Australia on watch-list as China billions pour into property

by | Jun 17, 2017 | Finance & Tax, Government

As billions in black money from China continues to flood into property markets, the global Financial Action Task Force has put Australia on a watch-list for failing to comply with money laundering and terrorism financing reforms. Canberra has been dragging the chain for nine years while the powerful lawyers, accountants and real estate lobby groups keep successive governments mired in a consultation process.

The Samuel Beckett classic, Waiting for Godot, features a couple of weary old guys Vladimir and Estragon waiting for another guy called Godot to arrive. Godot never arrives. The play finishes as the two protagonists contemplate hanging themselves.

As we contacted the Department of Justice again last week we were struck by the parallels with the always-impending though never-arriving Anti-Money Laundering and Counter-Terrorism Financing legislation (AML-CTF).

These are laws which were to have been introduced nine years ago but instead have been bogged down in a marathon of “reviews”, “stakeholder engagement”, “industry consultation”, “papers”, “studies” and “submissions”

Banks, bullion dealers and casinos were captured by the first tranche of the legislation way back in 2006 but as any self-respecting money-launder knows, if you are keen to launder some money, or perhaps finance a spot of terror, you can still do it through lawyers, accountants or real estate agents. These sectors are yet to be captured by the Godotesque second tranche of the legislation.

Besides tightening the screws on launderers and financiers of terrorism, the importance of these laws are that they could take steam out of the property market and address, albeit only in part, the crisis in affordability for first home buyers.

Splendid! Let’s lock an entire generation of Australians out of the property market

When asked last week how the process was coming along, since the laws were supposed to have been enacted in 2008, the response from the office of the Minister for Justice, Michael Keenan, was:

“A cost/benefit analysis of extending AML/CTF regulation to certain non-financial business (lawyers, conveyancers, accountants, real estate agents, trust and company service providers and high-value dealers) is well progressed and will be completed by July this year.

“The outcome of the cost-benefit analysis will inform the Government’s decision on the regulation of tranche two entities under the AML/CTF Act.”

In Waiting for Godot, Vladimir has to keep shuffling off to urinate when he starts laughing at his own jokes. This play however only runs for two acts. If Vladimir were a player in Australia’s money-laundering tragicomedy – assuming a constant rate of two urinations per hour – he would have urinated at least 153,792 times by now.

It would not only be Vladimir, and money laundering authority AUSTRAC, holding on either. When asked how Australia’s compliance with international standards was coming along, the communications officer for the Financial Action Task Force (FATF), Alexandra Wijmenga-Daniel, told

“Following its mutual evaluation, Australia was placed on enhanced follow-up and is reporting back to the FATF on an annual basis concerning the progress it has made to address the deficiencies identified in its mutual evaluation report.”

Slated anti-money laundering legislation is comically overdue

In the classroom of international compliance, this is the equivalent of nose-in-the-corner-at-the-back-of-the-classroom status. “Enhanced follow-up” and “deficiencies”.

The reason the process has meandered on for so long is clearly because the stakeholders involved: the accountants, lawyers and real estate lobbies, don’t want it to happen.

And now government is in a bind. If it stems the flow of Chinese capital it might prick the property bubble.

Chinese money is not alone in driving up prices but it is a factor. On Credit Suisse numbers, some $50 billion of Chinese capital has flooded the Australian property markets, mostly in Melbourne and Sydney, over the past eight years.

How much is black money? We don’t know but the Chinese are only permitted to take $US50,000 out of the country, so the rest, probably the majority of money landing here, is black money.

Introducing the second tranche of the AML-CTF legislation is no silver bullet which will suddenly make houses affordable for first home buyers. Though, along with reform to negative gearing on established homes, it would certainly help.

It is also important because the more the property bubble inflates, the more damaging will be the economic aftermath.

Meanwhile, other measures to address the first-home-buyer crisis, such as stamp duty relief (and a stamp duty surcharge for foreign buyers) are a step in the right direction though tinkering around the edges and arguably incentivising young buyers to hop into an overheated market.

In NSW, the measures run so close to the price threshold that they constitute an incentive to leave the city and go elsewhere to buy a house. The stamp duty measures are far better than cash hand-outs though, which only serve to drive up prices and put cash into the arms of agents and property developers.

Apprehensive of political reprisal, the money laundering agency AUSTRAC has been reliably mute on the failure of governments to comply with international standards. And even though the latest timeframe for action is the completion of a cost-benefit analysis by next month, the commitment to do anything about it remains up in the air, as usual. We remain waiting.

As the second and final act of Waiting for Godot closes, Vladimir and Estragon talk about hanging themselves. But when they conduct a strategic analysis of the strength of Estragon’s belt, which they intend to use as a noose, it breaks and Estragon’s trousers fall down.


Following its mutual evaluation, Australia was placed on enhanced follow-up and is reporting back to the FATF on an annual basis concerning the progress it has made to address the deficiencies identified in its mutual evaluation report. Follow-up reports are not published unless the country has made sufficient progress to justify a re-rating of its compliance with FATF Standards.

 The FATF expects countries to have satisfactorily addressed most, if not all, of their technical compliance deficiencies by the end of the 3rd year after their mutual evaluation report has been adopted. Australia would be expected to have reached this stage by June 2018.

