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As financial sector lobby groups frequently note, the banking industry is highly regulated.
There's an A-focused alphabet soup of regulators to satisfy – ASIC, APRA, ACCC, AUSTRAC – oversight bodies like AFCA and BCCC, and then pesky journalists writing about when things don't go well.
That's a good reason why criminals might avoid dealing with any of them and instead turn to an illegal multi-national "bank" to launder their dirty money around the globe and through investing in Australian real estate.
This is what the Australian Federal Police allege had been going on for years, casting a fresh spotlight on a potential gaping hole in Australia's anti-money-laundering monitoring — real estate agents, lawyers and accountants, none of whom are obliged to report suspicious transactions.
The sting
This week federal police arrested nine people and seized millions of dollars' worth of Sydney homes, cryptocurrency and luxury items, crushing a syndicate it is alleging offered money laundering at an "industrial scale".
The AFP allege the syndicate acted as an unregulated multi-national bank, drawing on cash reserves in multiple countries around the world and facilitating transactions for criminal clients.
Money laundering describes the "washing" of cash so that money made by criminal means ends up looking like legitimate profits.
In this case, the police allege the syndicate used "multiple jurisdictions by multiple means", including exploiting daigous (essentially, border-hopping shoppers), casino junkets and an informal transfer system outside of conventional banking.
It will be alleged in court the syndicate laundered $150 million in its own profits, gained from the movement of cash between 2018 and 2022.
Aside from a large collection of luxury goods and cars, it parked the allegedly illicit funds in a prized property portfolio, including 20 addresses across Sydney — with two homes in the eastern suburbs worth a combined $19 million alone — and a $47 million block of land near the future Western Sydney Airport.
The regulated
Sometimes criminals do simply use a bank to move their dirty money.
Banks don't always get it right as they try to combat money laundering and counter the financing of terrorism, a sector known by the acronym of AML/CTF.
In 2020, Westpac reached a deal with financial crime watchdog AUSTRAC to settle more than 23 million alleged breaches of anti-money-laundering laws by paying a record $1.3 billion penalty.
Some of the transfers in question were linked to alleged child exploitation activities in South-East Asia.
The penalty was the biggest in Australian corporate history, and almost double the previous record — a $700 million fine paid by the Commonwealth Bank for nearly 54,000 money-laundering breaches.
Some of those breaches related to alleged terrorism financing, while the bulk related to so-called smart ATMs that allowed users to deposit sums in excess of the $10,000 limit that triggers compulsory reporting obligations.
But banks are at least trying to stop breaches.
AUSTRAC's mega-penalties got the industry to stand to attention. Since then, institutions have poured significant additional resources into the field and increased how alert the board and governance bodies are to issues around AML/CTF.
The biggest loophole
On the other hand, real estate — a sector worth three times the value of the stock market in Australia — isn't forced to ask hard questions about where the money's coming from.
AUSTRAC puts it cleanly in a 2015 brief.
"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."
That's the regulator talking — and nothing has changed since then.
Real estate agents are still not subject to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
Because real estate transactions commonly go through a financial institution as loans, deposits or withdrawals, authorities get some insight into potential money laundering through property.
However, without being covered by the act, transactions done in cash or by other means of payment carry no obligation to be reported to AUSTRAC, meaning it could be years before authorities stumble across property-based money-laundering schemes, if they ever do.
Making real estate players subject to the laws would add complication to the sector. But it might also stop crime.
AUSTRAC estimates that, in 2020 alone, criminals linked to China laundered $1 billion through Australian real estate.
The solution
The chief executive officer of integrity group Transparency International Australia, Clancy Moore, says the real estate sector is letting Australia down.
"This $10 billion money-laundering factory is another example of how criminals see Australia as a go-to destination for washing their dirty money in our real estate sector," he argues.
"Our weak laws allow them to invest the proceeds of crime in our property sector, and [it] arguably contributes to higher property prices.
"Transparency International has long called for strong reforms and, despite numerous parliamentary inquiries, Australia's current anti-money laundering laws do not require real estate agents to carry out due diligence checks on customers or provide reports on suspicious transactions."
A Senate committee inquiry into Australia's anti-money-laundering laws called out the failure to regulate "designated non-financial businesses and professions" (DNFBPs) also known as "professional facilitators".
That's people like casino operators, real estate agents, precious metal and gem dealers, lawyers, notaries and accountants.
The committee's March 2022 report called for the implementation of the so-called "tranche 2" reforms that would force these professions to comply with laws designed to stop money laundering.
The real estate industry's peak body is dead against it.
"The introduction of a reporting scheme addressing money laundering in real estate would impose a cost much larger than the relatively small anticipated benefit to the community through detection of money laundering," the Real Estate Institute of Australia's chief executive Anna Neelagama wrote in a submission to the hearings.
"Evidence indicates that money laundering and terrorism financing through real estate tends to be concentrated to a small number of locations.
"Most Australian real estate agents will never encounter a suspect client, and including real estate practitioners in reporting would therefore be likely of limited value."
Whether real estate agents will be forced to be on the lookout for dodgy transactions is up to the government and parliament.
Meanwhile, the police, AUSTRAC and the other regulators will be doing their bit to stop criminals from getting their money to call Australia home, albeit with a mansion-sized blind spot.