Anti-corruption group Transparency International has named Australia as one of the main countries in which corrupt government officials from overseas can buy real estate by exploiting legal loopholes.
The group identified “severe deficiencies” in local rules designed to stop illicit funds flowing into property that put Australia in breach of its commitments to tackle corruption and money laundering.
Transparency International is urging governments to close loopholes that allow corrupt politicians, civil servants and executives to hide stolen wealth through buying mansions in Sydney, which ranks alongside London, New York, and Vancouver as a popular place to hide money.
“Governments must close the loopholes that allow corrupt politicians, civil servants and business executives to be able to hide stolen wealth through the purchase of expensive houses,” the organisation’s chair Jose Ugaz said.
“The failure to deliver on their anti-corruption commitments feeds poverty and inequality while the corrupt enjoy lives of luxury.”
The warning comes after The Australian revealed in January that financial intelligence officials investigated more than $3.3 billion of suspect transfers by Chinese investors — including $1bn invested in property — last year.
Transparency International found that identifying the beneficial owners that stand behind legal entities, trusts and other arrangements is still not the norm in the property industry. Local rules do not require real estate agents, lawyers, accountants, notaries or any other person involved in real estate closings to identify the beneficial owner of their customers.
Australia has safeguards on foreign investment but these are not designed to prevent money laundering. Banks and other financial institutions must keep watch but others involved in the deals are not required to submit suspicious transaction reports.
Another legal gap means that real estate agents are not required to verify whether customers are politically exposed persons, family members, or their close associates, as they must in Britain, where more checks are imposed in such cases.
This has allowed homes to be bought under the radar of authorities.
The Australian reported last September that a former South Sudanese army chief named in a separate anti-corruption watchdog’s report paid $1.5 million cash for a mansion in Melbourne’s southeast.
The family of General James Hoth Mai Nguoth, who controlled the South Sudanese government forces at the height of the fledgling nation’s bloody civil war, was revealed to be living in a four-bedroom home in Melbourne’s Narre Warren.