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The Real Estate Institute of Australia (REIA) is asking for proposed changes to Australia’s money laundering laws to proceed cautiously, citing fears that they could have unintended consequences for home buyers, tenants and real estate agencies.
“If all the emancipated activities for Tranche 2 reporting are implemented, the costs to the sector could easily reach the billions,” REIA president Adrian Kelly said last week, warning that real estate agencies could find themselves shouldering a burden of around $50,000 each.
Tranche 2 reforms, a policy change that has been in the works since 2006, would extend anti-money laundering (AML) regulations to real estate professionals, as well as lawyers and accountants.
“At REIA, it is our job to defend against undue regulatory costs and fight for our members against draconian regulation that does not even advance the national interest,” Mr Kelly said.
REIA argued that the cost of Tranche 2 reforms on agencies has the potential of being ultimately passed down to home buyers and tenants and questioned their efficacy.
“Monitoring and enforcement authorities also confirmed additional reporting would likely be of limited impact to intelligence and surveillance, if processed at all,” Mr Kelly said.
He used the opportunity of discussing the financial strain new reforms might cause for agencies to counter the idea that money laundering through property purchases is pushing up the cost of Australian housing.
“Low supply, high demand, high taxes, a greater demand for houses of units and uncertainty of vendors to list new properties created by the ongoing COVID-19 pandemic are all major factors in the current market,” he said.
His comments come in a week where Mr Kelly and others addressed a Senate committee regarding the impact money laundering was having on the real estate sector.
Appearing before the committee on Tuesday, 9 November, Transparency International Australia chief executive Serena Lillywhite stated it would be “reasonable” to think money laundering was driving up prices, though she noted it would be difficult to obtain evidence to this effect.
“We know that we do have this gaping hole in our law, that does mean that Australia is a more attractive destination than others,” she said.
Transparency International advocates for reforms that target Australia’s “weak” AML regime and the introduction of a public register of beneficial ownership.
Similarly, AUSTRAC’s submission to the committee warned, “the use of real estate is an established method of money laundering internationally”.
During the committee hearing, Bradley Brown, AUSTRAC’s national manager for strategic intelligence and policy, acknowledged that the organisation’s research examined potential impacts of money laundering rather than tracking actual impact or what is occurring.
“We note that widespread, concentrated real estate purchases with proceeds could drive prices up, and the word is could,” Mr Brown said.
In his remarks following the hearing, Mr Kelly said any changes to the law should be weighed against a current understanding of the scale of the issue.
“The inquiry heard that of the $187 million in assets seized by authorities in the 2021 financial year, $116 million was in real estate assets.
“To put this in context, the Australian commercial sales market alone over this period recorded more than $50 billion in sales, and the residential sector recorded a massive 598,000 transactions,” Mr Kelly said.
He added that REIA was willing to work with the government to strengthen Australia’s AML capabilities.
“We urge the Senate committee to deliver practical recommendations that target sophisticated money launderers without creating a financial burden on home buyers, tenants and real estate agencies.”
REIA has called for a cost-benefit analysis led by the Commonwealth to quantify the impact on real estate agencies versus the projected benefits of additional reform.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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