White collar ‘gatekeepers’ such as accountants, real estate agents and lawyers are helping criminals launder billions of dollars, much of it through the housing market, the Australian Criminal Intelligence Commission (ACIC) has warned.

ACIC deputy chief executive Matthew Rippon told a Senate inquiry into Australia’s money laundering laws that criminals were exploiting the skills and expertise of professional facilitators in order to conduct transnational, serious and organized crimes (TSOC).

The commission was carrying out multiple intelligence operations involving professional facilitators laundering the proceeds of crime, he said.

It had found that lawyers, accountants, real estate agents, liquidators, stockbrokers, bankers, luxury car dealers and offshore services providers were either actively complicit or coerced into providing services for TSOC groups.

“They are critical enablers of TSOC to drive profit and apply strategies to generate an appearance of legitimacy.” Mr Rippon said.

The Senate’s Legal and Constitutional Affairs References Committee was tasked in June with reviewing the adequacy and efficacy of Australia’s anti-money laundering and counter terrorism financing (AML/CFT) regime. In October, the inquiry’s reporting date was moved from December to March 2022.

Australian banks and fintechs have previously told the inquiry that they back the closure of major loopholes in the country’s AML legislation and warned that gaps in the current framework impact the country’s international reputation.

They outlined support for ‘Tranche 2’ legislation that would see Designated Non-Financial Business and Professions (DNFBPs) such as law firms, accountants, and real estate agents subject to similar laws to banks, emitters, and wagering companies in relation to AML/CTF.

The Financial Action Taskforce (FATF) has made it a priority for DNFBPs to be regulated across jurisdictions, and has made repeated recommendations in Mutual Evaluation Reports (MERs) on Australia since 2005.

Only Australia, Haiti and Madagascar have yet to expand their AML/CFT laws to include “professional facilitators”.

The FATF’s 2018 report ‘Professional Laundering’ includes instances where DNFBPs have facilitated money laundering and has some key insight on the subject for compliance professionals.

In Australia’s 2015 mutual evaluation report, FATF briefly explored DNFBPs in Australia, stating: ‘A concern is that the regulatory framework gives reporting entities substantive discretion for applying the AML/CTF requirements and allows simplified measures for all medium and low risk situations, yet there is only limited guidance for identifying high risk customers or situations.”

In 2018, in its 3rd Enhanced Follow-up Report and Technical Compliance Re-Rating, Australia was assessed as remaining largely non-compliant with recommendations related to DNFBPs and remains in enhanced follow-up.

Organized Crime in Australia

Australian Federal Police (AFP) say that the country has become a “lucrative” market for organized crime and told the inquiry that of the $187m in assets it seized in the 2021 financial year, $116m was in real estate assets.

“Money laundering poses a serious, significant and growing threat to Australia’s national security,” AFP deputy commissioner Ian McCartney said. “We’ve acknowledged, and other agencies have acknowledged, the vulnerability in this space.”

The Australian Transaction Reports and Analysis Centre (AUSTRAC) estimates that in 2020, Chinese interests laundered $1bn through Australian real estate.

Property is an attractive vehicle for criminals to use to launder money. Illicit funds can be parked in the form of property and where property prices increase, can mean criminals making further gains on illicit funds.

In a 2015 strategic analysis brief, AUSTRAC highlighted the risk of property being used to launder funds. Compliance teams should find the brief’s 10 common ‘methods’ of money laundering through real estate particularly useful.

Method nine focuses on the use of professional facilitators or ‘gatekeepers’ and the services they can provide to criminals, including establishing complex loans and other credit arrangements, and introducing criminals to financial institutions.

Find out more about the state of compliance in 2021 with our latest on-demand webinar.