelligence at Thomson Reuters and author of The Lucky Laundry: how the Aussie economy got hooked on the world’s dirtiest cash.
Nevertheless, change could be on the horizon. In April this year, the Australian government launched a public consultation on the introduction of Tranche 2 reforms, with submissions to the attorney-general’s department being accepted until June 16, 2023. This follows a treasury consultation on the introduction of an overdue public beneficial ownership register, at the end of last year.
These moves have been welcomed by the country’s AML/CFT community. But Australia is in a race against time; its upcoming, fifth evaluation by global anti-money laundering watchdog, the Financial Action Task Force (FATF), is expected between 2025 and 2026.
Failure to update its AML/CFT rulebook by then could have severe consequences in the form of a “greylisting” by the FATF. This would subject Australia to enhanced international monitoring by the watchdog and push its already poor reputation to new lows.
Read more on FATF greylisting
“Australia’s fourth round mutual evaluation [by the FATF], which took place in 2015, excoriated the country and its political masters for not acting on the gatekeeper professions,” says Mr Lynch. “Now Australia is facing its fifth round of mutual evaluation. If there hasn’t been progress by then, the country is going to get absolutely pummelled on the international stage.”
The FATF’s upcoming evaluation will take place against a backdrop of horrific money-laundering scandals. In March 2022, Austrac filed a statement of claim against casino operator Crown Resorts, for allegedly permitting the turnover of about A$70bn through its premises by just 60 individuals of whom “high money-laundering and/or terrorist financing risks were indicated”.
Meanwhile, Austrac commenced civil proceedings against another casino operator, Star, for alleged money-laundering failures. “What happened at places like the Star and Crown casinos is not complicated. When you’re facilitating international gangsters and junkets, a lot of dubious business will happen. But it’s difficult to give up that profit stream,” says Charles Littrell, a senior adviser to the Central Bank of the Bahamas and former Australian prudential regulator.
“The key to stopping big-ticket money-laundering is wanting to stop it. It’s that simple. If you look at Australia, it has decided that it’s more profitable to do business with gangsters than it is to refuse to do business with them,” Mr Littrell adds.
The onus is now on Australia’s political class to act.
