3 Jun, 2015
Australian reports reveal how real estate deals are used for criminal money-laundering
Canberra, (AUSTRAC media release / Travel Impact Newswire) 2 June 2015 – The Australian Transaction Reports and Analysis Centre AUSTRAC has released two new reports to help businesses identify money laundering methodologies used through real estate agents and lawyers.
Although the reports are designed primarily to help Australian businesses beware of this criminal activity, they are of even greater relevance to businesses in Dubai, Singapore, Bangkok and many other parts of the world where real estate transactions are proliferating.
Many of these real estate transactions occur in the travel & tourism industry, especially the hotel sector. Entire conferences are organised solely to promote these transactions.
AUSTRAC is Australia’s primary source of financial intelligence, providing expertise and global leadership on financial intelligence matters.
The two AUSTRAC strategic analysis briefs “Money laundering through real estate” and “Money laundering through legal practitioners” provide information about money laundering methods, business vulnerabilities and indicators that a person is laundering the proceeds of crime.
The AUSTRAC media release says, “Laundering of illicit funds through real estate is an established money laundering method in Australia. Criminals are drawn to real estate investment in Australia because it is possible to purchase in cash, it offers reliable financial returns and it is possible to disguise ownership.
“Methods of laundering money include mixing illicit funds with loan funds, manipulating the value of properties, use of third parties to present as the official owner, purchasing properties to facilitate criminal activity, generating rental income to seem legitimate and using front companies and trusts to hide the identity of ownership.”
It says criminals also use professional facilitators such as lawyers to help them seem legitimate. Money laundering methods include using lawyers and other professional services to conduct transactions of their behalf, establishing trusts and other structures to hide identity, recovering fictitious debts, making payments through lawyer’s trust accounts.
Indicators include:
(+) using cash to settle transactions which are not usually cash-based, such as real estate purchase
(+) multiple and unexplained funds transfers, especially from overseas
(+) difficulty identifying the ultimate source of deposits
(+) moving funds to/from the law firm’s trust account to/from bank secrecy jurisdictions or high-risk jurisdictions.
One of the briefs says, “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.”
It adds, “The Commonwealth Director of Public Prosecutions recovered approximately AUD10 million in assets and the Australian Federal Police (AFP) restrained AUD62.5 million in assets between 1 July 2012 and 30 June 2013. The AFP restrained residential property valued at AUD5 million as part of an investigation in March 2013 and approximately AUD8.1 million in property was restrained as part of Project Wickenby in 2012–13.”
The brief notes that Australian rreal estate agents are not subject to the provisions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). However, real estate transactions most commonly go through a financial institution – for example, as loans, deposits or withdrawals.
“At this stage, real estate transactions intersect with the regulated AML/CTF sector. Reportable transactions which intersect with the regulated sector (banks and other financial institutions) provide authorities with some visibility of potential money laundering through real estate.”
Suspicious activities are reported to AUSTRAC through Suspicious Matter Reports (SMRs). A range of Australian businesses including banks, casinos, remitters and foreign exchange providers have submitted SMRs which have helped detect, disrupt and deter crime.
The brief says that the New South Wales Government introduced updated fraud prevention guidelines for the real estate industry in October 2012. These guidelines were introduced to combat identity fraud and scams in the industry.
“The guidelines provide a set of practices and procedures for agents to confirm the identity of vendors or their appointed representatives, as well as a list of possible fraud warning signs and a proof of identity checklist.
“The guidelines were developed following two publicised incidents in 2010 and 2011 that resulted in properties being sold in Western Australia without the knowledge and consent of the lawful property owners.6
“In response, the Western Australian Government strengthened the real estate industry’s verification of identity practice. The practice recommends that conveyancers and other property professionals take reasonable steps to verify the identity of their clients and confirm their clients’ authority to give instructions when dealing with a particular property.”
The brief also identifies some common methods of money laundering through real estate. In Australia, criminals are known to use a combination of these methods to launder illicit funds through real estate.
These include use of third parties to buy properties; use of loans and mortgages to layer and integrate illicit funds into high-value assets; manipulation of property values by buying and selling real estate at a price above or below market value; structuring of cash deposits to buy real estate; using rental income to legitimise illicit funds; and using front companies, shell companies, trust and company structures established domestically or offshore.
The brief identifies how the professional services of lawyers, accountants, real estate agents, financial advisers and trust and company service providers, known as ‘gatekeepers’, are used because, “either wittingly or unknowingly, they can provide an entry point for those seeking to misuse legitimate financial and corporate systems for money laundering.”
It says overseas-based crime groups and individuals may buy real estate in Australia using illicit funds to conceal assets from authorities in their home jurisdiction. Criminals may seek to integrate their funds into Australian assets in an attempt to avoid confiscation in their home jurisdiction. Purchases may be funded through overseas-based personal, company or trust accounts. Criminals may also use third parties to buy and sell property to further conceal ownership.
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