Where the Chinese billions pouring into Australian real estate really come from;
CHINESE investors are pouring billions into Australian real estate, but there are concerns large portions of the cash could come from corruption and money-laundering.
The country’s super-rich are buying up magnificent waterfront homes, luxury off-the-plan apartments and lucrative commercial properties in the country’s wealthiest enclaves from the Gold Coast to Melbourne and Sydney to Perth.
But experts are raising concerns over the shadowy origins of the $12 billion ploughed into Aussie property in the past financial year alone, as the Chinese government admits it has a problem with endemic corruption.
Chinese investment in Australian property has surged by more than 400 per cent in just five years, but no one has taken responsibility for monitoring where the money comes from, and agents are not required to report suspicions.
There are further questions over whether foreign investors are circumventing the rules in how they can invest, pushing our economy further into troubled waters.
HOW DODGY IS THIS MONEY?
It’s almost impossible to quantify just how much of Chinese investment comes from illicit sources, since there are no official checks, but credible sources claim large amounts of money are being laundered in Australia. “China (is) by far the biggest exporter of illicit capital,” one money laundering expert told Four Corners inThe Great Wall Of Money, which airstonight at 8.30pm on ABC.
It’s estimated that $1.7 trillion of corrupt and criminal proceeds from China have been spent around the world in the decade to 2012, with tax evasion one significant problem.
“China is really a black box, not dissimilar to Russia,” ABC reporter Linton Besser told news.com.au. “Similar issues face the UK with Russian money. There are no proper figures, but well-credentialed people are saying this is ‘capital flight’.”
With a corruption crackdown by the government in Beijing shaking the Chinese economy, Australian real estate is a highly attractive market in which to invest ill-gotten gains. While we presume foreign nations will do their own checks on their super-rich, China lacks transparency in business and the legal system.
“It’s not just China,” Mr Besser told news.com.au. “We have on our doorstep Indonesia, Sri Lanka, Bangladesh, Thailand and Papua New Guinea, which have major issues with corruption.”
WHY DOES IT MATTER?
“There is a legitimate public interest issue in the extent to which Australia should welcome funds from other nations where the proceeds are corrupt,” said Linton. “When people invest in Australia with the proceeds of corruption, it’s not a level playing field, and it can provoke massive distortions to the economy.”
Even when the law hasn’t been broken, there are concerns over foreign activity in Australian real estate. There are some rules: investors cannot buy established property, with a few exceptions — for example, if they have a temporary visa they can have one property but must sell it if they leave.
But some suspect people are getting around the legislation, with Joe Hockey recently pointing the finger one of his neighbours, who he thought had gained approval on “spurious grounds”. This was Sam Guo, a colourful character known as “the Chinese Gatsby,” who bought $12 million mansion Windermere in exclusive Sydney neighbourhood Hunters Hill, claiming he was adding to the housing stock by installing a granny flat.
Mr Guo was found to have acted within the law and the investigation against him is now closed, but his story makes some people uneasy. The property magnate is at the centre of a dispute in China over the existence of his luxury resort on an artificial island, “the Floating Palace”.
He made his fortune by turning underground military bunkers into a vast shopping mall, raising questions over how he gained control of the spaces previously owned by China’s People’s Liberation Army.
Mr Guo, who dresses in monk’s robes and hosts lavish A-list parties, is unfazed, telling Four Corners that investment by Chinese entrepreneurs represented an enormous opportunity for Australia. And he said Mr Hockey was still welcome to attend one of his soirees.
WHAT’S BEING DONE?
The Foreign Investment Review Board (FIRB), Australia’s main authority for monitoring offshore funds, has until recently insisted that dirty money is outside its scope. But Mr Besser says its remit to check if investment is “against the national interest” is an “amorphous concept”.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) will investigate if it receives a tip-off, usually from a foreign government, but it doesn’t work with FIRB. If an agent has suspicions about where overseas investment has come from, they have no requirement to file a report.
John Schmidt, the former head of AUSTRAC, told Four Corners that Australia had not “covered the field” of money-laundering. The international community has criticised us for failures in this area, with a framework adopted in 2008 still not implemented.
“Hockey gave $50 million to the tax office and Treasury to investigate Australian real estate purchases that may have breached the rules,” said Mr Besser. Around 500 investments are now being investigated, but it’s unclear how much progress is being made since his resignation.
Justice Minister Michael Keenan told Four Corners that improvements to Australia’s anti-money laundering regime were being considered as part of a review of the Anti-Money Laundering and Counter-Terrorism Financing Act to be tabled in Parliament by the end of the year.
In the meantime, China’s elite will continue to throw their millions at Australia’s most covetable homes.
The Great Wall Of Money airs tonight at 8.30pm, repeated tomorrow at 10.00am and Wednesday at midnight. It can also be seen on ABC News 24 on Saturday at 8.00pm, ABC iview and at abc.net.au/4corners.