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.
Wow.
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?
rona chadwick says
good article. i agree. we need to be vigilant about this practice. corrup PNG business men and pollies have been laundering money into Qld for years. it is a disgrace.
ron says
hi jon..a very good, well resourced article. i tell ya..these guys in control…are out of control! and that applies to every facet of our lives…busy body morons in the public service..self serving pollies and greedy guts foreigners.lol but really thats quite fair..because life is fair..even though its unfair it seems. that little fish doesn’t like that big fish chomping on him/her..adios i’m out of here it says..but that bigger fish has got to eat darn it! so it chases more smaller fish and the bigger fish eat the fish that ate the smaller fish etc. etc. then we humans catch the bigger fish to eat. wow.. and we are at the end of the food chain….well a friendly shark or tiger or lion might not think so. but you get my drift..life IS fair. so lets not dwell on monetary misdeeds too much. is better to look after your own affairs and be kind to other people in less fortunate circumstances. i wish also that the federal police or whoever had let that idiot go to syria..the russians would have blown his head off..now we have to put him in jail for a term and then he is on the loose again! that is more of a problem i think. you see jon, re the chinese, while things are politically stable in the land of oz their ‘investment ‘ is secure. but things might not always be so. and the chinese can’t take the real estate with them..its stuck in oz. to me its all so much b.s. cheerio
Simon says
manufacturing countries have wealth, but manufacturing has become illegal in australia,
so we need to sell our minerals and land to countries that work, to fund our nation of bureaucrats to create the paperwork to track our slide into negative net worth
Jason says
All very well, but the problem that was outlined on the 4 corners program was, how do we find out who is legit or not? Do you have a list of all the corrupt people in China? It’s not all dirty money and it’s not only China doing it, have a look in our own back yard, Aussies are just as likely to hide some coin in a high rise or two.Like I have said in the past, we should be leasing our land to overseas investors, not selling it off, China will own a big chunk of our cattle stations soon and export the lot….
Sanders Payne says
The best way to remove the dirty money after they have built hundreds of thousands of apartments in our cities and driving down rent affordability is to have a down turn in property. Macquarie release yesterday a down turn in property from March next year a reductions by -7.5%.
Not to mention the tough new restrictions on building to the boundaries being limited to 24 stories? I get the impression that Joe Hockey was directly targeting the Chinese investors and the banks to reduce lending to investors overall in a attempt to control house prices? This being said it may have directed a much needed adjustment? Was Hockey/Abbott removed by the much loved ex Goldman Sachs member to support the banks and get spending up? Who will take the air out of the Bubble? I think Chinese investors currently developing in Melbourne and Sydney are about to get caught with their pants down. This has been going on with the Chinese arriving by boat to Robe South Australia to avoid the taxes in Melbourne and Adelaide placed upon only the Chinese during the Gold Rush of the early 1900s,we closed the front door and they come in the back door? Is this any different to a gold rush? They came with opium and gambling upon arrival to the gold fields? Every billionaire alive has tested the boundaries of there wealth and this is no difference.
I want my friends and family to be able to afford housing and I’m willing to loose money off the top of my investments and as for a friendship with China? Well there is no friends in buisness and never has been.
Good article Jon
Stuart says
Just on the “7.5% downturn prediction” (the number was in a font size of about 20cm per digit on the front of the SMH yesterday) – they may be right, but what I want to know is know is how many of these so-called experts also predicted the 30-40% rise in average property values over the last 2-3 years in Sydney? Approximately none … So I’ll take the “7.5% downturn” [pretty specific isn’t it?] with a pinch of salt.
Sanders Payne says
30-40% sounds like a spike to me?
Stuart says
Well, yes, it is a massive spike, but my point is that none of these ‘experts’ predicted it, yet we are supposed to believe their current prediction of a downturn (to a tenth of a percent).
Sanders Payne says
Fair call… I have noticed the US fed has introduced 6x the amount of money it needed to bail out the banks back in 2007/8 so yet another spike….Wespac raised rates today to prepare for the GFC so in my opinion the sum of -7.5% is underestimated and designed to only reduce the air out. Most economists are in cash at the moment and there has been a turn towards gold recently. Is it a good time to be under invested? Property? South Australia is undervalued and has had no boom so I like the possibilities around its coastline and the freedom the state offers.
Rudolf says
Hi Jon,
I wonder if our “Proceeds of Crime” laws allow confiscation of assets for any crime, or only those committed in Australia. I don’t believe the law is limited to only crimes committed in Australia, but only limited to what our laws classify as a crime. Therefore any asset purchased with such “laundered money” may be confiscated by our government….anytime in the future.
Ian W says
What a load of rubbish – for Chines people to obtain a 188 visa to come to Australia for permanent residency you must prove to the Chinese Authorities where your money came from. They check the funds to ensure they have been legally obtained and taxes have been paid on them. This rumour mongering of how much is “illicit or illegal” is just sensationalist journalism. It also besmirches all those legitimate immigrants who have bought property through there lawfully obtained funds. Who decided there were “billions” of dollars of “proceeds of crime” going into Aussie property – it is an amount that is impossible to determine or verify so some idiots picked a huge number and run with it – it is nothing more than a wild guess? You would have to be a sucker to believe it.
darrel says
We are a global world, shutting the doors on overseas investors will not benefit anyone in this country. The ongoing cash injection that goes into a community when anyone has invested will benefit all for many years to come in there need for products and services.
Colin says
As I see it where ever money goes it creates jobs, now who wants to block the jobs coming into the country?
Rather than complaining about outsiders coming in why not reward employers who create FULL time jobs so that their employees can get into the property market rather than forever being financially cut out.
Sadly fewer and fewer Australians can afford to enter the property market and that’s never going to change until wages grow as fast as the property market does, hands up who would like to match their pay to the property market!
Richard Eason says
World famous Peruvian economist, Hernando de Soto, took a large team of economists to every continent to discover the causes of national poverty. They found the main cause to be corruption in a nation’s legal system. His book “The Mystery of Capital” shows why.
Unless China eradicates its endemic corruption, its economy will experience the same kind of financial crisis that the “Asian Tiger” economies did in 1997. If we allow Chinese corruption to get a foothold in Australia, we too will experience economic crisis.
Lasting national economic prosperity has only ever been built on widespread genuine freedom, which in turn depends on compassionate justice that is difficult to corrupt. All three – justice, freedom and prosperity – first emerged from the Christian values that underpin the English common law inherited by Australia, Canada, New Zealand and the United States
That compassionate justice took English judges a thousand years to develop as a sound basis for the real freedom that began to appear in England in the 17th century. Parliament developed real power and a crop of learned scientific geniuses sprang up as never before, which gave rise to England’s 18th century.Industrial Revolution that initiated Western prosperity.
If we forsake our Christian legal values (that force no-one to become a Christian) and if we fail to stop corruption permeating our system, we will eventually lose justice, freedom and prosperity.