In response to a new report from the Australian Institute of Criminology (AIC) and AUSTRAC on the impact of money laundering and organised crime, the Real Estate Institute of Australia (REIA) has expressed concern about the lack of practical policy recommendations for real estate agents.
While the report confirms the link between organised crime and money laundering in real estate, it does not offer specific advice on how agents can combat this issue, said REIA President Leanne Pilkington.
“Using detailed econometric analysis of data on organised crime, the report finds, amongst other things, that reducing the amount of money laundered by organised crime groups would limit their ability to reinvest illicit funds in future criminal enterprises; groups involved in money laundering were most likely to target the financial sector – three times as much as real estate,” said Ms Pilkington.
“Real estate agencies are primarily small businesses and do not have the expertise nor resources to be able to identify such activity.
In this regard, the report referred to earlier research that found that stricter money laundering regulations had not led to declines in proceeds of crime or in money laundering, as criminals switched markets to less regulated ones.”
The report also references past research showing that stricter regulations have led criminals to shift markets rather than reducing money laundering overall.
Ms Pilkington cited the example of New Zealand, where anti-money laundering (AML) requirements have imposed significant costs on real estate agencies, ranging from $30,000 to $60,000, without clear evidence of public benefit.
Kristen Porter, Director of O*NO Legal, said that we often disregard money laundering because it seems victimless, but it’s actually a gateway to other serious crimes.
“In Australia, money laundering is governed by Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime. Now the government is proposing to expand its reach to include real estate professionals, an industry which is at high risk for money laundering activity,” she said.
“Money laundering becomes a vicious cycle, because those engaged in it do it to make profits from it, which they then reinvest into further laundering and crimes, and so the cycle continues.
At the end of the day, these reforms are all about boosting Australia’s ability to crack down on illicit financing. It’s about making it a lot harder for serious crime to take root here in Australia.”
Ms Porter highlighted several red flags for real estate agents to watch out for, including clients who buy a property without inspecting it or buy/sell properties below or well over market value.
She emphasised the importance of developing a program tailored to an agency’s risk level, performing thorough due diligence on clients, staying informed on market trends, and being willing to say ‘no’ to suspicious deals.
“Not every red flag means something shady is going on, but if your gut’s telling you otherwise or if you spot multiple warning signs, it’s time to dig deeper and be extra vigilant. Better safe than sorry, especially when it comes to criminal laws.”
Some practical ways you can avoid these risks:
- Develop a program around the AML/CTF regime tailored to your agency. The Australia’s Anti-Money Laundering and Counter-Terrorism Financing laws and regulations regime uses a ‘risk-based approach’, which means your measures should match the level of risk your business faces from money laundering or terrorism financing.
For example, high risk looks like an overseas client from a high-risk country wanting to snap up a property fast with lots of cash and little questioning, while low risk is your local, long-term client with a clear track record and standard financing.
- Know Your Clients. Always perform thorough, and ongoing, due diligence on your clients.
Verify their identity, understand their source of funds, and ensure everything checks out.
Don’t hesitate to ask clients why they’re buying or selling at unusual prices, or why they’re making sudden changes. Trust your instincts and follow up if something feels off.
- Stay Informed on Market Trends. Keep up with current market values and trends.
If a price seems too good to be true or way off, dig deeper to find out why.
- Report suspicious transactions/activities. If something feels off, don’t hesitate to consult with a professional or regulatory body.
This shows you’re on top of things and helps protect your interests.
- Get Comfortable Saying ‘No’. If a deal seems suspicious or you’re asked to do something that feels wrong, it’s okay to walk away.
Protecting your reputation and business is more important than closing every deal.
- Keep Detailed Records. Document every step of your transactions meticulously.
Clear and detailed records can protect you if something goes wrong later on.
- Stay Updated on Compliance. Regularly refresh your knowledge of anti-money laundering laws and compliance requirements.
Being proactive can save you from potential pitfalls.