 In addition to the follow up reports each country is subject to, that consider changes to laws and regulations (technical compliance), five years after the mutual evaluation report, all countries are assessed against the actions they have taken to improve the effectiveness of their measures to combat money laundering and terrorist financing.  This 5-year follow up assessment looks specifically at actions taken by a country to address the high-risk areas and priority actions identified in the mutual evaluation report. 

For more information, see the Procedures for the FATF Fourth Round of AML/CFT Mutual Evaluations :


Michael West

Michael West

Michael West established to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.


  1. Avatar

    It`s all OK Michael
    The grande` larceny is going to plan as Oz is primed for the FannyMae&FreedyMac we missed out on in GFC Mk1

    The mere ability of being able to pay the interest only part of CC repayment is in freefall and housing repos are moving East from WA fast now

    But of course none of this will affect the top end of town,merely make for some very cheap acquisitions

    • Sandi Keane

      Ha Ha. Am tweeting out your comment Biggy!

      • Avatar

        LOL Sandi
        During GFC Mk1 the ANZ bank sent to China a portfolio management rep of theirs who actually represented the Big 4/Elders and Rabo Bank

        One tranche of property portfolios was for bank repossessed sheep/wheat properties covering all the Eyre Peninsula SA
        During that time there was a pandemic of failed farmer suicides going on
        At the same time there were the typical Murdoch owned Adelaide Advertiser headlines,Chinese buying up sheep/wheat properties en masse and how we were being invaded by a new wave “yellow peril”

        Even small town rags echoed the `Tiser

        Then the ANZ bank rep [who`d retired by this} blew the whistle on Port Lincoln`s ABC radio as the what was really going down

        Most who lived on Eyre Pen at that time { as I did } knew someone involved in repo`s and suicides

      • Sandi Keane

        Who would want to be a farmer? You have to borrow $ when there’s a drought and risk repossession. If the bank doesn’t get you, the frackers will. Were you on a farm?

      • Avatar

        No,I was an opal miner and contractor at Olympic Dam who got caught up in GFC when they booted out 1400+ of us

      • Sandi Keane

        Such a gut-wrenching time for everyone. So sad and so unnecessary.

      • Avatar

        We go on with joy in our heart and a song on the wind
        Fret not,for we all are just passing through, this time,this place

        Here is tragedy,anguish and the result of the Tory war on the poor

      • Sandi Keane

        Well put Biggy!

  2. Avatar

    Hi Michael, Every time Chinese investors are painted as the bad guys in the housing bubble, I can’t help thinking it’s a deliberate distraction from the fact that it’s local investment that’s driving the market – no govt wants to do ANYTHING that will threaten the wealth of that sector of the Australian population (especially the electorate of Wentworth).

    Demonising and taxing foreign investors keeps the attention off where it actually should be – govts only want to LOOK like they’re tackling housing affordability by targetting foreigners, but making sure that NOTHING is done to jeopardise local investors. The proof is whether any of the proposed measures actually make housing affordable – where ‘affordable’ doesn’t mean giving people more access to money, but prices dropping so that properties are actually, you know, affordable.

    • Michael West

      Hi Annie, yes I agree that Chinese money is only one factor and that that they should not be demonised. I did point out that it was just one factor. Agree too, that it is convenient to target a few Chinese as the last Treasurer did – without touching the AML laws. Thing is that introducing the laws would be a good thing: a bit of heat out of the market, international compliance and making sure the Chinese money we get here is not black money. As you suggest, the measures don’t do much! And the government will do everything to protect the market

      • Avatar

        I wonder what the chances of success for a civil action against the commonwealth of australia. For deliberately causing the housing affordability crisis. And unnaturally skewing market forces. Namely encouraging all the blood money into the country that has forced property prices into dangerous territory?

  3. Avatar

    Good article Michael, keep the heat on our pollies and regulators, these measures need to be implemented – NOW!

  4. Avatar

    I have argued much on forums that international money buying up local real estate provides almost no benefit to the local populace while inflating our house prices. I see no benefit for allowing it, and many countries do not. Connections in the industry suggest that the vast bulk of foreigner money in real estate comes not just from China, but also US, Canada and UK, happily anglo countries so let’s not bother with them.

    This is not a xenophobic call to exclude all foreigners, it is a rationalist argument about what benefit there is to the local economy. I recognise Annie’s comment regarding the local investors, and they do drive the largest part of the market, but the foreign money becomes the price setter. Every dollar spent on property from foreign sources ramps up the cost for the local buyers, whether owner occupiers or investors, and therefore is a large part of the build up in prices even if not a huge percentage of the market. When it’s black money, whatever price you pay is a bargain.

    I also acknowledge that foreign investment in real estate can be beneficial IF it adds to the housing stock, and is lived in whether by renter or owner. To a large extent that is not the case.

    Of course, any sensible policy would couple that with reforms to negative gearing and capital gains tax concessions. I think Chris Richardson acknowledged at the time that it was possibly the stupidest decision to come from a Treasurer in 25+ years. He was being kind, thanks Peter Costello.

    Michael, you mention the accountants, lawyers and real estate industry being stakeholders, but forget a major beneficiary, that being the SMH/AGE and their Domain listings, as well as other msm advertising. They are curiously disinterested in the major threat to the Australian economy. Conflicted? You bet he is, I mean you bet I am, I mean ………………..

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