Chinese criminals are laundering money through Australian real estate. As long as this continues, no body wins.
Chinese money in Australian real estate is the story that just keeps on giving.
For most of the last couple two years angst has been building about Chinese buyers pricing out Australian families.
That finally prompted the government to get tough and start enforcing the rules that foreign nationals cannot buy existing property.
But it gets worse. Not only is Chinese money crowding out poor Aussie families, that money seems to be dirty money, and the Chinese are using Australian property to launder it.
Some of it is coming from drug lords and international arms dealers, apparently.
Tell me this isn’t a free kick to everyone who thinks that anyone who doesn’t look like Kylie Minogue should be kicked out of the country.
Dirty money from corrupt Chinese businessmen and criminals being filtered through Australian real estate – you couldn’t make this stuff up.
The ABC’s four corners ran a piece this week called ‘The Great Wall of Money’, which highlighted that Australia has done diddly-squat to protect the property market from money launders.
Australian Transaction Reports and Analysis Centre (AUSTRAC) former head John Schmidt told ABC’s Four Corners that Australia should cover itself from corruption.
“Real estate is recognised internationally as one of the means by which people will launder money, yet we ourselves have not covered the field as yet,” Mr Schmidt said.
In his last sit-down interview as treasurer Joe Hockey agreed Australia’s safeguards against the global flow of dirty money should be strengthened.
“Currently they are not appropriately covered by the anti-money laundering legislation, but it obviously needs to take place,” Mr Hockey said.
Despite highly credible warnings that large volumes of illicit money leaving China were being laundered in Australia, a Four Corners investigation found no Australian agency was charged with identifying the true source of foreign funds being invested into the economy…
Two former [FIRB] board members have confirmed to Four Corners, concerns about offshore corruption were rarely discussed.
That is despite $US1.25 trillion ($1.7 trillion) worth of corrupt and criminal proceeds from China estimated to have been spent around the world in the decade to 2012…
One former FIRB director — who asked to remain anonymous — said the organisation held “no concerns about corruption”…
Another former board member, Chris Miles, told Four Corners FIRB did not concern itself with identifying the true source of funds from offshore.
“Where the money came from is somebody else’s responsibility,” he said…
The problem lies with the fact no federal authority — including AUSTRAC — has checked the source of funds used to invest in Australia from China, unless there were obvious concerns about drug trafficking or other serious crimes.
Mr Schmidt said Australian law-enforcement authorities did not have the resources to filter the billions flowing in from China.
This is the reality of living in a globalised world. Even Australia is too small to properly manage that massive wall of money coming out of China.
How do you think Fiji is doing?
Australia’s draft rules on anti-money laundering (AML) affecting real estate were released in 2007, but have been largely ignored by the federal government ever since. I guess no one thought it was too big a deal.
But then a lot of pollies own property in the suburbs where the Chinese are buying, so maybe they’re just happy to see prices rise, and somebody else can deal with it.
Whatever the case, it’s a massive crack in the integrity of the Australian financial system, and through that crack, Chinese businesses, gangs and “Princelings” – the sons of former top politicians – are pouring billions and billions of dollars.
So, should we care?
The money comes in, house prices go up, and if you own a house, you’re better off. We don’t want to kill the golden goose, right?
I roll my eyes when I hear this. Not because it’s exactly wrong, but it’s too simplistic to be right.
The point is that Chinese money, especially dirty money is not distributed evenly around the economy. It will juice some markets and do nothing for others. Think of the divergence between Sydney, Melbourne and the rest of the country.
And that puts a hand-brake on the RBA. They might think we need lower rates, but then they look at certain suburbs in certain cities that are going bananas, and they’re too scared to move.
And while Chinese money going into real estate might be a Golden Goose for property, The Chinese economy itself is Australia’s real Golden Goose. China is by far our biggest export market, and together with its connections to other important Asian markets, it has become the central support in our entire economic future.
Given its importance, do we want to be undermining the Chinese economy by helping criminals and corrupt politicians suck money out of the country?
The long term benefits of building enduring export markets surely outweigh any temporary gains from jazzing up real estate with dirty money.
Canberra can’t hide from this one anymore. Time to get up and do something about it.
How do you believe you can best benefit from this phenomenon?
What's the real estate play based on this trend?